This morning, there are numerous business and social media reports concerning a worker riot that broke out overnight at the Foxconn Technology factory in Taiyuan, China facility located in Shanxi province. According to a New York Times report (paid subscription or free metered view), the disturbance was triggered when workers started brawling with factory security guards and escalated from there. There are conflicting reports with some estimates that as many as 2000 workers were involved and up to 5000 security personnel were called in to restore order. Reports further indicate that as many as 40 people were taken to a local hospital for medical attention while some were arrested.

The plant itself employs 79,000 workers and supplies components for multiple automotive electronics and consumer electronics brands, and there are some reports, notably ComputerWorld that the plant supplies the outer enclosure for Apple’s new iPhone 5 smartphone.

This latest incident is concerning for a number of reasons.  First, the plant itself is located in the interior region of China. Foxconn continues to move production away from the massive coastal manufacturing clusters to buffer the impacts of worker unrests and previous suicides at the massive factory complexes located in China’s Pearl River coastal region.  This latest incident is an indicator that the strategy to move operations to the interior to avoid worker unrest is potentially flawed because certain worker monitoring processes were carried over. Foxconn itself has been cooperating with both Apple and its third party audit agency the Fair Labor Association (FLA) to address excessive working hour requirements, wage and worker safety standards at its factories, but this latest incident adds more challenges to the notion of improved standards.

The spokesperson for Foxconn had indicated that the Taiyuan factory incident first started as a “personal dispute” and then escalated outside employee dorms, and did not appear to be ‘work-related”. According to reporting on the National Public Radio News Blog, NPR reporter Frank Lanfitt had been monitoring the incident from Shanghai.   In a recorded broadcast interview, Lanfitt indicates that workers told a different story, pointing to procedures related to metal detector screenings that inspect workers for potential theft as the main contention.  He points to reports from workers and social media indicating that certain security guards had physically beaten workers, which triggered a serious of incidents that led to the rioting.  Workers were also seeking outside representation to air their grievances.

The overall implications to consumer electronics OEM’s including Apple remain unclear at this point.  Foxconn’s Taiyuan factory remains closed while the investigation continues. As business and social media continue to run with headlines of more worker riots concerning the world’s largest contract manufacturer, the looking glass toward worker unrest will continue to flame further outcries for worker rights and standards.

Meanwhile, we continue to read of the millions of iPhone 5’s sold in the first two weeks of introduction with consumers clamoring  for more and retailers and online providers increasing the pressure for added inventory and production volumes.

Despite Foxconn’s best efforts, this latest incident is not one of isolation and will not just fade away in memory. To its credit, progress has been made, but the sheer scale of its operations and global supply chain influence place even more demands on conformance to supplier responsibility standards among multiple companies, including those of Apple. We note Apple because of its standing as the number one rated global supply chain and the implications of that stature, particularly manifested in its supplier social responsibility standards. Something clearly has to give and that is where the challenges lie for consumer electronics supply chains in the months to come.

Stay tuned.

Bob Ferrari