The main producer of Apple’s products as well as products for other well-known electronics makers is Hon Hai Precision Industry, which goes by the trade name Foxconn. Foxconn is a Taiwanese company that has become one of the world's biggest employers. Foxconn makes over 40 percent of the world’s electronics products---including for such brands as Amazon, Dell and Hewlett-Packard---and is China’s largest and most prominent private employer, with 1.2 million workers.
Foxconn is the world’s biggest contract electronics supplier and and manufacturer. Founded by the Taiwanese industrialist Terry Gou, it is a $60 billion operation that makes Apple iPhones and devices for Hewlett Packard, Sony, Dell, Nokia and others. It has two huge campuses in Shenzhen, where about 400,000 employees live and work.[Source: David Barboza, New York Times, June 6, 2010; Peter Brieger, AFP, May 2010; Barbara Demick, David Sarno, Los Angeles Times, June 2010]
The main Foxconn facility covers about one square mile and is a city within a city, with its own bakeries, banks, fast food outlets and acupuncture clinics. It teems with uniformed migrant workers, filing into work at gray, low-slung factory complexes, or entering utilitarian high-rise dormitories.Workers say they rarely have time to enjoy the facilities’ amenities like Olympic-size swimming pools. “How can I have time for swimming?” a 21-year-old assembly line worker said, adding she had only 30 minutes to eat her lunch, including the walk to and from the cafeteria. [Ibid]
John Bussey wrote in the Street Journal,”Hon Hai is a colossus because its founder, Terry Gou, early and adroitly capitalized on labor and supply chains in China, building economies of scale competitors couldn't easily match. His factories include dorms, dining halls, book stores and recreation facilities. And they are versatile: In meetings with visitors, Mr. Gou is given to leaping from his chair to outline his next idea for integrating production on a large pad of paper. [Source: John Bussey,Wall Street Journal, June 3, 2011]
Companies like Apple use Foxconn because it was one of the few enterprises that can meet its production requirements and churn out millions of devices a month. Apple requires its suppliers to abide by a code of conduct in which certain safety standards have to be met and workers are restricted from over 60 hours a week. The company performed an audit of more than 100 of its production facilities in 2009 and found that half its partner facilities violated the policy of workers working over 60 hours a week. [Op Cit, New York Times]
Foxconn has started to shift production inland with a few giant new factories, taking entire supply chains with them.
Foxconn’s Relationship With It’s a-List Brands
John Bussey wrote in the Street Journal, It's a tricky dance between first-world brands and third-world production. Customers like Apple can't afford the hit to their reputation that dust explosions and worker suicides tend to produce. Hon Hai can't afford to alienate customers as big as Apple.
So the electronics companies have created their own oversight. Apple audits Hon Hai's facilities and requires its suppliers to agree to a "Supplier Code of Conduct" that sets expectations for worker protections and factory conditions. It also produces an annual "Supplier Responsibility" report, detailing efforts to assure safety, fairness in hiring, and attention to pollution control, among other things.
Dell conducts on-site reviews and has a code of conduct for suppliers. "Earlier this year, our team reviewed Foxconn's proposed procedures to improve working conditions and employee morale," David Frink, a Dell spokesman says. Then Dell went back and walked the line at Hon Hai's plant in Shenzhen to see if the initiatives were working. H-P and other companies use similar measures and codes of conduct.
Poor Working Conditions at Foxconn
John Bussey wrote in the Street Journal, “Compared with conditions at factories when the West industrialized, Hon Hai may not look half bad. But labor groups complain about low morale, subsistence wages, overcrowding, and excessive hours on Foxconn production lines. Before the recent dust explosion, an advocacy group in Hong Kong pummeled the company for what it said were dirty and dangerous conditions at the Chengdu plant. In the last 18 months, there have been a spate of highly publicized suicides at Hon Hai facilities. [Source: John Bussey,Wall Street Journal, June 3, 2011]
The company has defended its treatment of workers and announced big wage increases in 2010 to address employee discontent. It says that worker safety is its top priority and it will fix any problems at its factories. A spokesman says Hon Hai is "applying the highest possible safety practices."
Roughly 300,000 people?most of the them migrants between aged 18 to 24?work in the drab factory buildings at one of the sprawling Foxconn facility in Shenzhen. Many work long hours for low pay under heavy pressure, sleeping seven to a room hundreds of kilometers away from their home villages. [Source: David Barboza, New York Times, June 6, 2010; Peter Brieger, AFP, May 2010; Barbara Demick, David Sarno, Los Angeles Times, June 2010]
Foxconn has a reputation for military-style efficiency that includes mapping out assembly line workers? movements in great detail and monitoring tasks with a stopwatch. A typical worker shares a dormitory room with nine other workers, eats in the campus cafeteria and works 11 to 13 hour shifts. Often they do little more than work and sleep. Some have no friends on campus and do not even know the names of their roommates. Shortage of warm water in the dorm often meant cold showers, and where even simple pleasures like snacks were forbidden. [Source: David Barboza, New York Times, June 6, 2010]
Foxconn Electronics factory in Shenzhen
Liu Zhiyu, a reporter with the Southern Weekly, worked undercover at the factory for a month. He said the employees rarely stop working except to eat and sleep and are forced to put in long hours and work overtime just make a $130 month, “If you don’t work overtime, you don’t make money,” he wrote. “If you take the overtime, the fatigue will make your whole body feel the pain.”
