Labor conditions worsening at big Apple supplier in China, nonprofit says

As Apple’s sales and profit have slowed, Chinese workers making its iPhones are feeling the pain, a new report says.

China Labor Watch, a New York-based nonprofit group that advocates for workers’ rights in China, alleges in a report released this week that working conditions have worsened as Apple suppliers feel the effects of the company’s declining fortunes — although Apple is still raking in billions of dollars from its iPhones, computers and other devices. (In July, the company reported a third-quarter profit of $7.8 billion, compared with $10.7 billion in the same period a year ago. Revenue from the iPhone was down 23 percent.)

The report focuses on Pegatron, a supplier that employs tens of thousands of workers in mainland China and is the second-biggest contract electronics manufacturer in the world after Foxconn, according to Bloomberg Intelligence.

“Currently, Apple’s profits are declining, and the effects of this decline have been passed on to suppliers,” the report says. “To mitigate the impact, Pegatron has taken some covert measures to exploit workers.”

A news report this summer from Digitimes, a Taiwan newspaper, also said Apple suppliers were feeling pressure to reduce costs.

All this is a headache for Apple, which for years has been under pressure to improve working conditions for the foreign workers who make its products and regularly conducts supplier audits. The company has been touting progress in this area for the past few years, especially under CEO Tim Cook’s watch. In this year’s corporate responsibility report, Chief Operating Officer Jeff Williams said that “work-hour compliance” among Apple’s suppliers reached 97 percent in 2015, which he said was “virtually unheard of” in the industry.

Apple has set a 60-hour maximum workweek for its suppliers. But CLW says it found that “excessive and illegal overtime work is still prevalent at Pegatron” and that employees are forced to work overtime, with some interns working 80 hours a month in overtime.

China Labor Watch’s investigation, which includes interviews with workers plus comparisons of more than 2,000 worker pay stubs from May 2015 to May 2016, also found that although the average wage in China is up, Pegatron has cut benefits so its workers are actually making less in 2016 than they were last year.

From the report: “In 2015, workers’ hourly wage was $1.85 USD. In 2016, workers’ hourly wage increased to $2.00 USD, and after deductions, this amounts to only $1.60 USD.”

An Apple spokesman declined to comment to SiliconBeat; we have requested comment from Pegatron but have not received a response.

Bloomberg reported in April from Pegatron’s factory, which has implemented a high-tech system complete with turnstiles and face scanners that management says is supposed to prevent people from working too much overtime. One worker told Bloomberg that “we never work more than 6o hours.” But another Pegatron worker told Bloomberg that low wages mean some people actually want to work overtime.

The CLW report addresses the Bloomberg report, saying its reporter was “only able to visit the areas that Pegatron wanted people to see.” The group also said it examined pay stubs after the Bloomberg report and found that “excessive overtime persists.”

The report by CLW, which notes that it has published a report about Pegatron’s working conditions every year since 2013, comes ahead of the expected release of the iPhone 7 this year, and presumably a ramp-up in production. The phone is expected to be unveiled at an Apple event next month.


Photo: Apple Vice President Greg Joswiak introduces the Apple iPhone SE at a product launch event March 21, 2016, at Apple headquarters in Cupertino. (Karl Mondon/Bay Area News Group)


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  • hiramwalker

    Pegatron is not exclusively an Apple supplier, and Apple only can monitor those facilities that are producing Apple products. This article is very unspecific about which Pegatron facilities are in violation and which products they produce. In fact, no mention of any other Pegatron customers leaves a false impression. Although Apple is about 27% of Pegatron’s sales but no mention of the other 73%.

    • fstein

      Adding this quote .. of a quote:

      “From the report: “In 2015, workers’ hourly wage was $1.85 USD. In 2016, workers’ hourly wage increased to $2.00 USD, and after deductions, this amounts to only $1.60 USD.””

      So was that $1.85 USD after deductions – an apples to apples comparison – haha. We don’t know. I want the reporter to dig hard to find facts that support the headline. But his facts are slippery.

      I’m more suspicious because Apple’s business is slower this year than last and all there are no new physical packages. Generally this should reduce the intense pressure that would have occurred when new form factors broke sales record, as in Aug 2014 through Spring 2015.

    • 99%

      I did some back-of-the-envelope calculations from the perspective of the Pegatron production worker:

      Let’s say 60 hours/week is the normal work schedule. There are on average 4.3333 weeks in a month; that gets you to 260 hours. Add in the 80 hours of overtime reported and you get 340 hours a month.

      Let’s assume $1.85 was in fact take-home after all deductions, otherwise the CLW criticism wouldn’t make sense. Then you need to remember the renminbi has gotten weaker against the US$ during this time period. I assume an average exchange rate of 6.25 against the US dollar in 2015 and 6.55 so far this year.

      All this produces a take-home pay of ¥3,931/month last year and ¥3,536 this year. Enough to make workers complain but still high enough (including the dormitories and cafeterias) to probably have an excess supply pool of willing workers in China. It’s a tough job, tough enough that many quit as the Bloomberg article told you. But that’s real life in China.

  • fstein

    Pegatron makes about 30% of the iOS devices. And Apple is only about 30% of their business.
    The crux of the CLW thesis is their assertion Apple demands 5% to 10% annual cost reductions. Process improvements, improved tools, building mature products (as occurred during the time period referenced) should make cost improvements possible, without taking it out of the workers.