The company takes seriously violations of its supplier code of conduct, but not seriously enough to screw up Phone 12 production.
From Bloomberg’s “Apple Freezes New Business for Pegatron on China Labor Abuse” posted early Monday:
Apple suspended new business with iPhone assembler Pegatron Corp. after discovering labor violations at a student workers’ program, taking strong action to clean up a Chinese-based production chain long accused of worker abuse.
The Cupertino, California-based technology giant said it discovered several weeks ago that the Taiwanese manufacturer misclassified student workers and allowed some to work nights and overtime in violation of Apple’s Supplier Code of Conduct. Employees then “went to extraordinary lengths” to cover up the violations. It’s since placed its partner on probation until corrective action is completed, the U.S. company said in a statement.
Pegatron is one of just a handful of partners Apple relies on globally to assemble marquee products such as the iPhone. Like larger rival Foxconnor Hon Hai Precision Industry Co., the Taiwanese company is an integral part of Apple’s global supply chain, which has been the target of criticismby labor activists over the years.
The world’s most valuable company is in the middle of producing four new iPhone models with 5G, and has been working with Pegatron to expand iPhone assembly outside of China. Those efforts are unlikely to be impacted by this suspension, which was first reported by local outlet The Paper, as it only covers new business. But Apple’s move hands an opening to rival Luxshare Precision Industry Co., which is on the verge of becoming the first mainland company to assemble the iPhone. Pegatron’s shares gave up gains and closed Monday down 2.1% in Taipei, while Luxshare finished up almost 1% in Shenzhen.
My take: The pressure on suppliers to meet Apple’s production goals is intense, especially when new iPhones are backordered.