Many workers quit not long after they start working for the company. In interviews with the New York Times employees said the typical Foxconn hire lasted just a few months at the factory before leaving, demoralized. They complain about military-style drills, verbal abuse by superiors and self-criticisms they are forced to read aloud, as well as occasionally being pressured to work as many 13 consecutive days to complete a big customer order---even when it means sleeping on the factory floor. [Barboza, Op. Cit]
Although the legal limit in China is 36 hours of overtime a month, several workers interviewed here said they regularly exceeded that by wide margins. They leave so soon because they can’t adjust to factory life, said Wang Xueliu, a production team leader who has worked at Foxconn for six years. He, too, plans to leave soon, to join a new business with his brother making candles for export. [Ibid]
Apple-Foxconn Factories in China Accused of Exploitation
animation of Foxconn workers work day In Shenzhen and Chengdu a joint Foxconn workforce of 500,000 provides labor for Apple. The Guardian reported that interviews by center for Research on Multinational Corporations and the human rights group Students & Scholars Against Corporate Misbehavior (Sacom) with mainly migrant employees and managers have laid bare the dark side of those profits: a Dickensian world of work that would be considered shocking in the west. [Source:Gethin Chamberlain, The Guardian, April 30, 2011]
"Sometimes my roommates cry when they arrive in the dormitory after a long day," one 19-year-old girl told investigators. "It's difficult to adapt to this work and hard to be away from your family." Li (not her real name) arrived a few months ago to join the rapidly growing workforce at the newest factory opened by Foxconn. She was attracted, like many of her colleagues, by government adverts promising work and good pay.
Gethin Chamberlain wrote in The Guardian, “Apple is publicly committed to good employment practice. Its supplier code of conduct demands that employees in its supply chain are treated with respect and dignity. But Li claims that her experience has been one of illegally long hours and draconian rules for a basic daily wage of as little as $5.20. Like her, many Foxconn workers manage to go home only once a year.
While Apple says it expects high standards from suppliers, its own audit reports suggest that many fall short. The latest figures show Foxconn's Chinese factories are not alone in working staff beyond the legal limits, with fewer than one in three supplier factories obeying the rules on working hours. The audits also show that 30 percent broke rules on wages and benefits, while 24 percent were in breach of strict rules on involuntary labor.
In Shenzhen and Chengdu, the workforce knows only too well that such conditions can all too often lead to despair and, last summer, to tragedy.In a statement, Apple said: "Apple is committed to ensuring the highest standards of social responsibility throughout our supply base. Apple requires suppliers to commit to our comprehensive supplier.
Eventually, the company raised wages at Shenzhen, though it is currently switching much of its production to Chengdu, where it expects to eventually employ 200,000 people. There are about 400,000 workers at Shenzhen, a number expected to drop to around 300,000.
Apple's financial results for its fiscal first quarter of 2011 showed record revenue of $26.74 billion and record net quarterly profit of $6bn worldwide. It sold 4.13 million Macs during the quarter, 16.24 million iPhones, 19.45 million iPods and 7.33 million iPads. About 15 million iPads were sold worldwide in 2010, with up to 45m iPads expected to be sold in 2011.
Working and Living at an Chinese Apple- Foxconn Factory
Gethin Chamberlain wrote in The Guardian, “For the first few days at the factory, Li said that she and her colleagues---most seem to be aged 18-20---were put through military drills by former soldiers: "They made us do marching and standing still and walking. It was very boring." [Source: Gethin Chamberlain, The Guardian, April 30, 2011]
The dormitories where she and most others live offer little comfort. Up to 24 people can share one room and the rules are strict, even prohibiting the use of a kettle or a hairdryer. One worker who did was forced to write a confession letter: "It is my fault. I will never blow my hair inside my room. I have done something wrong. I will never do it again."
Many workers interviewed claimed that they were regularly required to work far in excess of the 36 hours of overtime per month that Chinese law---and therefore international labor law---permits. At Chengdu it was claimed that anything between 60 and 80 hours of overtime a month was normal. One worker produced a payslip showing 98 hours of extra time in a single month---nearly three times the legal maximum and in breach of Apple's own code of conduct. The rule that employees should have one day off in seven is often flouted, some claimed.
Others said that if they missed targets, they had to work through their lunch breaks to make up for it. When they do get a day off, they spend much of it catching up on sleep. During work, some employees claimed they were forbidden to speak to each other and some were forced to stand for hours without a break. Foxconn, a Fortune 500 company, does not deny it breaks the overtime laws, but claims that all overtime is voluntary.
