Life in the iPhone factories: Apple suppliers still breaking labor laws, report

Treatment of workers across the Apple [AAPL] supply chain returns to the spotlight today following release last night of a highly critical China Labor Watch report. Among other claims the report tells us some workers at Apple suppliers are toiling through up to 150 additional hours of overtime each month.


[ABOVE: Workers assemble and perform quality control checks on MacBook Pro display enclosures at an Apple supplier facility in Shanghai. Image c/o Apple.]

You want low prices? You want cheap labor.

The latest findings reflect conditions in 10 Apple supplier factories between January to April this year. The latest in a salvo of such reports into labor conditions inside those manufacturers involved in the iPhone supply chain.

"The squeezing of factory workers exists throughout Apple's supply chain in China, and not just at Foxconn," said Li Qiang, executive director of China Labor Watch (CLW).  "Apple has the responsibility, and the financial resources, to ensure that needed improvements for workers occur systematically and quickly."

It warns that many in the chain are using temporary labor. These so-called "dispatched workers" are temporary workers who are not contracted to the supplier but to a third party and who have no rights to compensation, severance pay or union protection. They also don't show up on the books.

The report does say that Foxconn's among the best places to work -- it transferred all dispatched workers to direct hire status in 2011, but component suppliers and others outside of that firm have not.

This matters because use of such temporary staff enables factories to offload part of their commitment to worker rights under Apple's own supplier responsibility guidelines. Up to 80 percent of workers at some Apple suppliers are despatched workers. That's why China Labor Watch seem correct to point out that none of Apple's Supplier Responsibility Progress Reports have noted working conditions for temporary staff (though it has looked at problems afflicting migrant workers on temporary contracts).

"If Apple were to take the problem into account, the number of supplier factories that meet Apple's standards would fall considerably, " the report observes.

This is an industry problem, not just an Apple problem

China Labor Watch may be focusing on Apple, but for real change consumers and electronics firms will need to bite the bullet and recognize that an industry-wide approach is required. Without that there will always be a factory prepared to cut corners on working conditions in order to deliver cheap products. Low-cost electronics are likely to demand low cost component suppliers, after all, and this translates directly into the electronics industry sweat-shop mentality.

In a report last year, China Labor Watch warned: "Foxconn should not bear the only responsibility for worker suicides: Apple, HP, Dell and other international OEMs should also be held responsible, as their goal of profit maximization comes at the cost of workers' wages and sub-optimal working conditions."

That's the rub: Apple this year seems to have become the company everybody wants to hate. That's inevitable, of course, because everybody hates you when you become successful (in the words of Morrisey), but that focus on Cupertino shouldn't blind critics to the grim reality that every large or small-scale worker abuse within the Apple value chain is almost inevitably being repeated across the supply chain of every other consumer electronics firm: Dell, HP, you name them.

Even those shiny new Asus-made Nexus devices will inevitably have at least some components sourced from factories engaged in such working practices.

All these firms attempt to deliver products you can afford and in doing so demand the best deal they  can get from labor -- and this directly translates into such working rights abuses.

"Multinational companies seek to shorten the assembly time in order to manufacture products more quickly, and factories seek to receive a greater share of multinational companies' orders, thus increasing their profit," reports China Labor Watch.

"In order to receive more OEMs' orders, factories must be able to offer quick and powerful manufacturing capabilities to help companies shorten the time it takes a product to enter the market. This profit pressure almost always shifts onto the worker, increasing the work intensity and overtime hours they are required to perform."

Apple responds

Apple has previously committed to improving working conditions across its suppliers. It has also hired the Fair Labor Association (FLA) which is now continuously monitoring working conditions across Apple suppliers. This suggests the most likely outcome from the latest China Labor Association report will be an FLA investigation into those Apple suppliers it names.

In a statement provided to Reuters, Apple referred to its own audits under the supplier responsibility program. Saying every factory mentioned in the CLW report had already been audited, an Apple spokesperson said: "In some places, our auditors found issues similar to those described by China Labor Watch, including overtime violations."

Apple claims that, in May, 95 percent of worker weeks were compliant with the 60-hour maximum work week specified in its code; sustaining the 95 percent that was reported in April.

In a statement, Foxconn said it continues work to improve conditions inside its factories: "The process of change in our company continues, and competitive wages, improved living conditions and the abolition of the use of dispatched workers by our company are some examples of this."

Apple has identified problems with temporary labor in the past. A 2008 audit found that many workers were forced to pay huge fees to employment agents in order to get jobs in other countries. Apple's response to this problem suggests its response to the latest report.

"What we will not do - and never have done - is stand still or turn a blind eye to problems in our supply chain," Tim Cook wrote in an email earlier this year. "Any suggestion that we don't care is patently false and offensive to us."

While criticism of working practices inside the iPhone factories is likely to continue, I have one caveat to the latest China Labor Watch report: the period it covers (January to April) also includes a period during which Apple began making moves to -- allegedly -- improve working conditions. Because some of those improvements (if there have indeed been any improvements) are only likely to have begun toward the end of the reporting period, it will be far more valuable to read a report covering the September-December time-frame.

This is because this period will reflect:

-- Pressure posed on the supply chain in order to produce iPhone 5's in quantity.

-- A period during which (hopefully) any working practice improvements have been put into place across Apple's partners.

That would make a follow-up report a far more valuable insight into what improvements have been put in place. I also believe it's time labor rights organizations moved to widen their focus and take a look at supply chain challenges beyond Apple.

That's because in order to truly improve life across the consumer electronics value chain, it is essential all players in the space become as focused on labor rights as Apple now claims to be. Apple may be the poster child, but surely it's also time to look beyond Cupertino -- take a look at Samsung, for example -- in order to truly effect real change.

This story seems set to run and run.

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Copyright © 2012 IDG Communications, Inc.

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