* Violations discovered, Apple and Foxconn addressing
* To reduce work hours but keep pay steady
* If commitments kept, sets new bar for Western firms in
* Move follows years of criticism of worker abuse
By Poornima Gupta and Edwin Chan
SAN FRANCISCO, March 30 Apple Inc and
its main contract manufacturing Foxconn agreed to tackle
violations of conditions among the 1.2 million workers
assembling iPhones and iPads in a landmark decision that could
change the way Western companies do business in China.
Taiwan's Foxconn Technology Group, whose subsidiary Hon Hai
Precision Industry assembles Apple devices in factories in
China, will hire tens of thousands of new workers, eliminate
illegal overtime, improve safety protocols and upgrade workers'
housing and other amenities.
It is a response to one of the largest investigations ever
conducted of a U.S. company's operations outside of America.
Apple had agreed to the probe by the independent Fair Labor
Association (FLA) to stem a crescendo of criticism that its
products were built on the backs of mistreated Chinese workers.
The association, in disclosing its findings from a survey of
three Foxconn plants and over 35,000 workers, said it had
unearthed multiple violations of labour law, including extreme
hours and unpaid overtime.
FLA President Auret van Heerden expects the agreement
between Apple, the world's most valuable listed company, and
Foxconn, which supplies 50 percent of the world's consumer
electronics, to have far reaching affects.
"Apple and Foxconn are obviously the two biggest players in
this sector," he said in an interview. "Since they're teaming up
to drive this change, I really do think they set the bar for the
rest of the sector."
That could affect brand names that have contracts with the
Taiwanese company, including Dell Inc, Hewlett-Packard
, Amazon.com Inc, Motorola Mobility Holdings
, Nokia Oyj and Sony Corp.
The agreement is a sign of the increasing power of Chinese
workers to command higher wages given increasing prices in
China, and an ageing workforce that has led to labour shortages.
"Foxconn is proposing this better deal," said van Heerden.
"Their competitors will be obliged to offer a similar package
just in order to get enough workers."
Working conditions at many Chinese factories suppling
Western brands are considerably inferior to those at Foxconn,
Still, labour costs are a fraction of the total cost of most
high-tech devices, so consumers might not see higher prices.
"If Foxconn's labour cost goes up ... that will be an
industry-wide phenomenon and then we have to decide how much do
we pass on to our customers versus how much cost do we absorb,"
HP Chief Executive Meg Whitman told Reuters in February.
Under the agreement, Foxconn said it will reduce working
hours to 49 per week, including overtime, while keeping total
compensation for workers at its current level. The FLA audit
found workers in the three factories put in more than 60 hours
per week on average during peak production periods.
To keep up with demand, Foxconn will hire tens of thousands
of additional workers and build more housing and canteens.
Apple CEO Tim Cook, who took over from the late co-founder
Steve Jobs last year, has shown a willingness to tackle the
"We fully support their recommendations," an Apple spokesman
said. "We share the FLA's goal of improving lives and raising
the bar for manufacturing companies everywhere."
But New York-based labour advocacy group China Labor Watch
said the report failed to address the workers' primary concerns.
"Until Apple shares a larger proportion of its profits with
its supplier factories, workers will receive the same pittance
for a salary while working around the clock," Li Qiang, the
director of China Labor Watch, said in an emailed statement.
The agreement has not gone down well with some Foxconn
Chen Yamei, 25, who has worked at a Foxconn factory at
Longhua in southern Guangdong province for four years,
complained that her salary will drop to just over 2,000 yuan a
month ($317) from over 4,000 yuan.
"We are here to work and not to play," she said. "Our income
is very important." Another worker was less concerned.
"Working here is just so-so. Working conditions and the pay
are all right," said Li Wei, a 20-year-old who has worked at the
Foxconn factory for about a year.
"However there are around 100,000 people in there, so
sometimes the feeling can be oppressive," Li said, who works
eight hours, or a maximum 10 hours, a day.
Hon Hai shares fell on Friday around 1.3 percent,
underperforming a rising market. Apple shares, which hit a
record high on Wednesday, dropped 1.3 percent on Thursday.
The report marks the first phase of a probe into Apple's
contract manufacturers across the world's most populous nation.
Foreign firms have long grappled with working conditions in
China, dubbed the world's factory because of its low wages and
efficient coastal transport and shipping infrastructure.
Global protests against Apple swelled after reports spread
in 2010 of a string or suicides at Foxconn's plants in southern
China, blamed on inhumane working conditions and the alienation
that migrant labourers, often from impoverished provinces, face
in a bustling metropolis like Shenzhen, where two of the three
factories the FLA inspected are located.
In months past, protesters have shown up at Apple events -
the rollout of the new iPad, the iPhone 4GS and its annual
shareholders' meeting - holding up placards urging the $500
billion corporation to make "ethical" devices.
Some have also criticized the FLA for its close alignment
The actor Mike Daisey also did much to raise awareness of
the issue through his one man show in the United States, "The
Agony and the Ecstasy of Steve Jobs". His credibility was
damaged though when it emerged parts of his monologue were
The FLA in its report sought measures that will reduce
working hours while ensuring that migrant labourers - often
willing to pile up the overtime to make ends meet back home - do
not forego much-needed income.
Foxconn committed to building new housing to ease situations
where multiple workers were squeezed into rooms that seemed
inhumane by Western standards. It agreed to improve accident
reporting and help workers enroll for social welfare and
increase their participation in committees and other union
The FLA will conduct onsite verification visits to make sure
the agreement is implemented, van Heerden said.
Apple is not the first U.S. consumer brand to respond to
criticism of working conditions at factories abroad making its
Nike Inc implemented wide-ranging changes to improve
safety and working conditions after it was rocked by reports in
the 1990s that its contractors in China and elsewhere forced
employees to work in slave-like conditions for a pittance.
Yet even Nike stopped short of Apple's and Foxconn's hiring
and income-boosting spree. Last month, Foxconn said it was
raising salaries by 16 to 25 percent, and was advertising a
basic monthly wage, not including overtime, of 1,800 yuan ($290)
in the southern city of Shenzhen, Guangdong province - where the
monthly minimum wage is 1,500 yuan.
Future forays by the FLA over coming months will encompass
Apple contractors Quanta Computer Inc, Pegatron Corp
, Wintek Corp and other suppliers, all
notoriously tight-lipped about their operations.