Workers who step out of line can be publicly humiliated, it is alleged. "When a worker makes a mistake, when he talks or laughs loudly, he will be humiliated," a production worker said. "Sometimes you have to stand like a soldier in front of everybody. It is a loss of dignity and means an extra pressure for the worker."
A typical working day in Chengdu means getting up at 6.30am, catching a bus for the 30-minute ride to the factory at 7.10am and attending a compulsory---but unpaid---assembly at 8.10am, before starting work at 8.30am. Shifts, including overtime and breaks, end at 8.30pm. Night shifts follow a similar pattern; with demand for the iPad2 outstripping supply in many countries, this is a round-the-clock operation. Demand for the first iPad was so intense that workers claim they had to put in a seven-day week during peak production period.
"We only had a rest day every 13 days," claimed one. "And there was no overtime premium for weekends. Working for 12 hours a day really made me exhausted." Sacom says the company's initial response to the suicides was to bring in monks to exorcise evil spirits. The chief executive later suggested workers were committing suicide to secure large compensation payments for their families. Workers were even asked to sign a document promising not to commit suicide and pledging that if they did their families would not claim more compensation than the legal minimum.
Apple’s Response to the Foxconn Suicides and Charges of Overwork
Gethin Chamberlain wrote in The Guardian, “The company concedes that it has faced "some very challenging months for everyone associated with the Foxconn family and the loss of a number of colleagues to tragic suicides". The anti-suicide nets, says Louis Woo, special assistant to the chairman, were suggested by psychologists and other suicide prevention experts. The anti-suicide pledge, Foxconn said, was the idea of the official employee labor union at a rally last year and was "dedicated to the promotion of treasuring your life". Critics point out that in China, unions are not independent bodies. [Source: Gethin Chamberlain, The Guardian, April 30, 2011]
When The Guardian challenged Woo over the NGOs' findings, he said the workers' criticisms were unduly harsh. Responding to the allegations of public humiliation, he said: "It is not something we endorse or encourage. However, I would not exclude that this might happen given the diverse and large population of our workforce. But we are working to change it."
Not all employees had to stand, he said, and there was no "ban" on talking in the factories. Instead, employees were "encouraged not to engage in conversations that may distract them from the attention needed to ensure accuracy and their own safety". NGO investigator Leontien Aarnoudse is unimpressed. Although Apple and Foxconn make enormous profits, she said, employees "work excessive overtime for a salary they can hardly live on while they are inhumanely treated by the management.
"The work is so monotonous and they are so young. When they start this job they have no idea what they are letting themselves in for. They don't have a social life any more. Their life is just working in a factory and that is it."
Explosion and Four Workers Killed at Chinese Factory That Makes Ipads
Foxconn workers replaced by robots May 2011 three workers were killed and 15 were injured in an explosion in the workshop of a factory in Chengdu owned by a supplier to Apple and other electronic companies such as Hewlett-Packard, Dell and Sony.
According to the Wall Street Journal the factory makes Ipads and is run Hon Hai Precision Industry (Foxconn). The circumstances of the explosion and deaths were largely hidden. Two weeks after the explosion, there were only preliminary reports of what happened. Apple doesn't even publicly acknowledge the iPad is made in Chengdu. What is known is that one of the more primitive of industrial problems sparked the explosion: A metal polishing shop was improperly ventilated or cleaned, dust collected in the air or on surfaces, and then, in a moment of considerable violence, the dust ignited.
John Bussey wrote in the Street Journal, “Hon Hai said it investigated the accident and resumed operations at its polishing workshops after improving ventilation and other safety-related practices. Apple says it is "working closely with Foxconn to understand" what happened. And the Chinese government, barely raising an eyebrow, has chided Hon Hai for not paying enough attention to safety. In China, where industrial accidents are frequent by-products of headlong, government-led development, this was a notable moment of the pot calling the kettle black.
In the U.S., where nearly 150 people have been killed and more than 850 injured since 1980 in dust explosions similar to Chengdu's, businesses have been shut down for violating safety rules. In 2007, the Occupational Safety and Health Administration launched a national inspection program that targeted facilities that handle combustible dusts, and it has since held open meetings with companies to discuss solutions.
This sort of national standard-setting is rare in places like China, where foreign companies would likely welcome it. The accident in Chengdu was tragic, but Apple may have gotten off easy this time. If the body count had been 103 instead of three, global public opinion would have been more mightily stirred. And in that instance, an arm's length would have proved little protection for the company and its brand.
Apple Reveals Information About Child Labor and Poisoned Workers
In a company report released in February 2011, The Guardian reported, Apple said it found 91 children working at its suppliers in China 2010, nine times as many as the previous year, and 137 workers were poisoned by n-hexane. The company also said less than a third of the facilities it audited were complying with its code on working hours. Apple usually refuses to comment on which firms make its goods, but came under increased scrutiny last year following multiple suicides at electronics giant Foxconn, one of its main suppliers. In January 2011, anti-pollution activists accused the firm of being more secretive about its supply chain in China than almost all of its rivals. [Source: Tania Branigan, The Guardian February 15, 2011]
The report says Apple found 91 children working at 10 facilities. The previous year it found 11 at three workplaces. It ordered most to pay the children's education costs but fired one contractor which was using 42 minors and had "chosen to overlook the issue", the company said. It also reported the vocational school that had arranged the employment to the authorities for falsifying student IDs and threatening retaliation against pupils who revealed their ages. Apple said it had strengthened its checks on age because of concerns about the falsification of ages by such schools and labor agencies. It also audited 127 facilities last year, mostly for the first time, compared with 102 in 2009.
