08/21/2012 04:00 pm ET Updated Sep 05, 2013

Apple, Foxconn Stick To Vows But Toughest Tasks Ahead: Audit

By Poornima Gupta

SAN FRANCISCO (Reuters) - Apple Inc and Foxconn have improved work and safety conditions at the Chinese factories that make most of the world's iPads and iPhones, but the auditors they enlisted to monitor the process warn that the toughest tasks lay ahead.

The real challenge is in reducing working hours by almost a third for the hundreds of thousands working in Foxconn plants across Southern China to comply with local labor laws by 2013, the Fair Labor Association said on Tuesday.

The group - of which Apple is a member - earlier this year found multiple violations of labor law including extreme hours after kicking off one of the largest investigations ever conducted of a U.S. company's operations outside America. Apple agreed to the probe to stem criticism that its products were built on the backs of mistreated Chinese workers.

The world's most valuable company and Foxconn - which counts the likes of Dell Inc, Sony Corp, and Hewlett-Packard Co among its clients - agreed to slash overtime, beef up safety, hire new workers and even upgrade dormitories.

In a report tracking the progress of those commitments, the FLA said it had verified that agreed-upon changes had been instituted and that Apple was trying to hold its partner, the world's largest contract manufacturer, accountable.

"One of the sheer engineering challenges is being able to shorten the production cycle, so that they can get it all done in 49 hours instead of 60 hours. And the other part of the challenge then is workers' expectations," Auret van Heerden, president and CEO of the FLA, said in an interview.


The latest report card on Apple-Foxconn comes after first findings and a timeline for improvements were announced in March, though some industry observers said it was not entirely independent because of close ties with corporate members. Since that March audit, rights groups including China Labor Watch have conducted their own studies.

Some factory workers at Foxconn - an affiliate of Taiwan's Hon Hai Precision Industry - have also protested potential lost wages as hours get cut. Both the FLA and Foxconn have tried to help employees through the transition.

"A lot of workers have clearly come to Shenzhen to make as much money as they can in as short a period as they can, and overtime hours are very important in that calculation," Van Heerden said.

"If you reduce overtime significantly, you work that idea through with workers," he said, adding that given the severe shortage of labor in China it is likely that Foxconn would ensure that workers are happy with their compensation and avoid the risk of them leaving.

Foreign firms have long grappled with working conditions in China, dubbed the world's factory because of its low wages and efficient coastal transport and shipping infrastructure. Nike Inc in the 1990s was also the target of investigations and eventually agreed to institute changes.

Global protests against Apple swelled after reports spread in 2010 of a string or suicides at Foxconn's plants, blamed on harsh 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.

Foxconn is estimated to make half the world's consumer electronics.

Protesters have since kept up a small but regular presence at Apple events, holding up placards urging the $620 billion corporation to make "ethical" devices.

Apple CEO Tim Cook, who took over from the late co-founder Steve Jobs last year, has shown a willingness to tackle the criticism head-on.

"We've been making steady progress in reducing excessive work hours throughout our supply chain. We track working hours weekly for over 700,000 workers and currently have 97 percent compliance with the 60-hour maximum workweek specified in our code of conduct," spokesman Steve Dowling said in a statement.

(Editing by Edwin Chan and Matthew Lewis)



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