Apple suspends new orders with Pegatron after labor abuse

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Apple iPhone assembler Pegatron will reportedly receive no new business from the Cupertino company until it takes action to prevent student labor violations.

Apple manufacturing partner Pegatron to invest $1 billion in Vietnamese plant


Shortly after investing $1 billion in a new Vietnamese plant, iPhone assembly partner Pegatron has been told it will receive no new orders from Apple until concerns over labor issues have been resolved.

According to Bloomberg, Apple discovered that Pegatron had been reclassifying students as regular workers, meaning they would receive overtime and work at night.

"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," Apple said in a statement seen by Bloomberg

"The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms," it continued.

Apple also said that it had discovered Pegatron falsified paperwork to hide these violations. It did not find evidence of underage or forced labor. One Pegatron manager has been fired.

"We are working on the corrective actions and are confident that we will complete it soon," a Pegatron spokesperson told Bloomberg

It's unclear what orders Pegatron will now fail to get, or whether Apple has imposed any time limits. Pegatron's work in assembling iPhones is to continue, at least until the current order is completed.

However, future orders may instead be placed with Pegatron's rivals, such as Luxshare. Both Pegatron and Luxhare have invested in Vietnam plants for Apple, but Apple has reportedly been hesitant over moving iPhone production to the country because of workers' living conditions.
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Comments

  • Reply 1 of 27
    Reading between the lines, it seems that Apple knows it is in a position of power here and is using its power to obtain certain objectives. I just wish Apple knew that it's also in a position of power with regard to its App Store and start behaving just as tough in that business line.
  • Reply 2 of 27
    Rayz2016Rayz2016 Posts: 6,699member
    Putting their diversified supply chain where their mouth is. 

    I imagine that Pegatron will have this all fixed by the start of December. (Though I also said that Spotify would fix their hypocrisy and allow developers to transfer subscriber playlists to other services, and I was wrong about that)


    tenthousandthingsOferwatto_cobra
  • Reply 3 of 27
    Rayz2016Rayz2016 Posts: 6,699member

    Reading between the lines,
    Translation: I’m about to state something based on no evidence gleaned from the article. 
    iOSDevSWEDancingMonkeysbshankmuthuk_vanalingamneoncatCloudTalkinlkruppbeowulfschmidtjcs2305Ofer
  • Reply 4 of 27
    Apple: Stop this abuse.
    Pega: Wow. You pay us 1% of the iPhone sales price, roughly $9 bucks to assemble this.
    We had to undercut to get the job. So what do you expect ?
    Apple: That’s just natural competition.
     
    jido
  • Reply 5 of 27
    GeorgeBMacGeorgeBMac Posts: 9,238member
    Double Standards....
    No other company would have done this.   Or, if they did it would have been a behind closed doors request.

    But, Apple is held to a different standard:   if word got out that it was using (in any way) improper child labor people's heads would explode.   It would be like the Pope swearing when he stubs his toe.   Neither is permitted even the slightest, most minor of infractions.  And, if and when they do, outrage ensues....

    Very simply, the double standard means Apple has to be the perfect saint.
    It's not fair.  And, they may have brought it on themselves.   But that's just the way it is.
    lkrupp
  • Reply 6 of 27
    lkrupplkrupp Posts: 8,999member
    Both Pegatron and Luxhare have invested in Vietnam plants for Apple, but Apple has reportedly been hesitant over moving iPhone production to the country because of workers' living conditions.
    Moving manufacturing from one communist totalitarian state to another communist totalitarian state, eh, Apple? I wonder if the children and grandchildren fathered by U.S. soldiers are working in those factories. 
  • Reply 7 of 27
    lkrupplkrupp Posts: 8,999member
    Double Standards....
    No other company would have done this.   Or, if they did it would have been a behind closed doors request.

    But, Apple is held to a different standard:   if word got out that it was using (in any way) improper child labor people's heads would explode.   It would be like the Pope swearing when he stubs his toe.   Neither is permitted even the slightest, most minor of infractions.  And, if and when they do, outrage ensues....

    Very simply, the double standard means Apple has to be the perfect saint.
    It's not fair.  And, they may have brought it on themselves.   But that's just the way it is.
    Well, if Apple didn’t do so much virtue signaling in their marketing campaigns they might not be under such scrutiny. “Look at me, I’m so good” is an invitation to someone to also say, “Oh yeah? We’ll se about that."
    gatorguy
  • Reply 8 of 27
    pk22901pk22901 Posts: 151member
    lkrupp said:

    Moving manufacturing from one communist totalitarian state to another communist totalitarian state...

