Apple confirmed reports this morning that it has sat long-time supplier Pegatron on the naughty step, putting the Taiwanese contract manufacturer on probation until it addresses several labour concerns.
Pegatron, formerly part of ASUS parent AsusTek Computer, was accused of having violated Apple's supplier code of conduct by misclassifying student workers and allowing them to work night shifts or overtime, as well as in roles unrelated to their majors.
Apple also claimed the Pegatron had taken "extraordinary measures" to cover its tracks, including the falsification of paperwork.
Until Pegatron completes undisclosed corrective actions, it will not receive any new business from Apple. While this naturally does not affect Apple's bottom line ongoing contracts, it could potentially limit the supplier's involvement in any upcoming iPhone models.
Although some of the major contract electronics manufacturers including Pegatron reported annual declines in sales for the first quarter as the coronavirus outbreak hit shipments, the firm's Q2 2020 ended 30 June saw a 9.5 per cent year-on-year increase in revenue to NT$327.84bn ($11.48bn, £8.71bn) which it said was "driven by increasing WFH demand and seasonality" and "revenue from the Computing and Consumer Electronics segment", which was up by 37 per cent.
The former ASUS offshoot also makes components for branded ASUS kit as well as other US tech firms, although it does not make any of its contracts public.
Pegatron – along with fellow Taiwan-based electronics manufacturer Foxconn – has long played an important role in Apple's supply chain despite historic allegations of labour abuses on both firms' parts throughout the years.
In 2013, human rights group China Labor Watch conducted an undercover inquiry into Pegatron, sending investigators into three of the firm's facilities, and conducting 200 interviews with employees. The findings were damning, with the group alleging hiring discrimination against ethnic minorities, poor working and living conditions, and working weeks that were, on average, 66 hours long.
The same year, former student workers from Henan University accused Pegatron of wage theft. In an open letter, the staffers said Pegatron had denied workers mandatory overtime payments.
Dismal working conditions are a recurring theme within Apple's supply chain. Earlier this year, Nanchang O-Film, which provides camera components, was placed on a US government entity list over allegations it used forced Uighur labour.
Foxconn, which assembles iPhones for Apple in both China and India, has attracted the bulk of notoriety. In the early 2010s, the firm was the subject of tremendous scrutiny after a spate of worker suicides that were attributed to poor pay and conditions.
In 2019, China Labor Watch turned its attention to the conditions at a Zhengzhou factory producing iPhones. Following a four-year investigation, the NGO claimed workers were routinely performing overtime in excess of what was permitted by Chinese law, with base pay insufficient to provide a decent standard of living. Apple and Foxconn denied the allegations made in the report.
The Register has asked Apple and Pegatron for comment. ®