UPDATE 1-Hon Hai unit to build inland China plants -source


HONG KONG, June 28 (Reuters) - Taiwan's Hon Hai Precision Industry Co will build factories for its LCD panel maker Chi Mei Innolux in the Chinese cities of Chengdu and Wuhan to mitigate rising labour costs in southern China's factory belt.

A source with direct knowledge of the company's plans told Reuters on Monday that the company would also expand production at existing plants in Ningbo, Nanjing and Foshan.

The moves come amid a string of labour unrest in the coastal industrial hub of the Pearl River Delta, where increasingly assertive migrant workers are demanding better conditions and higher wages.

Hon Hai, the world's No.1 electronic components maker, was one of the first to be hit after a spate of worker suicides this year at its Foxconn International Holdings unit in Shenzhen, maker of the Apple Inc's iPhone, which focused attention on often harsh labour rights and led to the company raising wages for many of its workers.

In recent weeks, strikes have disrupted production at car makers Toyota Motor Corp and Honda Motor Co , prompting some international companies to look at other areas of China where costs are lower, or even at other countries.

Hon Hai's latest move to China's interior, where wages and production costs are often lower than coastal regions such as Shenzhen, could be a sign of its desire to trim production costs and wage bills.

It recently said it would seek higher prices from clients, which include Apple, Dell Inc and Hewlett-Packard Co , to help offset the wage increases.

Hon Hai and Foxconn have made other large investments to bolster production in China's interior and are planning a $1 billion production facility in the southwestern city of Chengdu.

Chi Mei will hold its annual shareholder meeting in Taiwan on Tuesday. A Chi Mei official said there would be more explanation offered at the meeting.

A job centre manager in Longhua, the site of one of Hon Hai's big manufacturing complexes, where workers are housed and fed as well as employed on massive production lines, noted a change in Chi Mei's recruitment practices.

"Chi Mei is now mostly looking for middle to higher level managers. They haven't been recruiting so many ordinary workers," said Liu Hong, manager of Shenzhen's Longguan employment market, one of the region's biggest job recruitment centres to the north of Shenzhen.

Liu said he had not heard of the move to other sites and noted that recent labour shortages seemed to be easing a little in Shenzhen.

"A lot of summer workers are coming now. Also, those students who didn't make it to high school are now looking for work," he said.

For full coverage of China's labour issues, see [ID:nSGE65103V]. (Reporting by James Pomfret; Editing by Chris Lewis)



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