    Forget the "totalitarian". 99.9% of the Vietanmese have no totalitarian in them. Apple's hring people
    (fathers, mothers, sons, daughters, et al), not totalitarians.


    edited November 2020 viclauyyc
  • Reply 9 of 27
    maestro64maestro64 Posts: 4,908member
    What About the poor students, maybe they want to work over time to help pay for school. I know when I was in college I jump at any opportunity to work over time. Time and half is great you get 50% more pay for no additional effort on your part.

    I said this before, it should not be a responsibility of any company to enforce work standards outside their own company. This is why laws exist. In the US if you found out a company was violated labor laws, you do not call the the companies who buy from them or the consumer who buy from them you call the Government and they fix it. Notice all the people who are upset with the labor practices in other countries are not jumping on plane to protest these countries, not they run to Apple and protest Apple, Ask yourself why they are not in China or Vietnam fighting for these people.
    watto_cobra
  • Reply 10 of 27
    tzeshantzeshan Posts: 2,351member
    maestro64 said:
    What About the poor students, maybe they want to work over time to help pay for school. I know when I was in college I jump at any opportunity to work over time. Time and half is great you get 50% more pay for no additional effort on your part.

    I said this before, it should not be a responsibility of any company to enforce work standards outside their own company. This is why laws exist. In the US if you found out a company was violated labor laws, you do not call the the companies who buy from them or the consumer who buy from them you call the Government and they fix it. Notice all the people who are upset with the labor practices in other countries are not jumping on plane to protest these countries, not they run to Apple and protest Apple, Ask yourself why they are not in China or Vietnam fighting for these people.
    The media don't understand the difference between Apple and its suppliers. They always reported the news as Apple making iPhones in China. In fact, you look at the posts of Lkrupp, he thinks Apple is producing iPhones in China. 
    jcs2305radarthekatrandominternetpersonwatto_cobraviclauyyc
  • Reply 11 of 27
    No chance of ever replacing these human workers with robots in the US... ever?
    watto_cobra
  • Reply 12 of 27
    tzeshantzeshan Posts: 2,351member
    No chance of ever replacing these human workers with robots in the US... ever?
    The people keeping the robots working will be much more expensive. 
  • Reply 13 of 27
    dewmedewme Posts: 3,529member
    maestro64 said:
    What About the poor students, maybe they want to work over time to help pay for school. I know when I was in college I jump at any opportunity to work over time. Time and half is great you get 50% more pay for no additional effort on your part.

    I said this before, it should not be a responsibility of any company to enforce work standards outside their own company. This is why laws exist. In the US if you found out a company was violated labor laws, you do not call the the companies who buy from them or the consumer who buy from them you call the Government and they fix it. Notice all the people who are upset with the labor practices in other countries are not jumping on plane to protest these countries, not they run to Apple and protest Apple, Ask yourself why they are not in China or Vietnam fighting for these people.
    I disagree. Apple has a right to place whatever "standards" it wishes to place on its suppliers. It doesn't matter where or how these standards are enforced in the host country. The "law" does not stipulate or enforce quality standards that Apple places on its suppliers. Apple places requirements on its suppliers to meet regulatory and safety requirements, e.g., UL, CSA, CE, etc., that are often not required in the country of origin. Apple and its suppliers have contracts with terms and conditions, along with explicit and implicit standards, so Apple is calling a supplier out for not meeting Apple's standards.

    This is entirely about Apple's administration and enforcement of standards that it places on its suppliers. The fact that Apple can only enforce the lack of adherence to its standards through the terms of its business arrangements with suppliers underscores the fact that Apple isn't acting as an enforcer of any laws in other countries, they are only enforcing their own standards they expect their suppliers, regardless of the laws in those countries. 

    Apple is at the very least trying to establish standards it expects from its suppliers, standards that Aplle believes are in harmony with Apple's core values. How much of this is genuine versus how much is being done for "improved optics" is always subject to debate. Offshore manufacturing will always involve some appearance of exploitation, at least at the cost of human capital level. However, no company wants to add any additional appearance of exploitation such as lax labor laws or oppressive working conditions on top of the base level. I personally believe Apple is genuinely trying to do the right thing at an ethical level, but at the same time, at a business level, it realizes that even the appearance of not doing so would be very destructive to its global manufacturing and sales strategies and do harm to Apple's stakeholders.

