China state TV recasts spotlight on Apple suppliers' pollution problems

Wed Oct 19, 2011 5:32am EDT

* Report on issues highlighted by environmental groups earlier

* Refocus of attention hits Apple suppliers' shares in Taiwan

* At least one supplier has shut some China operations

* Analysts warn of risk closures could expand

By Melanie Lee and Clare Jim

SHANGHAI/TAIPEI, Oct 19 (Reuters) - Some of Apple Inc's suppliers in China have once again come under scrutiny, with state broadcaster China Central Television (CCTV) accusing them of causing pollution.

Taiwan media gave prominent play on Wednesday to an investigative report aired on Sunday in which CCTV reporters visited a few suppliers that Chinese environmental groups in August had said were thought to be doing business with Apple and had lax environmental standards.

In the 40-minute report, CCTV named Japan's Meiko Electronics and Taiwanese notebook casing supplier Catcher Technology as being polluters.

"China, as the world's factory, is experiencing pains of restructuring. The emerging environmental problems for the country's large-scale manufacturers are closely related to China's status in the global economic structure," CCTV said in its report.

The report, which was picked up by almost all Taiwan's dailies and given a prominent two-page spread in one business newspaper, was partly behind the fall in shares of Apple suppliers listed in Taiwan on Wednesday.

Those shares were also hit by the U.S. company reporting results that missed expectations for the first time in years.

CCTV carries out investigative reports on a range of issues, including local corruption, scams and wrongdoing by local firms, but their impact has reverberated especially widely in cases where they have touched on foreign firms or firms listed overseas.

In one recent high-profile case, a half-hour CCTV special report in August alleging improper business practices at Nasdaq-listed Baidu Inc sent its shares tumbling.

RESURFACING OF REPORT

CCTV said polluted water was flowing into a lake in an economic development zone in Wuhan, in central China, and showed footage of dead fish floating on the surface. (here)

The polluted water was purportedly coming from Meiko Electronics, CCTV said.

Meiko makes circuit boards for Apple, the coalition of Chinese environmental organisations including Friends of Nature and the Institute of Public & Environmental Affairs said in their report in August.

The report accused Apple of turning a blind eye as its suppliers polluted the country. It also alleged that 27 suspected Apple suppliers had severe pollution problems, from toxic gases to heavy metal sludge.

The Taiwanese business daily republished the full list of 27 on Wednesday, adding also its opinion that Taiwan firms were becoming the "sacrifices in a trade war" between China and the U.S.

Meiko could not be reached for comment. Apple declined to comment.

Meiko's shares fell 1.9 percent on Wednesday. However, shares of some of the Taiwan firms have been hit harder by the original environmental groups' report, the follow-up steps taken by authorities and now the refocusing of attention on the original report.

Catcher's shares have been limit-down for three straight sessions after it said on Sunday that it had been ordered to close a China plant due to pollution.

RISK TO SUPPLY CHAIN

Print circuit board makers Compeq Manufacturing and Unimicron Tech , which were among the companies named by the environmental organisations, shed 5.8 percent and 2.3 percent respectively.

Apple's major supplier, Hon Hai , as well as touch panel makers TPK Holding and Wintek , said in separate statements late on Tuesday that their China factories were all in operation. Compal also said on Wednesday its factory was running normally.

But analysts cautioned the Apple supply chain was not out of the woods.

"The environmental issue could have a longer-term impact on the supply chain because we don't know if more factories will be asked to close down," said KGI Securities senior vice president Chu Yen-min.

Bevan Yeh, a senior fund manager of Prudential Financial Securities Investment Trust, cautioned that if more suppliers were forced to close facilities due to environmental problems in the future, it might trigger systematic risks.

"The manufacturers may have to re-evaluate their investment in China and some may consider pulling out of the country," Yeh said. (Editing by Jason Subler)