Apple’s Supplier Foxconn to Set New Standard for Chinese Workers

Apple Inc. CEO Tim Cook visited Foxconn Technology Group’s newly built manufacturing facility for the iPhone in Zhengzhou, China, as the U.S. company seeks to improve working conditions.

While Mark Zuckerberg's using his China trip for touristy things with girlfriend Priscilla Chan, Apple CEO Tim Cook has taken his China trip to do some Foxconn related PR-cleanup. Photo: Apple Inc.

In response to one of the largest investigations ever conducted of a U.S. company’s operations outside of America Apple 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, tells Reuters.

The results of an audit of three Foxconn factories that manufacture Apple products has turned up “serious and pressing” violations of Chinese labor laws.

The Huff Post reports that a team inspectors from the FLA visited three Foxconn factories in Shenzhen and in Chengdu. The inspectors spent up to five days at each plant and conducted hundreds of interviews with workers and managers in order to understand what labor problems existed at the manufacturing facilities of China’s largest employer.

The FLA reports revealed a number of violations. For example, the reports says: “The assessors discovered that unscheduled overtime was only paid in 30-minute increments. This means, for example, that 29 minutes of overtime work results in no pay and 58 minutes results in only one unit of overtime pay.”

“The SCI assessors found that wages are paid on time and are above the applicable legal rates…Sick leave payments are higher than the local law requirement, with workers compensated 70% as opposed to the minimum law requirement of 60%.”

“Overtime hours were also paid at the appropriate premiums…With respect to satisfaction with wages, 64.3% of workers thought that their salary was not sufficient to cover their basic needs,” tells the FLA report.

Foxconn announced it would reduce working hours to 49 per week, including overtime, while keeping total compensation for workers at its current level.

To keep up with demand, Foxconn will hire tens of thousands of additional workers and build more housing and canteens.

The Apple-Foxconn agreement may also raise costs for other manufacturers who contract with the Taiwanese company, including Dell Inc, Hewlett-Packard, Motorola Mobility Holdings, Amazon.com Inc, Nokia Oyj and Sony Corp., informs MSN BC.

“Apple and Foxconn are obviously the two biggest players in this sector and since they’re teaming up to drive this change, I really do think they set the bar for the rest of the sector,” FLA President Auret van Heerden told Reuters in an interview.

Tim Cook has shown a willingness to tackle the global criticism head-on. “We appreciate the work the FLA has done to assess conditions at Foxconn and we fully support their recommendations,” Apple said in a statement. “We share the FLA’s goal of improving lives and raising the bar for manufacturing companies everywhere.”

“Apple has had a string of negative publicity this year with Foxconn factory issues,” Mark Natkin, managing director of Marbridge Consulting Ltd., a Beijing-based market research firm, told Bloomberg. “Apple is trying to demonstrate how seriously they take these issues, and how strong their commitment is to China.”

The agreement signals the increasing power of Chinese workers that start to command higher wages given increasing prices in China, and an ageing workforce that has led to labor 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.”

However, labor costs are a fraction of the total cost of most high-tech devices, so consumers might not see higher prices.

“If Foxconn’s labor 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 said in February.

Global protests against Apple broke out after reports in 2010 about a string or suicides at Foxconn’s plants in southern China, caused by inhumane working conditions and the alienation that migrant laborers, often from impoverished provinces, face in a bustling metropolis like Shenzhen, where two of the three factories the FLA inspected are located.

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