    So yes, Apple and its leadership team are responsible and justified for placing these demands and enforcing standards on its suppliers. Whether you believe they are compelled by ethical reasons or business reasons reasons, or a bit of both, is up to you to decide. 

    radarthekatrandominternetpersonMplsPviclauyyc
  • Reply 14 of 27
    XedXed Posts: 820member
    Apple: Stop this abuse.
    Pega: Wow. You pay us 1% of the iPhone sales price, roughly $9 bucks to assemble this.
    We had to undercut to get the job. So what do you expect ?
    Apple: That’s just natural competition.
     
    How much should the assembler get paid? Are they having to source and buy all the components? Are they having to design the device? Are they paying for the distribution, legal fees, marketing, testing, and countless other things needed for a final product?Of course not! Their job is to assemble the product and they've agreed that they will do it for a specific price and within certain ethical and quality guidelines.

    Your comment makes me think you're the kind of person that steals from places you work because by comparison "they have so much" and you have "so little."
    edited November 2020 mike1viclauyyc
  • Reply 15 of 27
    No chance of ever replacing these human workers with robots in the US... ever?

    Why not robots in China?   That's where the expertise, investment and infrastructure is.  Here, we're only interested in defense spending and stock buybacks -- neither of which are good investments for the future. 

    The U.S. has to realize that industry gravitates to and flourishes in the best environment.   And, to attract and keep industry you need to be the best.  Not the best whiner.
    viclauyyc
  • Reply 16 of 27
    lkrupp said:
    Both Pegatron and Luxhare have invested in Vietnam plants for Apple, but Apple has reportedly been hesitant over moving iPhone production to the country because of workers' living conditions.
    Moving manufacturing from one communist totalitarian state to another communist totalitarian state, eh, Apple? I wonder if the children and grandchildren fathered by U.S. soldiers are working in those factories. 

    So why should the form of government matter where something is made?   All industry cares about is a stable, supportive environment.
    China and Vietnam chose Communism.   That's their choice.   We chose Democracy.   That was our choice.

    Your ideology means nothing to them or to industry. 

    It's no different than a christian saying phones should only be made in a christian country -- or a muslim saying their phone should be made in a muslim country.

    Industry cares nothing about either your politics or your religion.
    viclauyyc
  • Reply 17 of 27
    Apple has caused a massive race to the bottom for manufacturing costs so companies are doing what they need to do in order to win the contract. If the protection of the employees was so important why were these conditions not outlined in the contract? You can’t tell me that Apple wasn’t aware of these practices ahead of agreeing to do business with them - I would find it incredibly hard to believe that Apple didn’t do it’s diligence in ensuring that the costs could be met without reduction to the quality of the output. The number 1 reason why companies outsource from the US is that labor costs are too high.While I do believe at times unions abuse their position they were implemented to ensure fair treatment and wages for workers which has resulted in higher costs of doing business in the US. If fair and ethical treatment is a priority then move the manufacturing to the US - while not perfect, the US is one of the world’s leaders in protection of employees.
    edited November 2020
  • Reply 18 of 27
    dewmedewme Posts: 3,529member
    No chance of ever replacing these human workers with robots in the US... ever?

    Why not robots in China?   That's where the expertise, investment and infrastructure is.  Here, we're only interested in defense spending and stock buybacks -- neither of which are good investments for the future. 

    The U.S. has to realize that industry gravitates to and flourishes in the best environment.   And, to attract and keep industry you need to be the best.  Not the best whiner.
    The largest industrial and manufacturing robotics companies are mainly in Europe and Japan. I’d imagine there are a lot of robotics applications done in China but the incentives for automation are diminished by the ready access to a massive, and in most cases highly skilled (vocational), labor force. In complex manufacturing and assembly there’s always a need for humans to complement the automation. What we’re lacking in the US is the large pool of highly skilled workers. The reasons for the deficit are what needs to be addressed. 
    randominternetpersonGeorgeBMac
  • Reply 19 of 27
    NinjaMan said:
    Apple has caused a massive race to the bottom for manufacturing costs so companies are doing what they need to do in order to win the contract. If the protection of the employees was so important why were these conditions not outlined in the contract? You can’t tell me that Apple wasn’t aware of these practices ahead of agreeing to do business with them - I would find it incredibly hard to believe that Apple didn’t do it’s diligence in ensuring that the costs could be met without reduction to the quality of the output. The number 1 reason why companies outsource from the US is that labor costs are too high.While I do believe at times unions abuse their position they were implemented to ensure fair treatment and wages for workers which has resulted in higher costs of doing business in the US. If fair and ethical treatment is a priority then move the manufacturing to the US - while not perfect, the US is one of the world’s leaders in protection of employees.
    Did you read even 2 sentences of the article?

