How to think about Foxconn

October 11, 2012: 5:00 AM ET

The contract manufacturer has become a symbol for worker abuse, but the Apple partner isn't the only bad actor in China.

By Bill Powell, editor-at-large

FORTUNE -- Hon Hai Precision, a.k.a. Foxconn, has become synonymous with emblematic 21st-century workplace misery. In late September, worker brawls triggered riots at a Foxconn assembly plant in central China. From January to June in 2010, 14 workers at Foxconn's massive operation in Shenzhe -- a facility that back then put together iPads and iPhones -- committed suicide at the company dorms, while four others tried and failed.

Apple (AAPL) responded by hiring the Fair Labor Association, a global monitoring group, to report on conditions at Foxconn. The findings (high rates of worker accidents and forced overtime) prompted Apple CEO Tim Cook to pledge he'd work with Foxconn to improve conditions.

No one disputes that Foxconn needs to make significant changes. But often lost in the criticism of Apple and Foxconn is some local context. Does Foxconn run its assembly plants in a way that appalls Westerners? Sure. But it also turns away nearly three workers for every one it hires in China every year.

MORE: What's really going on over at Foxconn?

Nor, actually, is Foxconn simply a sweatshop doing low-tech assembly of devices dreamed up by Americans. Foxconn, which ranked No. 43 on the Fortune Global 500 list of the world's biggest companies by revenue, is an innovator too. It is "the only company on the planet that could mass-produce such an array of products so quickly on the same production lines,'' says author Dan Breznitz, who has chronicled China's rise as a manufacturing giant. Adds a former China-based executive for rival Flextronics (FLEX): "They're still superefficient and the cost leader; Apple still benefits from that."

And while the central government in Beijing has tried to pressure the company to clean up its act, local officials are constantly wooing Foxconn to set up new operations in their provinces. Officials in Henan province, for example, helped the company recruit thousands of young workers to a new iPhone 5 factory in the city of Zhengzhou.

Earlier this summer another nonprofit, China Labor Watch, issued a 31- page report on a company called HEG Electronics that documented, among other things, the use of child labor in its factories. The report concluded: "Working conditions at HEG are well below those general conditions in Apple's supplier factories." One of HEG's biggest customers? Apple rival Samsung Electronics. (Samsung has said it is moving to address the issues in the report.)

This story is from the October 29, 2012 issue of Fortune.

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