By Miyoung Kim
SEOUL Nov 30 Samsung Electronics Co
plans to keep the bulk of its manufacturing inhouse but
reiterated a pledge to improve working conditions at its
suppliers after admitting excessive overtime and fines for
employees in China, a senior executive said on Friday.
New York-based China Labor Watch (CLW) said employees at one
of Samsung's suppliers sometimes worked up to 16 hours a day,
with only one day's rest a month.
That prompted an investigation in September by Samsung of
its suppliers in China.
"There was common use of a system of penalties (at our
suppliers in China) for being late or producing faulty products,
which is improper practice under global standards but somewhat
general practice under local regulations," said Mok Jangkyun,
who led the team of over 100 auditors to inspect Samsung's 105
suppliers in China.
"We're working with them to change these practices and
introduce a better work environment," Mok, vice president of
human resources, told Reuters in an interview.
"There were indeed some cases of excessive overtime work.
When workers have to work weekends, for example, due to a
temporary spike in orders, overtime work reached 32 hours a week
or 100 hours a month," he said.
"We've recommended they hire more workers, introduce
automation and improve production processes to fix this. We are
also working on guidelines to gradually reduce overtime work
Samsung produces more than 40 percent of its goods in China
including its popular Galaxy S smartphones, home appliances and
chips. But most of that is in its own plants, with outsourcing
accounting for less than 10 percent of total production.
A number of foreign companies have been accused in recent
years of improper work practices in China, seen as a cheap
source of labour.
Many multinational brands have contracts with firms using
Chinese labour, including Apple Inc, Dell Inc,
Hewlett-Packard, Amazon.com Inc, Google's
Motorola Mobility, Nokia Oyj, and Sony Corp
Samsung defended its in-house manufacturing strategy even
though it tends to be more expensive than outsourcing, calling
it a main strength of the company.
"Multinationals are increasingly opting for outsourcing for
various reasons. But at Samsung, out of over 200,000 staff
worldwide, more than half are manufacturing jobs, which
indicates we are very much a manufacturing-driven company and it
is where our core strength is," Mok said.
"Samsung manufactures more than 90 percent of our products
internally and only relies on contractors for peripheral
products such as components, feature phones and handset cases."
He said it allows the company to adapt quickly to changing
As an example, Mok cited Samsung's smartphone plants in
South Korea, China and Vietnam as giving it the flexibility to
adjust output of its Galaxy S, depending on demand or production
problems at one factory. By contrast, main rival Apple depends
heavily on contractors.
Apple warned last month that its industry-leading margins
would shrink this quarter as new products have become more
expensive to build and as it is having trouble meeting robust
demand for the iPhone 5.
Chairman Terry Gou of Taiwan's Foxconn Technology Group,
Apple's main contract manufacturer, said earlier this month the
company was falling short of meeting demand for the phone.
"Manufacturing is the backbone of Samsung's growth and we
put very much emphasis on improving manufacturing
competitiveness, as this is how we've become the leader in chips
and displays," Mok said.