    It's precisely because these conditions were outlined in the contract that Apple is pulling their business from Pegatron. Apple was aware of the potential for these practices and therefore clarified that they wouldn't be acceptable.  Then they monitored the contract and ultimately determined that Pegatron was going to "extraordinary lengths to evade [their] oversight mechanisms."  SMH.

    Also, I expect most countries in Europe would get a good chuckle with your characterization of "
    the US is one of the world’s leaders in protection of employees."  The US, unlike the EU, generally assumes that adults can look after their own interest when agreeing to sell their labor to the market, and therefore need fewer "protections" (AKA restrictions in options available to them).
    dewme
  • Reply 20 of 27
    dewmedewme Posts: 3,529member
    NinjaMan said:
    Apple Capitalism has caused a massive race to the bottom for manufacturing costs so companies are doing what they need to do in order to win the contract. If the protection of the employees was so important why were these conditions not outlined in the contract? You can’t tell me that Apple a company involved in outsourcing wasn’t aware of these practices ahead of agreeing to do business with them - I would find it incredibly hard to believe that Apple a company involved in outsourcing didn’t do it’s diligence in ensuring that the costs could be met without reduction to the quality of the output. The number 1 reason why companies outsource from the US is that labor costs are too high.While I do believe at times unions abuse their position they were implemented to ensure fair treatment and wages for workers which has resulted in higher costs of doing business in the US. If fair and ethical treatment is a priority then move the manufacturing to the US - while not perfect, the US is one of the world’s leaders in protection of employees shareholder value.
    Somewhat better now ... but some of your assertions are still not entirely accurate. 

    I've had firsthand exposure to the dynamics of outsourcing and I know that each case is very different. I've seen entire divisions and factories of a company I worked for crated up by the outgoing US workers and shipped to China, lock stock and barrel - because the business they were in was no longer profitable to perform in the US, and hadn't been for at least a decade prior. The only thing left in the US was empty shells of buildings and superfund cleanup problems.

    I've seen the manufacturing arm of a company I worked for sold off to a contract manufacturer who then walled off the manufacturing parts of the business from the engineering parts of the business, even at the same sites, because the manufacturing workers were now building products for both our company and our competitors. These manufacturing worker's job security and benefits improved, at least temporarily, because they were no longer bound to the success of only one company. But anyway, this move was done to get those former manufacturing employees off the books, especially as the company was moving more towards services, software, and automation.

    I was heavily involved with creating a new product line that was focused on selling into non-US low-cost markets where the company's existing products could not compete due to cost and capabilities that exceeded the need in those countries. Imagine you have a high-end product line that requires a vast sales and distribution channel and you're trying to compete against local companies who are selling lower end stuff out of the back of their shops or online. To get your toe in the door and establish presence in emerging markets with tremendous upside potential you have to tailor your way of doing business to fit the market. This involves developing the products, including hardware and software locally, and taking advantage of lower costs, and cough cough ... some nice tax incentives and subsidies to set up shop in countries that are very aggressive about attracting new businesses that create local jobs. So in this case it wasn't about outsourcing at all, it was about establishing presence in new markets, tailoring your product to the market, competing at a different level, and of course taking advantage of incentives that materially helped the overall business, in other words, increasing shareholder value. 

    I can't provide any detailed specifics about labor rates, but I can say that the deltas between the US and locations where (software, hardware, and systems) development and manufacturing are outsourced tend to shrink over time and the cost of doing business always increases due to other factors like shipping, time differences, currency exchange rates, and several other factors, like time boxed subsidies running out. This is why you see companies moving from say China or Singapore to the Philippines, Viet Nam, Columbia, or wherever. It's a constant challenge and a continuous struggle, but capitalism is a cruel master and you have to play by its rules if you're going to stay in that game.


    randominternetpersonviclauyyc
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