Foxconn in Taiwan
The report showed a marked decrease in compliance on working hour requirements of a maximum 60-hour week with one day off. In 2009, only 46 percent met the standard; last year that fell to 32 percent . Only 57 percent were compliant with its code on preventing working injuries and 70 percent or fewer met standards on air emissions, managing hazardous substances, and environmental permits and reporting.
But there were some signs of improvement in other areas. Compliance on wages and benefits improved from 65 percent in 2009 to 70 percent. The report also said that 99 percent of facilities met its freedom of association requirements. But independent unions are not allowed on the Chinese mainland and Geoff Crothall, of Hong Kong's China labor Bulletin, said: "It is Henry Ford-style freedom of association: You can have any union as long as it is [in] the Associated Federation of Trade Unions."
Foxconn Worker Commits Suicide Over Missing iPhone in China
In July 2009, an employee at Foxconn factory that makes Apple iPhones killed himself after his house was raided and he was allegedly beaten up following the disappearance of an iPhone prototype. The dead worker, Sun Danyong, 25, was responsible for sending iPhone prototypes to Apple. After he reported to his bosses that he was missing a unit early last week his apartment was then raided, and he was beaten and imprisoned by security guards, his friends told the Southern Metropolis Daily. Three days after reporting the missing iPhone Sun jumped from the 12th floor of his apartment building. [Source: Alexandra Topping The Guardian, July 22, 2009]
Jill Tan, an Apple spokeswoman in Hong Kong, issued a brief statement about the incident. “We are saddened by the tragic loss of this young employee...We require our suppliers to treat all workers with dignity and respect.” Sun, like other employees dealing with Apple's new products, was under huge pressure to maintain a high-level of secrecy over the gadgets. The launches of new Apple products produce huge anticipation and excitement in fans and the media and the technology giant is constantly targeted by journalists, fans and its competitors who want to uncover its secrets.
Before his death Sun wrote in text messages that he had been beaten and humiliated during interrogations. Gu Qinming, the security chief who led the raid on Sun's house was suspended and turned over to the police, Foxconn said in a statement. Gu denied hitting Sun, adding that he thought the employee was lying about the missing device. After the raid failed to uncover the missing iPhone, Sun had been ordered to go to Gu's office, Gu told the Southern Metropolis Daily. “I got a bit agitated. I pointed my finger at him and said that he was trying to shift the blame,” Gu was quoted as saying. I was a little angry and I pulled his right shoulder once to get him to tell me what happened. It [the beating] couldn't have happened,” he told the paper.
Foxconn executive Li Jinming said in a statement that Sun's death revealed that the company had to work harder to help employees deal with psychological pressures. “Sun Danyong graduated from a good school. He joined the company in 2008. He had an extremely bright future. The group and I feel deep pain and regret when a young person dies like this,” he said.
Apple Criticized for China Supply Chain Pollution
In August 2011, Reuters reported: “Chinese environmental groups accused Apple Inc of turning a blind eye as its suppliers pollute the country, the latest criticism of the technology company's environmental record. Toxic discharges from "suspected Apple suppliers" have been encroaching on local communities and environments, a coalition of environmental organizations said on Wednesday in a 46-page report alleging efforts to conceal pollution. [Source: Reuters, Michael Martina, August 31, 2011]
"The large volume of discharge in Apple's supply chain greatly endangers the public's health and safety," said the report, issued on the website of the Beijing-based Institute of Public and Environmental Affairs. The report alleges that 27 suspected Apple suppliers had severe pollution problems, from toxic gases to heavy metal sludge. In one case, the report said, a nearby village experienced a "phenomenal rise in cases of cancer."
Apple has decided to "take advantage of loopholes" in developing countries' environmental management systems to "grab super profits," it said. Apple does not disclose who its suppliers are. The environmental groups said public documents and five months of research and field investigation led to the findings in the report. "A large number of IT supplier violation records have already been publicized; however, Apple chooses not to face such information and continues to use these companies as suppliers. This can only be seen as a deliberate refusal of responsibility," the report said.
This is not the first time Apple has been targeted for environmental infractions and its secretive supply chain management in Chinese factories, where it assembles most of its products.In January, several of the same non-governmental organizations issued a report alleging woeful environmental records for the iPad and iPhone maker's China-based contract manufacturers.In February, workers at a Taiwanese-owned factory in eastern China making touch screens on contract for Apple aired their grievances over a chemical poisoning after using N-Hexane, a toxic solvent.
Apple says it maintains a rigorous auditing regime and all its suppliers are monitored and investigated regularly. "Apple is committed to driving the highest standards of social responsibility throughout our supply base," Apple spokeswoman Carolyn Wu told Reuters."We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made," she said.
