Workplace Issues

Apple Rebukes Supplier for Labor Code Violations

The company's decision to put Taiwan's Pegatron on probation underscores the “challenge facing Apple as it seeks to address abuses in its supply ch...
Matthew HellerNovember 9, 2020
Apple Rebukes Supplier for Labor Code Violations

Apple has suspended future business with Taiwan’s Pegatron after discovering improper labor practices at Chinese factories operated by the second-largest iPhone assembler.

Apple’s move to put Pegatron on probation, announced Monday, is a “rare rebuke” for a high-profile supplier and underscores the “challenge facing Apple as it seeks to address abuses in its supply chain,” according to The New York Times.

“While Apple can make or break the smaller companies that make the innards of its iPhones and put them together, few have the scale to assemble large numbers of phones quickly, leaving Apple reliant on assemblers like Pegatron and its larger Taiwanese rival, Foxconn,” the Times noted.

How Startup CFO Grew Food Company 50% YoY

How Startup CFO Grew Food Company 50% YoY

This case study of JonnyPops’ success highlights the unusual financial and operational strategies that enabled rapid expansion into a crowded and highly competitive frozen treat market. 

Apple said it discovered several weeks ago that Pegatron was improperly using student workers at factories in Shanghai and the eastern Chinese city of Kunshan.

“Pegatron misclassified the student workers in their program and falsified paperwork to disguise violations of our Code, including allowing students to work nights and/or overtime and in some cases to perform work unrelated to their major,” the company said in a statement.

“The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms,” it added.

Apple declined to comment on what contracts it has with Pegatron but CNN Business, citing a source close to the Taiwanese firm, said it is assembling the iPhone 12 Mini. The probation does not affect existing business.

As the Times reports, “To meet grueling deadlines, factories in China sometimes recruit labor from local technical schools. Strict guidelines are supposed to limit how long and when such employees can work, but in practice, rules are often ignored and other abuses are common.”

Pegatron, which has factories across China and has been accused of a number of labor and environmental abuses over the years, said it had removed the student workers from production lines and was undertaking an audit to ensure its labor standards are upheld.

Generally, Apple works with suppliers for 90 days to ensure corrective actions are taken. Pegatron reported a T$19.3 billion ($676 million) profit in 2019, up 74% on the previous year.