iPhone or iExploit?

Rampant Labor Violations in

Apples Supply Chain Persist

A new report published by China Labor Watch demonstrates that the

same legal and ethical violations that attracted media attention in 2012
continue unabated at Apple supplier factories today. By Nicki Lisa
Cole, for Truthout.org
Apple is hindering the improvement of working conditions in the smartphone industry, and if Apple does
not take on responsibility commensurate with its status, other companies will

August 28, 2016

Note: This article first appeared on Truthout.org and has been
reprinted with permission.
Right now hundreds of thousands of young Chinese workers are laboring on iPhone 7
production lines.
With these products set to launch in September, the final assembly is happening in a series of
Foxconn and Pegatron factories across the country.
Foxconn is likely a familiar name to readers, as it became the focal point of international media
attention in 2012 after widespread legal and ethical labor violations were revealed by This
American Life and The New York Times.

Pegatron, however, has received scant media attention, despite its growing role in Apple's
supply chain over the last four years.
Unfortunately, the terrible conditions in which 100,000 young Chinese workers labor and live at
Pegatron's Shanghai factory are painfully familiar.
A new report published August 24 by China Labor Watch (CLW) demonstrates that the same
legal and ethical violations that attracted media attention in 2012 continue unabated at Apple
supplier factories today.
The Unfair and Irresponsible Apple
In 2015, wages accounted for around 44% of the United States gross domestic production.
However, the total income of 1.6 million workers in Apples supply chain only accounts for 4.3%
of Apples revenue.
This is not because Apple has a very small profit margin that it has to control its labor cost.
Apple does have sufficient profits, but most of the profits are taken by its senior executives and
large shareholders.
For example, Tim Cook received one million shares of Apples stock in 2011, which was worth
376 million dollars at that time, almost two times higher than the total base wages of 50,000
Pegatron workers in a year.
Latest News: Tim Cook Collects $36 Million in Stock Sale

Note: We assume that

all workers in Apples supply chain are paid the same wage (including overtime pay and others) as Pegatron workers. Then, we
assume that in a year, there are six months in the busy season and six months in the off season. We use the average wage in
October 2015 to represent the wage during peak season, and the average in May 2016 to represent offseason wage. Based on that,

Pegatron workers earn 44,160 RMB each year, or USD 7,032 according to the average exchange rate in 2015. In total, 1.6 million
workers can make 11.3 billion US dollars. Apples revenue in 2015 is from its 2015 financial report. Exchange rate data is from
FSForex.
Download: Apple Making Big Profits but Chinese Workers Wage on the Slide

In the case of Pegatron, CLW reports that conditions have actually worsened since 2015,
despite years of audits commissioned by Apple, a membership in the Fair Labor Association,
and promises from the company that it is committed to ensuring the safety and dignity of those
who make its lucrative products.
CLW, a nonprofit organization dedicated to exposing labor rights violations in the Chinese
factories that produce for global brands, revealed this through a study of workers' pay stubs and
interviews with workers at Pegatron Shanghai.
The study found that workers continue to be forced to endure extreme overtime hours, working
as many as 109 hours per month beyond their regularly scheduled workdays - three times the
legal limit in China.
CLW found that the vast majority of workers within the maintenance department recorded more
than 82 overtime hours in March 2016, while all 382 pay stubs examined from this department
showed overtime hours in excess of the 36-hour-per-month legal limit for overtime.
Included among these workers are student "interns" who are not legally allowed to work
overtime, yet were found to log up to 80 hours of overtime per month.
When questioned about these practices, executives at Pegatron and Foxconn state that
overtime within their facilities is optional. However, CLW's research shows that high production
quotas imposed by Apple, low base wages imposed by the factory, and harsh management
techniques and denial of requests for time off combine to remove workers' choice in the matter.
CLW's investigation revealed that the base wage offered to workers by Pegatron, after
deductions, is equivalent to just $213 per month, which is $117 less than the legal minimum
wage in Shanghai. Even with all of the overtime hours, workers still earn $300 below the
average monthly wage for the region.
These figures represent a decline in wages for Pegatron workers from 2015 to 2016, because
the factory management made up for a government-mandated minimum wage increase by
cutting welfare payments and forcing workers to contribute monthly earnings to the social
insurance benefit that was previously paid by the company.

Apple CEO Tim Cook recently sold more than $35 million worth of Apple stock,
according documents filed with the SEC this week, Cook sold 334,000 shares at prices
ranging from $107.21 to $107.69, netting himself almost $36 million dollars.
Read: Apple Could Be On the Hook for $19 Billion in Taxes
So, though wages were legally raised from $1.85 per hour in 2015 to $2.00 per hour in
2016, workers' real hourly earnings after deductions were just $1.60 per hour.
Other legal and ethical violations documented by CLW include daily unpaid labor of
more than one hour, cramped and unsanitary living conditions in factory dormitories,
and the failure to provide necessary protective equipment, which puts the health and
safety of workers at risk.
A 14-Year History of Ignoring Serious Labor Violations
Legal and ethical violations like these at Apple suppliers should ring familiar. You've
read about them before, here and in other media outlets. What you might not realize is
that they are happening a full decade after they were first brought to Apple's attention.
On August 18, 2006, Britain's The Mail on Sunday published a scathing report on
conditions at Chinese factories where Apple's iPod line was then in production.
Investigative reporters found that workers were living 100-to-a-room at Foxconn's
Longhua facility in Shenzhen, then dubbed "iPod City," and that they labored as much
as 15 hours per day for very low wages.

They found similar conditions at an Asustek facility in Suzhou, Jiangsu Province, which
produced the iPod Shuffle. Laboring up to 12 hours per day, workers lost half their
wages to the factory-imposed cost of accommodations and food.
These legal and ethical violations in Apple's supply chain actually date even further
back. In a report published in September 2005, SOMO, a Dutch nonprofit group that
researches the practices of global corporations, documented trouble at Apple laptop
suppliers Quanta Shanghai and Elite Computer Systems, located in Shenzhen.
SOMO's investigation documented excessively long work hours, insufficient wages,
failure to protect the health and safety of workers, intimidation and humiliation of
workers by management and an absence of grievance channels through which workers
could safely raise workplace issues.
Since then, my own analysis of available data on labor incidents shows that the same
types of violations - and others, including injuries and medical problems, worker
exhaustion and emotional distress, the use of dispatch labor, and interference with thirdparty audits - have recurred year after year at Apple suppliers across China.
Using all known reports by nonprofits and scholars who have documented labor
conditions in Chinese Apple suppliers, including CLW, Students and Scholars Against
Corporate Misbehavior, the Institute of Public & Environmental Affairs, SOMO, Good
Electronics and a few others, I found that these violations, which occurred at 36 unique
supplier factories over a period of 14 years, continue through the present.

In its annual supplier responsibility reports, Apple repeatedly claims that it works with
troubled suppliers to improve workplace and dormitory conditions, and that it removes
those who fail to improve from its supply chain.
However, year-over-year repeat violations were found at 17 supplier sites owned by 10
companies with which Apple has contracted. Most recently, repeat violations have been
documented at Pegatron-owned facilities from 2012 through the present, as well as at
numerous Foxconn facilities through 2015.
In total, my study identified 76 unique cases, one for each year that legal and ethical
violations were documented at any given factory. Over 14 years, the most common and
consistent legal violations were overworking of employees and failure to protect worker
health and safety - each present in more than three-quarters of all cases.
Further, I found other serious violations in half or more cases, including harsh
management tactics involving intimidation and humiliation of workers, insufficiently low
wages, workplace injuries or medical problems stemming from an unsafe workplace,
unpaid wages, severe and chronic exhaustion often coupled with emotional distress,
and the lack of a union or other body to represent and protect the interests of workers.
In addition, I found that in more than a third of the cases, workers reported that the
factory had ineffective or nonexistent grievance channels through which to express
complaints. In more than a quarter cases, workers suffered in poor living conditions.

Apple is actively 'obstructing' positive change in the industry Li Qiang,

China Labor Watch
Also in more than a quarter cases, suppliers relied on "dispatch workers" who are
economically exploited by both the factory and the employment agency that supplies
them, and on student "interns" who are forced to work for low wages by their schools
and local governments.

These "interns" work as much as 80 overtime hours per month even though Chinese
labor law prohibits overtime among student workers.
Interference with third-party audits, through falsifying overtime documents or
intimidating workers against speaking with auditors, was also common - I found it in 12
percent of the cases I examined.
These data show unequivocally that Apple is not effectively holding suppliers
accountable for violations that breach Chinese law and the company's Supplier Code of
Conduct. Today, the same violations can be found at Apple suppliers as were present 14
years ago, calling into question the efficacy of the industry-wide practice of auditing.
What's more, CLW's Li Qiang (pictured above) asserts that Apple is actively
"obstructing" positive change in the industry by squeezing suppliers to miniscule profit
margins while simultaneously imposing production quotas that require round-the-clock
factory operation.
Due to Apple's role as the smartphone sector's profit-leader, Qiang believes that little
will change in the industry until Apple changes its practices.
Articles like this can only be published because of readers like you. Please show your
support for independent journalism by making a small tax-deductible donation today,
many thanks.