Apple is not alone in drawing criticism from environmental groups. Some of the world's leading brands rely on Chinese suppliers that pollute the country's environment with chemicals banned in Europe and elsewhere. Many Western multinationals -- including toymaker Mattel Inc, which suffered a toxic lead paint scandal in 2007 -- have struggled to regulate product quality across scores of suppliers in knotted Chinese supply chains.
Foxconn Lifts Wages and Allows Closer Scrutiny
In February 2012, The Guardian reported: Foxconn, the Taiwan-owned manufacturer with giant assembly facilities in mainland China which is one of Apple's main contractors, says it has raised wages by up to 25 percent in the second major salary hike in less than two years. As the world's largest electronics contract manufacturer, it has come under intensive scrutiny after a spate of suicides last year and reports of long hours for the hundreds of thousands of staff. Its facilities are scheduled for inspection by a team from the US Fair Labor Association, at the prompting of Apple. [Source: The Guardian, Charles Arthur, February 20, 2012]
The continuing reports of deaths and distress at Foxconn have created a PR problem for Apple, which is seen as the principal user of the company's facilities. So far Hewlett-Packard, Microsoft and Dell have not commented on their use of Foxconn. None is presently a member of the FLA, whose membership is principally made of clothing companies with suppliers in the Far East. Tim Cook, Apple's chief executive, said that Apple took working conditions very seriously and that every worker had the right to a fair and safe work environment. Apple has also given ABC News's Nightline TV program special access to the Foxconn plants.
Foxconn employs about 1.2 million workers at a handful of massive plants in China which are run with almost military discipline, in which staff work for six or seven days a week and up to 14 hours per day. The workers assemble iPhones and iPads for Apple, Xbox 360 video game consoles for Microsoft, and computers for Dell and Hewlett-Packard. Foxconn is one of China's largest single private employers.
Chinese workers at Foxconn now receive between 1,800-2,500 yuan ($286-$400) per month following the raises that became effective from 1 February, the company said. "This is the way capitalism is supposed to work," David Autor, an economist at the Massachusetts Institute of Technology, told the New York Times . "As nations develop, wages rise and life theoretically gets better for everyone. "But in China, for that change to be permanent, consumers have to be willing to bear the consequences. When people read about bad Chinese factories in the paper, they might have a moment of outrage. But then they go to Amazon and are as ruthless as ever about paying the lowest prices."
Foxconn is also taking measures to limit workers' total work hours. The raises come as a compensation for their reduced overtime, company spokesman Simon Hsing said in a statement. Foxconn said it is cooperating with the FLA inspectors, pledging again to provide a safe and fair work environment.
The company has denied allegations that it ran excessively fast assembly lines and demanded too much overtime, but after the suicides it soon announced two pay hikes that more than doubled basic worker salaries to up to 2,000 yuan per month. In January 2012 dozens of workers assembling video game consoles climbed to a Foxconn factory dormitory roof in the central Chinese city of Wuhan and some threatened to jump to their deaths amid a dispute over job transfers that was later defused.
The New York Times reported that workers welcomed the announced raises and overtime limits, though some were unsure they would cause much real change. "When I was in Foxconn, there were rumors about pay raises every now and then, but I've never seen that day happen until I left," said Gan Lunqun, 23, a former Foxconn worker. "This time it sounds more credible." "China can't guarantee the low wages and costs they once did," Ron Turi of Element 3 Battery Venture, a consulting firm in the battery industry, told the paper. "And companies like Foxconn have developed international profiles, and so they have to worry about how they're seen by people living in places with very different standards." Foxconn has also announced plans to invest in millions of robots and automate aspects of production.
Apple, Foxconn Vow to Overhaul Work Conditions at Their Chinese Plants
In March 2012, Rachel Louise Snyder wrote in the Washington Post: Chief executive Tim Cook, on a trip to China, visited a Foxconn factory and released photos of grinning workers on the iPhone production line. Cook’s trip came after months of investigations, centered on Foxconn, of Apple’s alleged sweatshop conditions. As the story gained momentum---in part because of a theatrical performance by a man named Mike Daisey, who has since apologized for fabricating much of his narrative---Apple hired a third-party monitoring group, the Fair Labor Association (FLA), to audit working conditions at its factories. [Source: Rachel Louise Snyder, Washington Post, March 30, 2012]
At the same time Reuters reported: In a landmark development for the way Western companies do business in China, Apple Inc said it had agreed to work with partner Foxconn to tackle wage and working condition violations at the factories that produce its popular products. Foxconn - which makes Apple devices from the iPhone to the iPad - will hire tens of thousands of new workers, clamp down on illegal overtime, improve safety protocols and upgrade worker housing and other amenities. [Source: Poornima Gupta and Edwin Chan, Reuters, March 29, 2012]
The moves come in response to one of the largest investigations ever conducted of a U.S. company's operations abroad. Apple had agreed to the probe by the independent Fair Labor Association (FLA) in response to a crescendo of criticism that its products were built on the backs of mistreated Chinese workers. The association, in disclosing its findings from a survey of three Foxconn plants and over 35,000 workers, said it had unearthed multiple violations of labor law, including extreme hours and unpaid overtime.
