Apple, Foxconn agree to boost pay, cut hours in China after audit
Apple and manufacturer Foxconn promised changes after a far-ranging inspection by the Fair Labor Association, a monitoring group asked by Apple to inspect factories where iPads and iPhones are made, found widespread problems. It may make gadgets cost more.
The New York Times
Foxconn, which manufactures more than 40 percent of the world's electronics for such companies as Apple, Dell, Amazon.com and others, has pledged to sharply curtail the number of working hours within its Chinese factories and significantly increase wages, a move that could improve working conditions across China.
The shift comes after a far-ranging inspection by the Fair Labor Association (FLA), a monitoring group asked by Apple to inspect factories where iPads and iPhones are made, found widespread problems — including numerous instances where Foxconn violated Chinese law and industry codes of conduct by having employees work more than 60 hours a week and sometimes for 11 or more days in a row.
In recent weeks, the group surveyed more than 35,000 Foxconn employees and inspected three large facilities where Apple products are manufactured. It found that 43 percent of workers surveyed 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 did "not provide true worker representation."
"There's this lingering sense among workers that they're in a dangerous place," said Auret van Heerden, president and chief executive of the Fair Labor Association (FLA). But Foxconn has "reached a tipping point. They have publicly promised to make changes in a manner that they will have to deliver on it."
Apple has kept a close watch on its suppliers for years, and in January took the further step of joining the FLA. The organization has audited overseas suppliers for clothing manufacturers, but Apple was the first electronics company to join.
"Our team has been working for years to educate workers, improve conditions and make Apple's supply chain a model for the industry, which is why we asked the FLA to conduct these audits," Apple said in a statement.
Apple CEO Tim Cook visited a Foxconn factory in Zhengzhou, China, on Wednesday.
Since January, Apple has released a list of 156 of its suppliers — which it had previously declined to identify — and has begun posting regular monitoring reports on hours worked by factory employees.
The impact of Foxconn's hour and wage changes could signal a new, far-reaching turn in reforms. Foxconn is China's largest and most prominent private employer, with 1.2 million workers, and although the FLA's investigation was limited to Apple factories, the shifts announced Thursday have the potential to increase wages and improve working conditions across Foxconn, which also manufactures products for hundreds of other brands, and at non-Foxconn plants across China.
In response to the report, Foxconn said, "We are committed to work with Apple to carry out the remediation program, developed by both our companies, that has been presented along with the FLA audit findings and we will continue to support Apple's initiatives to ensure that its business partners are in compliance with all relevant China laws and regulations and the FLA's Workplace Code of Conduct."
The FLA auditors visited three Foxconn complexes last month and this month: Guanlan and Longhua near the coastal manufacturing hub of Shenzhen, and Chengdu in the inland province of Sichuan. They employ a total of 178,000 workers, with an average age of 23.
Average monthly salaries at the factories ranged from $360 to $455. Foxconn recently raised salaries by up to 25 percent in the second major salary hike in less than two years.
In a one-man Broadway play, actor Mike Daisey told of visiting China and talking to underage and injured Foxconn workers. The public radio program "This American Life" used Daisey's monologue in a show about Foxconn on Jan. 6, but retracted it two weeks ago, saying that Daisey had fabricated key parts of it, including him meeting 13-year-old workers.
The FLA said it didn't find instances of child or forced labor.
Foxconn's promises include a commitment that by July of next year, no worker will labor for more than 49 hours a week — the limit dictated by Chinese law.
Foxconn, which has its headquarters in Taiwan and is controlled by billionaire Terry Gou, has also pledged that despite cutting hours, employees' salaries will not decline.
Experts say such promises will most likely require Foxconn to hire tens of thousands of new employees as well as raise wages, steps that could cost it hundreds of millions of dollars annually.
Apple shares fell after the report was released, dropping 1.3 percent to close at $609.86.
Apple, the world's most valuable company, will have to cut profit margins or pass resulting costs on to consumers, said Alberto Moel, an analyst at Sanford C. Bernstein & Co. in Hong Kong.
"The benefit we, the consumers, and Apple extract from these products at the expense of Foxconn and its workforce is completely unequal," said Moel. "Foxconn will also have to meet these requirements for all its customers — Apple, Dell, HP — because it is at risk of being audited at any production line."
"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.
"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. "They have been promising to do that since 2006. And they have not delivered. I hope this time will be different."
The FLA said many 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. And the group's findings that unions and other worker-representation groups are dominated by management contradict Apple's findings that most factories allow free association among workers.
They also found that Foxconn in the past prepped workers with answers to give to monitors to avoid detection of violations.
"We found a cheat sheet," van Heerden, of the FLA, said. "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."
Material from The Associated Press and Bloomberg News
is included in this report.