FOXCONN

The main producer of Apple's products as well as products for other wellknown 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 firstworld 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 AppleFoxconn 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 1820---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 robotsMay 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 nhexane. 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 AppleFoxconn 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 privatesector 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. Fastfood 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 incomeboosting 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 AppleFoxconn 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 offBroadway 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.