Apple CEO Tim Cook, who company critics hoped would usher in a more open, transparent era at Apple after he took over from the late Steve Jobs last year, has shown a willingness to tackle the global criticism head-on. "We appreciate the work the FLA has done to assess conditions at Foxconn and we fully support their recommendations," an Apple spokesman said. "We share the FLA's goal of improving lives and raising the bar for manufacturing companies everywhere."
With 1.2 million workers, Foxconn---an affiliate of Taiwan's Hon Hai Precision Industry---is by far Apple's largest and most influential partner. In recent months, Apple's CEO has announced the results of an internal audit into more than a 100 of Apple's suppliers; caved to Wall Street pressure and put in place a dividend and stock buyback program; and addressed labor abuse protests directly. Cook reportedly told Chinese Vice Premier Li Keqiang he was working to resolve labor issues in the country. Apple joined the FLA in January and requested the group conduct a full-scale audit of its Chinese manufacturing.
Fair Labor Association Investigation of Apple-Foxconn Facilities
Charles Duhigg and Steven Greenhouse wrote in the New York Times: The shift comes after a far-ranging inspection by the Fair Labor Association, a monitoring group, found widespread problems---including at least 43 violations of Chinese laws and regulations, and numerous instances where Foxconn defied industry codes of conduct by having employees work more than 60 hours a week, and sometimes more than 11 days in a row. The group released a report Thursday with its findings. [Source: Charles Duhigg and Steven Greenhouse, New York Times, March 29, 2012]
The monitoring group, which surveyed more than 35,000 Foxconn employees and inspected three large facilities where Apple products are manufactured, also found that 43 percent of workers had experienced or witnessed accidents, and almost two-thirds said their compensation “does not meet their basic needs.” Many said that the unions available to them do “not provide true worker representation.”
?There’s this lingering sense among workers that they?re in a dangerous place,” Auret van Heerden, president and chief executive of the Fair Labor Association, said in an interview. But Foxconn has “reached a tipping point,” he added. “They have publicly promised to make changes in a manner that they will have to deliver on it.”
Apple, which recently joined the Fair Labor Association, had asked the group to investigate plants manufacturing iPhones, iPads and other devices. In past months, a growing outcry over conditions at such factories has drawn protests and petitions, and several labor rights organizations started independently scrutinizing Apple’s suppliers. Earlier this week a collection of advocacy groups sent Apple an open letter calling on the company to “ensure decent working conditions at all its suppliers.”
Since January, Apple has released the names of 156 of its suppliers---which it had previously declined to identify---and has started posting regular monitoring reports on the number of hours worked by factory employees. Apple, which has audited its suppliers since 2006, said in a statement Thursday that it shares “the F.L.A.’s goal of improving lives and raising the bar for manufacturing companies everywhere.”
Many of the group’s findings align with what Apple has found in the audits the company performs, said Mr. van Heerden. But the group’s findings that unions and other worker representation groups are dominated by nominees chosen by management contradict Apple’s reports that most factories allow free association among workers. The association’s findings also strongly contradict Foxconn’s statement, sent earlier this year to The New York Times, that workers generally “are limited to no more than 60 hours per week.” Among other things, the group found that Foxconn in the past prepped workers with answers to give to monitors to avoid detection of violations. “We found a cheat sheet,” said Mr. van Heerden. “If you?re asked how many hours you work, say this, for instance. Since we?re not asking the questions that conventional auditors ask, we were able to see what’s really going on.”
Grim Findings of the Fair Labor Association Report on Apple-Foxconn Plants
Juliette Garside wrote in The Guardian: An audit of Apple Chinese factories details "serious and pressing" concerns over excessive working hours, unpaid overtime, health and safety failings, and management interference in trade unions. In the most detailed public investigation yet into conditions at Foxconn, which assemble millions of iPhones and iPads each year, the independent Fair Labor Association found that more than half of employees had worked 11 days or more without rest. [Source:Juliette Garside, The Guardian, March 30, 2012]
More than 43 percent of workers reported experiencing or witnessing an accident at the three plants audited. Foxconn is China's largest private-sector employer, and its activities have turned the coastal town of Shenzhen into the electronics workshop of the world. Health and safety breaches found by auditors included blocked exits, lack of or faulty personal protective equipment and missing permits, which the FLA said was remedied when discovered.
Despite several suicides, which raised the alarm two years ago, and an explosion that killed three workers last year, Foxconn still failed to consult workers on safety, with the committees "failing to monitor conditions in a robust manner", the report found. The management was found to be nominating candidates for election to worker committees, with the result that "committees are composed not by those who need representation, but instead are dominated by management representatives". This left workers feeling "alienated" and lacking confidence in safety procedures.
