Apple Tallies Labor-Rights Violations in Supplier Audit

Apple Inc. (AAPL) uncovered labor violations in its supply chain, including the use of underage workers and abuses of migrant laborers lured by recruiters to work in factories making its devices.

Apple conducted 451 reviews of multiple levels in its supply chain covering facilities where nearly 1.5 million people work, according to its eighth annual internal audit. The company said it’s more aggressively trying to remove the use of so-called conflict minerals and has gotten 95 percent of the facilities to keep work to below 60 hours per week.

The report reveals the behind-the-scenes work that goes into making the company’s gadgets, from the mining of minerals used in components to assembly lines in China where a final product is put together. Apple sold a record 150.3 million iPhones and 71 million iPads in its latest fiscal year, putting pressure on suppliers such as Foxconn Technology Group to manufacture enough devices fast enough to keep up with demand.

For at least two decades, Apple and other technology companies such as Hewlett-Packard Co. (HPQ) and Dell Inc. have shifted production from the U.S. to Asia, where labor is less expensive and many electronic parts are manufactured. Cupertino, California-based Apple has faced criticism from labor-rights groups for issues at suppliers ranging from excessive overtime to a spate of employee suicides at Foxconn plants.

Photographer: Brent Lewin/Bloomberg

A smartphone sold as an Apple Inc. iPhone 4S, with its back cover removed, is arranged next to the company's logo for a photograph in Hong Kong. For at least two decades, Apple and other technology companies such as Hewlett-Packard Co. and Dell Inc. have shifted production from the U.S. to Asia, where labor is less expensive and many electronic parts are manufactured. Close

A smartphone sold as an Apple Inc. iPhone 4S, with its back cover removed, is arranged... Read More

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Photographer: Brent Lewin/Bloomberg

A smartphone sold as an Apple Inc. iPhone 4S, with its back cover removed, is arranged next to the company's logo for a photograph in Hong Kong. For at least two decades, Apple and other technology companies such as Hewlett-Packard Co. and Dell Inc. have shifted production from the U.S. to Asia, where labor is less expensive and many electronic parts are manufactured.

Apple Chief Executive Officer Tim Cook, who led the design of Apple’s supply chain as head of operations under co-founder Steve Jobs, has been touting plans to add more work in the U.S.

False Documents

Apple said it found 23 workers who were under the age of 16 when hired, a drop from last year when 74 children were found to be employed by one manufacturer. The facilities that employed the children in 2013 didn’t have adequate policies to catch falsified documents, Apple said.

Discrimination of women was found at four facilities, which Apple said conducted pregnancy tests.

Apple also addressed the issue of student workers in supplier factories, requiring that internships match educational goals and working hours don’t conflict with class attendance. Foxconn, Apple’s largest supplier, said in October that it’s investigating practices at one China plant after finding instances of interns working night shifts and overtime.

Apple said it’s working with Stanford University and PC-maker Dell to evaluate the education and internships of more than 12,000 students from over 130 schools to track the quality of education for interns, it said in today’s report.

Photographer: Qilai Shen/Bloomberg

An employee works on the assembly line at Hon Hai Group's Foxconn plant in Shenzhen. Close

An employee works on the assembly line at Hon Hai Group's Foxconn plant in Shenzhen.

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Photographer: Qilai Shen/Bloomberg

An employee works on the assembly line at Hon Hai Group's Foxconn plant in Shenzhen.

Apple said it found several instances of workers being tricked into paying excessive fees to recruiters in exchange for a job with its suppliers. The workers, typically from Cambodia, Indonesia, Myanmar and Vietnam, are then forced to work to pay off the debt, a violation of Apple’s policies that limit how much money recruiters can collect.

Fees Reimbursed

Apple said its suppliers reimbursed the migrant workers $3.9 million in 2013, and have paid $16.9 million since 2008.

“Because we know factories in certain countries are more likely to employ foreign contract labor, we target them for bonded labor audits,” Apple said. The company then helps “modify their management systems and practices to comply.”

In November, Bloomberg Businessweek reported that people from Nepal were recruited to work in a factory in Malaysia to make an iPhone camera component. After production at the factory was shut down, the workers were abandoned at the plant for more than a month until the government facilitated their return.

Conflict Minerals

Apple also found several environmental violations, including one factory that used a banned chemical, three facilities that released air emissions without adequate treatment and 11 facilities that discharged wastewater into pipes, drains or directly into bodies of water.

In the audit, Apple said that it has taken steps to weed out the use of minerals from mines like those in the Democratic Republic of Congo that are used to finance armed groups associated with human rights violations. Apple confirmed for the first time that all tantalum smelters in its supply chain had been certified by third-party auditors to be conflict free. Tantalum is a common mineral in electronics components.

Apple also said it’s attempting to limit the use of conflict minerals such as tin, tungsten and gold. The company listed the smelters within its supply chain for the first time.

Apple’s supplier report, first released in 2007, is separate from audits by the Fair Labor Association, which the iPhone maker teamed up with in 2012 to conduct independent reviews of factories where its products or components are made. While the group has found employees working too much overtime, it has said conditions are improving.

For Foxconn, labor shortages and high employee turnover resulted in production staff being required to work longer hours during peak season last year, the Fair Labor Association said in December. Many workers also seek more hours in order to earn higher overtime pay, making meeting regulations on time limits the biggest challenge facing the Taipei-based manufacturer, the group said.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Reed Stevenson at rstevenson15@bloomberg.net

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