Apple Inc. suspended new business with iPhone assembler Pegatron Corp. after discovering labor violations at a student workers’ program, taking strong action to clean up a Chinese-based production chain long accused of worker abuse.
The Cupertino, California-based technology giant said it discovered several weeks ago that the Taiwanese manufacturer misclassified student workers and allowed some to work nights and overtime in violation of Apple’s Supplier Code of Conduct. Employees then “went to extraordinary lengths” to cover up the violations. It’s since placed its partner on probation until corrective action is completed, the U.S. company said in a statement.
Pegatron is one of just a handful of partners Apple relies on globally to assemble marquee products such as the iPhone. Like larger rival Foxconn or Hon Hai Precision Industry Co., the Taiwanese company is an integral part of Apple’s global supply chain, which has been the target of criticism by labor activists over the years.
The world’s most valuable company is in the middle of producing four new iPhone models with 5G, and has been working with Pegatron to expand iPhone assembly outside of China. Those efforts are unlikely to be impacted by this suspension, which was first reported by local outlet The Paper, as it only covers new business. But Apple’s move hands an opening to rival Luxshare Precision Industry Co., which is on the verge of becoming the first mainland company to assemble the iPhone. Pegatron’s shares gave up gains and closed Monday down 2.1% in Taipei, while Luxshare finished up almost 1% in Shenzhen.
“Pegatron’s current iPhone business should not be affected. However, it is likely that Pegatron will lose some orders for the Apple’s new handsets next year to Luxshare, which is poised to become a new iPhone assembler in 2021,” GF Securities analyst Jeff Pu said.
Apple Inc. suspended new business with iPhone assembler Pegatron Corp. after discovering labor violations at a student workers’ program, taking strong action to clean up a Chinese-based production chain long accused of worker abuse.