In December 2011, 46 percent of the workforce clocked up to 70 hours per week, although Chinese labour laws say employees should work no more than an average of 49 hours a week, including overtime. The average maximum week was 61 hours, and between November and January more than a third of staff did not receive the statutory one day off in seven.
The breaches were discovered during a month-long investigation, described by the FLA which has previously specialised in auditing clothing trade sweat shops as a "full-body scan"; 35,000 employees were asked to fill in anonymous forms and auditors patrolled factory floors and examined paperwork. The audit focused on the Guanlan, Longhua and Chengdu plants, which have a combined workforce of 178,000.
While high turnover made Foxconn dependent on overtime, workers were often denied pay for extra hours, and around 14 percent were likely to have worked unpaid time. Overtime was only paid in 30-minute increments, so 29 extra minutes worked was not paid. Foxconn and Apple have agreed to compensate workers, and reduce increments to 15 minutes. A third of employees surveyed wanted to work more hours so that they could earn more, and half felt their hours were reasonable but around two-thirds of workers said their take-home pay did not meet their basic needs.
The use of student interns, supposedly on work experience related to their studies, but who are in fact used to supplement the workforce during holidays, was raised as of "major concern for external stakeholders", according to the report. The FLA found interns working both overtime and night shifts, in violation of the regulations, and said "their employment status remains vague and represents a major risk". Student labour peaks in the summer months, and stood at 5.7 percent in August 2011.
At Chengdu, 5.5 percent of employees were aged 16 or 17. The average age of all workers across the three plants was found to be 23, and many were migrant workers, with around a third of the workforce living in dormitories.
Implication of the Apple-Foxconn Labor Changes
Poornima Gupta and Edwin Chan of Reuters wrote: Apple, the world's most valuable corporation, and Foxconn, China's biggest private-sector employer and Apple' main contract manufacturer, are so dominant in the global technology industry that their newly forged accord will likely have a substantial ripple effect across the sector. The agreement is a sign of the increasing power of Chinese workers to command higher wages given climbing prices in China in recent years for everything from food to housing and medical care, and an aging workforce that has led to labor shortages. Working conditions at many Chinese manufacturers that supply Western companies are considerably inferior to those at Foxconn, experts say. [Source: Poornima Gupta and Edwin Chan, Reuters, March 29, 2012]
"Apple and Foxconn are obviously the two biggest players in this sector and since they're teaming up to drive this change, I really do think they set the bar for the rest of the sector,"FLA President Auret van Heerden told Reuters in an interview. The Apple-Foxconn agreement may also raise costs for other manufacturers who contract with the Taiwanese company, including Dell Inc, Hewlett-Packard, Amazon.com Inc, Motorola Mobility Holdings, Nokia Oyj and Sony Corp.
It could also mean more work for cheaper contract manufacturers. "If Foxconn tries to increase prices, Amazon could go to other major contract manufacturers like Quanta, Wistron, Pegatron or Inventec to see what they could do for the company," said Mark Gerber, director of technology research at brokerage Detwiler Fenton.
The agreement could result in higher prices for consumers, though the impact will be limited because labor costs are only a small fraction of the total cost for most high-tech devices. "If Foxconn's labor cost goes up ... that will be an industry-wide phenomenon and then we have to decide how much do we pass on to our customers versus how much cost do we absorb," HP Chief Executive Meg Whitman told Reuters in February.
Future forays by the FLA over coming months will encompass Apple contractors Quanta Computer Inc, Pegatron Corp, Wintek Corp and other suppliers, all notoriously tight-lipped about their operations. Should Chinese manufacturers and their American clients follow Apple's lead, already severely strained margins might further narrow, experts say. While labor costs are a relatively low percentage of total costs for electronics products, they account for a far higher percentage further down the value chain. Fast-food chains like McDonald's, or apparel makers like Nike or the Gap, are even more dependent on low-cost labor. Many companies have already relocated some manufacturing either to inland China, where wages are lower, or to countries like Vietnam.
Changes in Apple-Foxconn Work Conditions
Poornima Gupta and Edwin Chan of Reuters wrote: Foxconn said it would reduce working hours to 49 hours per week, including overtime, while keeping total compensation for workers at its current level. The FLA audit had found that during peak production times, workers in the three factories put in more than 60 hours per week on average. To compensate for the reduced hours, Foxconn will hire tens of thousands of additional workers. It also said it would build more housing and canteens to accommodate that influx. [Source: Poornima Gupta and Edwin Chan, Reuters, March 29, 2012]
The FLA in its report has sought measures that will reduce working hours while ensuring that migrant laborers---often willing to pile up the overtime to make ends meet back home---do not forego much-needed income. Foxconn committed to building new housing to alleviate situations where multiple workers were squeezed into dorm rooms that seem inhumane by Western standards. It will also improve accident reporting and help workers enroll in social welfare programs. But it is unclear if there will be independent monitoring of Apple and Foxconn's progress in adhering to its commitments.
