There are now added developments regarding reported worker unrest among Apple’s iPhone contract manufacturers.

About a week ago, Supply Chain Matters alerted readers to multiple reports of significant rioting and violence at the Wistron production facility located near Bangalore, India.

Reports had indicated that workers were upset over claims that they had not received pay and had been forced to work overtime. Local reporting indicated that the majority of workers at the Wistron India facility, believed to be in excess of 2000, were involved in the incident, with video sowing rioting workers throwing rocks, garnishing sticks and tossing furniture while setting fire to a Wistron sign.

Apple iPhone 12 supply chain challenges

Today, both The Wall Street Journal and Europe based Financial Times are both reporting that Wistron has formally apologized for the mishandling of wages at the India facility and that the manufacturer will correct the problems. Reportedly, a Wistron Vice President who had overseen the India facility has been dismissed. The contract manufacturer has further established an anonymous hotline to field complaints and has created further avenues for workers to express their concerns.

Both reports indicate that Apple itself issued statements indicating that it has placed the contract manufacturer on probation, implying that the manufacturer will not receive any new business before completing corrective actions. Apple indicated: “Our preliminary findings indicate violations of our supplier code of conduct by failing to implement proper working-hour management processes.

 

Added Unrest

In November, we highlighted reports indicating Apple had recently suspended new business with separate iPhone contract manufacturer Pegatron after discovering labor violations regarding a student workers’ program. These violations occurred at the contract manufacturer’s Shanghai and Kunshan production campuses in eastern China. According to a published Bloomberg, Apple discovered that the Taiwanese based contract manufacturer allegedly misclassified student workers allowing them to work nights and overtime which is in violation of Apple’s Supplier Code of Conduct. Reportedly, these workers “went to extraordinary lengths” to cover up such violations.  Apple had further indicated that it did not find evidence of forced use of underage labor, but rather falsified paperwork to hide violation.

In the Financial Times reporting from yesterday, Pegatron workers at this China facility protested on this past Friday and Saturday over unpaid bonuses. Video and labor advocacy organization China Watch indicated that more than 100 Shanghai based “dispatch workers” had protested. Noted was that these workers were casual staff employed by independent agencies in partnership with Pegatron, and that the bonuses, amounting to upwards of three to four months of wages reportedly compensate for low base pay.

 

What it Means

Contract manufacturing worker unrest now involving two separate, but noteworthy Apple iPhone contract manufacturers is likely a reflection of the increased volumes of production currently expected for this holiday surge period and for the upcoming year, including the new iPhone 12 product family.

The global consumer electronics manufacturer has been diligent and swift to act when workers protests over compensation and working conditions prove to be validated. Therefore there should be little surprise that the sheer influence of Apple can cause the dismissal of a senior executive for one of its contract manufacturers.

The above stated, the probationary status that has incurred is carefully worded to only include new business compared to existing production contracts. From our lens, that appears to be a de-facto admission that supplier labor practices in low-cost manufacturing facilities remains a challenge in spite of Apple’s active auditing.

India represents a very lucrative smartphone market in the coming years and there have been increasing signs that Apple  is seeking alternative iPhone manufacturing capacity external to China because of ongoing trade and political tensions among that country and the United States.

The consumer electronics provider knows all too well that visibility to its corporate and social responsibility actions will be constantly monitored and judged, both from workers and consumers. The is especially the case when offering a premium-priced product with healthy product margins. A company with a magnificent and enviable corporate headquarters has an added corporate responsibility involving its contracted manufacturers in domestic and international regions across the globe. This is indeed a manifestation of the substance to branding.

 

Bob Ferrari

© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.