Apple suspends iPhone assembler over Chinese labour violations

Apple has suspended handing new business to Pegatron, a key assembler of iPhones, after the company was found to be using illegal student labour at its Shanghai plant. 

The Taiwanese manufacturer misclassified student workers and allowed some to work nights and overtime in violation of Apple’s Supplier Code of Conduct.

“The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms," an Apple spokesperson said.

"Pegatron misclassified the student workers in their program and falsified paperwork to disguise violations of our code," the spokesperson continued. "Our investigations have found no evidence of forced or underage labor."

Apple has attempted for years to fight allegations of worker mistreatment inside its supply chain and introduced a supplier code of conduct following a series of suicides which took place at Foxconn, another key iPhone supplier.

Staff members work on the production line at the Foxconn complex in the southern Chinese city of Shenzhen, China, 2010.

Credit: Kin Cheung/ AP

A 2012 audit of Foxconn commissioned by Apple alleged that workplace accidents may be common and that some workers considered their overtime pay insufficient.

The world’s most valuable company is in the middle of producing four new iPhone models with 5G, and has been working with Pegatron to expand iPhone assembly outside of China.

The suspension of new business for Pegatron, which was first reported by Bloomberg, is likely to set back Apple’s ongoing attempts to deepen its supply chain.

Pegatron is likely to continue assembling Apple’s latest smartphone, the 5G-enabled iPhone 12, but could lose out on a key contract to help produce next year’s expected flagship device.

Luxshare, a China-headquartered rival to Pegatron, could stand to benefit from the suspension and pick up more business from Apple in 2021.

Pegatron has fired the executive alleged to have overseen the student worker programme, an Apple spokesman said. "We worked quickly to ensure the students were safely returned to their home and schools and received direct remedies in the form of financial compensation," he added.

Pegatron said the violations took place at its Shanghai and Kunshan campuses in eastern China and that students working night shifts, over-time, and in positions unrelated to their majors were “not in compliance with local rules and regulations.”

It said it has taken “quick action” to strengthen its procedures, and will adherence to the code of conduct to metrics used to evaluate senior management.

“Upon discovery of this non-compliant activity, we immediately took the student workers off production lines and worked with our customer and third-party experts to make appropriate arrangements for them to return to their homes or schools with proper compensation alongside all necessary support and care,” Pegatron said in a statement.