The Apple agreement is not the first time a U.S. consumer brand has agreed to address broadly the issue of working conditions at overseas factories. Nike Inc was rocked by reports in the 1990s that its contractors in China and elsewhere forced employees to work in slave-like conditions for a pittance. The sportswear brand eventually implemented wide-ranging reforms that vastly improved safety and working conditions, but the issue continues to rear its head: last year, Nike paid 4,400 workers $1 million to settle claims of non-payment of overtime wages.
Yet even Nike stopped short of Apple's and Foxconn's hiring and income-boosting spree. Last month, Foxconn said it was raising salaries by 16 to 25 percent, and was advertising a basic monthly wage, not including overtime, of 1,800 yuan ($290) in the southern city of Shenzhen, Guangdong province - where the monthly minimum wage is 1,500 yuan. Besides the two factories in Shenzhen, the other factory covered by the FLA report is in Chengdu, in central China.
The New York Times reported: Foxconn did not reveal how much it would raise wages or details on how its promises would be put into place. Its promises include a commitment that by July of 2013, no worker will labor for more than 49 hours per week---the limit set by Chinese law. Foxconn has also pledged that despite cutting hours, employees? pay will not decline.
?At the end of the day it’s a matter of image, a matter of recognition, a matter of reputation,” said Ricardo Ernst, a professor of global logistics at Georgetown University. But regardless of motivation, when a company as large as Foxconn changes, it reshapes other companies? decisions, he added.
Are the Labor Changes Promised By Apple-Foxconn for Real?
Charles Duhigg and Steven Greenhouse wrote in the New York Times: This is not the first time that independent monitors have criticized conditions at Foxconn---or that change has been promised. In 2006, Apple said that Foxconn “has enacted a policy change to enforce the weekly overtime limits set by our Code of Conduct.” That change, however, did not bring Foxconn into line with the law or Apple’s regulations. [Source:Charles Duhigg and Steven Greenhouse, New York Times, March 29, 2012]
In 2011, Apple wrote in its yearly audit summary that “reducing excessive overtime is a top priority? in 2012. This year, the company began weekly tracking of 110 facilities---including Foxconn---where excessive work-hour violations were commonplace. Last month, according to that tracking, the average employee worked 48 hours, and 89 percent of monitored employees worked 60 hours or less per week, which is the limit mandated in most circumstances by Apple’s supplier code of conduct.
?It is not news that Apple and Foxconn are promising to end labor rights abuses at these factories,” said Scott Nova, executive director of the Workers Rights Consortium, a university-backed monitoring group based in Washington. “They have been promising to do that since 2006. And they have not delivered. I hope this time will be different.”
Mr. van Heerden of the Fair Labor Association said he believed this time the promised changes would occur because his organization would continue monitoring Foxconn and because worldwide attention was focused on the issue more sharply than ever. “I think they have crossed the Rubicon,” he said, of Foxconn and its chief executive, Terry Gou. “He?d be crazy to make these commitments without fulfilling them,” he added.
In the extensive report documenting its findings, the Fair Labor Association said a majority or near majority of workers surveyed said they felt pain after working a full day, that wages were not sufficient to pay for health care or education and that dorms were crowded. But the group’s surveys found that not all employees had complaints or objected to long hours. Some wanted to work more to earn more money. Foxconn workers at one plant start at about $285 a month, and average wages are about $426 to $455 per month, according to the group’s report.
Apple and the “Ethical Supply Chain? Movement
?DEATH to Apple executives,” a protester shouted after a recent performance of “The Agony and Ecstasy of Steve Jobs?, a popular off-Broadway play. Apple executives must have been delighted when Mike Daisey, the playwright and star, recently retracted his nastiest allegations about the mistreatment of workers making Apple’s products in China. Apparently, he did not meet a worker poisoned by exposure to chemicals, or child workers at the factory gate. With its share price soaring as the latest iPad storms the market, Apple might be tempted to forget about the fuss over its labour practices. But that would be a mistake.[Source: The Economist, March 31, 2012 ]
While Apple began auditing the Chinese plants to which it outsources the manufacture of its consumer electronics in 2006, individual plants and employers were never named. The Economist reported: In the past 20 years what has become known as the “ethical supply chain? movement has targeted brands such as Nike, Gap and Coca-Cola. But its army of activists, some in business themselves, are grappling with growing evidence that appointing an outside body to audit and set standards, as Apple has done, is not going as well as it should. Apple could turn into a test case of how to improve things.
Tim Cook, Apple’s boss, visited a new Foxconn factory in central China which employs 120,000 people. He has insisted that Apple is doing a lot to improve working conditions. But he also echoes the concerns of critics. “We think the use of underage labour is abhorrent. It’s extremely rare in our supply chain, but our top priority is to eliminate it totally,” he declared. Apple’s sales continue to boom despite all the stories about the working conditions of the people who make iPads and iPhones. So how seriously should firms take these issues? Nike claims its approach means that good labour and environmental practices boost profits?even without taking into account any reputational benefits they may deliver. Productivity is rising and the turnover of workers is down, which saves money recruiting and training replacements.
Image Sources: Wiki Commons
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Yomiuri Shimbun, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.
© 2008 Jeffrey Hays
Last updated April 2012