Taiwan-based IC design houses are worried that they will be poised under an unfavorable position in future price negotiations with ODMs and OEMs should those makers be forced to raise monthly salaries in China, according to industry watchers.
ODMs and OEMs which are currently yielding a gross margin of below 5% on average, may eventually demand chip vendors reduce their quotes on the grounds of rising labor costs in China, the sources commented.
However, most IC design houses indicated that Foxconn's salary increase will not have a significant impact on their payrolls since the wages they pay out to their R&D staff in China are much higher the minimum wage required by the China government.
While Foxconn is raising monthly salaries for its employees at its production bases in Shenzhen, China to 2,000 yuan (US$293), MediaTek revealed that it currently hires a total of more than 1,000 R&D engineers in China with monthly salaries ranging from 4,000-5,000 yuan.
Article translated by Steve Shen
