Audit faults Apple supplier’s factories in China


A sweeping investigation into three Chinese factories that produce Apple Inc. products found “significant issues” with working conditions, including excessive overtime and health and safety risks.

An industry-funded labor watchdog group, the Fair Labor Assn., said Thursday that it had conducted a thorough inspection of the factories operated by Foxconn, a major supplier to Apple and other tech companies. The group said it had secured “groundbreaking commitments” that will reduce working hours, improve conditions and establish a voice for workers.

The nearly monthlong investigation by the organization, initiated by Apple, was a response to widespread criticism following worker deaths, including suicides, and injuries at the Chinese factories.

The group said it found excessive overtime and problems with overtime compensation at the factories, which produce iPhones and iPads, among other devices. It also cited health and safety risks: In a survey, more than 43% of 35,500 randomly selected employees said they had experienced or witnessed an accident, ranging from hand injuries to factory vehicle accidents, the group said.

Assessors logged more than 3,000 hours inside the facilities and interviewed hundreds of Foxconn workers and managers both on and off the site, in addition to the survey.

“The Fair Labor Assn. gave Apple’s largest supplier the equivalent of a full-body” inspection, said Auret van Heerden, chief executive of the group. “Apple and its supplier Foxconn have agreed to our prescriptions, and we will verify progress and report publicly.”

Foxconn, a Taiwanese company that has 1.2 million employees, also manufactures parts for many of Apple’s competitors, includingDell Inc.,Microsoft Inc.

The probe found that within the last 12 months, all three factories exceeded both the group’s standard of 60 working hours per week (regular plus overtime) and the Chinese legal limits of 40 regular hours per week and 36 hours maximum overtime per month.

During peak production periods, the average employee worked more than 60 hours per week. There were periods in which some employees worked more than seven days in a row.

According to the labor group’s worker survey, 64% of employees said their compensation did not meet their basic needs. The group said it would conduct a cost of living study to help Foxconn determine whether worker salaries meet the group’s requirements for basic needs and discretionary income.

Foxconn said it was committed to bringing its factories into full compliance with Chinese legal limits and Fair Labor Assn. standards on working hours by July 2013. Many critics consider that time frame too lengthy.

“You really think it’s going to take 15 months for Foxconn to come into compliance with the law? I don’t think so,” said Taren Stinebrickner-Kauffman, executive director of SumOfUs, a corporate accountability group inWashington, D.C.”I’m not saying it’s flip-a-switch easy, but if it were a priority it would happen a lot faster than that.”

In a statement Thursday, Apple said it shared the Fair Labor Assn.’s “goal of improving lives and raising the bar for manufacturing companies everywhere.”

“We fully support their recommendations. We think empowering workers and helping them understand their rights is essential,” the company said. “Our team has been working for years to educate workers, improve conditions and make Apple’s supply chain a model for the industry.”

In recent years, human rights groups have complained that while Apple was reaping monster profits, the Chinese workers who manufacture its products toil long hours for low pay in plants that don’t meet health and safety requirements. Activists have also alleged that workers’ off hours are spent in cramped dormitories.

The Foxconn facilities in the Chinese cities of Shenzhen and Chengdu that employ tens of thousands of live-in workers have garnered the most attention. Last May, a fire at one of the plants killed four workers and injured nearly 20 others. In 2010, about a dozen Foxconn employees jumped to their deaths from factory rooftops.

James Ragan, a senior equity analyst at Crowell, Weedon & Co. said the investigation indicated that Apple “very much wants to see improved working conditions.”

But human rights groups say the Cupertino, Calif., tech giant has pledged in the past to force reforms at its Chinese plants with few results, most notably in 2006 when it began auditing factories in its supply chain.

“Frankly, an investigation was not really needed. What’s needed is actual action,” Stinebrickner-Kauffman said. “So until we actually see workers’ lives getting better, we can’t assume this is going to lead anywhere.”

Analysts also point out that despite the high-profile criticism, consumers and investors haven’t been deterred from supporting Apple, said Colin Gillis, a tech analyst at BGC Partners.

“Their practices have not stopped anyone from buying these phones, and it’s also the largest valuation of any company on a U.S.-listed exchange, so it hasn’t stopped investors from buying the stock,” he said.

In January, Apple released for the first time a list of 156 of its suppliers and manufacturing partners in a responsibility report. It has also begun collecting and reporting the working hours for half a million workers in its supply chain. For the month of February, it found that the average work week was 48 hours.

Thursday’s report comes on the heels of Apple Chief Executive Tim Cook’s visit this week to the Foxconn plant in the city of Zhengzhou, which employs 120,000 people. The stop in Zhengzhou came after Cook met with top Chinese leaders, including Vice Premier Li Keqiang — expected to be the next prime minister — and Beijing Mayor Guo Jinlong.