Apple suspends new orders with Pegatron after labor abuse
Apple iPhone assembler Pegatron will reportedly receive no new business from the Cupertino company until it takes action to prevent student labor violations.
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.
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.
Comments
Translation: I’m about to state something based on no evidence gleaned from the article.
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.
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.
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.
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."
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).
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.