Apple shifted production to Pegatron to save money, but workers are still being exploited

Working conditions at Apple’s China-based supplier Pegatron may have improved, but all is not well according to a new report from American NGO China Labor Watch.

Apple moved some of its China production away from Foxconn last year, ostensibly for the purpose of diversifying its supply chain and further expanding its output. But according to the China Labor Watch report, Apple’s getting another advantage by moving some production from Foxconn to Pegatron: big-time savings. The report looked at labor costs at a Pegatron Shanghai factory as compared to the Foxconn Longhua factory and found that moving to the Pegatron factory saved Apple US$61 million a year.

The report also claims that Pegatron workers are still working too much overtime, with more than half of workers working 90 or more hours of overtime each month. Apple’s limit for worker overtime at suppliers is meant to be 60 hours/month, so this figure calls into question Apple CEO Tim Cook’s claims that its suppliers met 93 percent compliance with its overtime rules in 2014. Many workers choose to work overtime, of course, but this is at least partially because Pegatron’s base wages are too low to meet local living standards. Workers at Pegatron Shanghai had base wages 21 percent lower than wages at Foxconn Longhua, and their weekday and weekend overtime rates were also lower.

China Labor Watch also found that Pegatron workers were housed in dormitories with 10-12 people per room. Apple’s limit is 8 people per room.

See: Is it fair to single Apple out for factory worker abuses in China?

Interestingly, the report suggests that the improvements that have come to Apple suppliers have had more to do with the media attention placed on that company since the high-profile worker suicides in 2010 than Apple’s own efforts to police its suppliers. A wage hike at Foxconn, for example, was preceded directly by a damning report in the New York Times. Similarly, working hours at Pegatron were reduced quickly in 2014 after a BBC Panorama report showed workers so exhausted they were falling asleep at their stations.

China Labor Watch has frequently reported on labor issues at Apple’s and Samsung’s China suppliers over the past few years. China Labor Watch program coordinator Kevin Slaten told Tech in Asia that although it does also report on toy and textile manufacturers (for example), electronics are a particular area of focus because they have much higher profit margins, and their massive supply chains mean that a single report could affect working conditions at dozens of factories across the country. Said Slaten:

As a small organization with limited resources, we have to make choices about impact, determining which companies are most able to make reforms and the potential broader influence those reforms. If Samsung deeply reforms working conditions across its Chinese supply chain (of roughly 200 factories), the effect is much different than a lesser known regional discount store investing in better working conditions.

Apple’s profit report [last month] should punctuate corporations’ glaring ability to easily invest in revolutionary (to use Apple’s sort of lingo) labor standards in China. Imagine typical workers who could purchase an iPhone in China with less than one month’s wage and 40-hour workweeks. Why should we not expect this of the most profitable company in the world?

He added: