After discovering labor violations in a student workers’ program, Apple Inc. suspended new business with iPhone assembler Pegatron Corp., taking strong action to clean up a Chinese-based production chain long accused of worker abuse.
The technology giant based in Cupertino, California, said it found several weeks ago that student workers were misclassified by the Taiwanese manufacturer and allowed some to work nights and overtime in violation of Apple’s Supplier Code of Conduct. Employees then “went to extraordinary lengths” to cover up the breaches. The U.S. corporation said in a statement that it has now put its partner on probation until disciplinary action is completed.
Pegatron is one of only a handful of partners that Apple depends on to manufacture flagship items such as the iPhone globally. The Taiwanese company, including bigger rivals Foxconn or Hon Hai Precision Industry Co., is an important part of the global supply chain of Apple, which has been the subject of labor activists’ criticism.
The most valuable company in the world is manufacturing four new 5 G iPhone models and has been collaborating with Pegatron to extend the assembly of iPhones outside China. This suspension, which was first mentioned by local outlet The Paper, as it only concerns new business, is unlikely to affect those efforts. But the move by Apple gives an opening to rival Luxshare Precision Industry Co., which is on the verge of becoming the first iPhone assembly company on the mainland. The shares of Pegatron gave up gains and closed 2.1 percent down in Taipei on Monday.
“The new iPhone company of Pegatron should not be affected. Nonetheless, Pegatron will likely lose some orders next year to Luxshare for the new Apple handsets, which is poised to become a new iPhone assembler in 2021,’ said GF Securities analyst Jeff Pu.
After a rash of suicides at main partner Foxconn in 2010, Apple spent years upbraiding factories, provoking anger over the harsh working conditions in which its upscale gadgets were produced. Apple quickly developed standards and launched audits of hundreds of businesses that manufacture components for their products, threatening to pull business from those that breach labor laws. Yet the sheer size of the chain makes it impossible to police. Among those called out in the past for breaching local regulations were Foxconn and Catcher Technology Co.
Pegatron said the violations took place at its campuses in Shanghai and Kunshan in eastern China and that students working night shifts, overtime, and in roles unrelated to their majors were “not in accordance with local laws and regulations.” It said that “quick action” has been taken to strengthen its procedures and would add compliance with the code of conduct to the metrics used to determine senior management.