Apple finds underage labor in its Chinese supply chain
Foxconn assembly workers on the iPad production line work behind a pile of brand new iPads, fresh off the line.
Just two days after the company's stock took a nose dive, Apple has now released its annual supplier responsibility report. Last year, Apple was in hot water with worker safety issues and excessive overtime hours at its largest supplier in China, Foxconn.
Since then, Apple has secured the help of the Fair Labor Association to help Foxconn improve its labor conditions. And with this year's report, Apple has gone deeper than ever into its Chinese supply chain.
Last year, Apple conducted nearly 400 audits at multiple levels of its supply chain in China, a 72 percent increase over the previous year.
"I think as we go deeper, we'll find more and more problems," says Jeff Williams, senior vice president of operations at Apple.
Last January, Apple auditors were inspecting a factory in the city of Guangzhou. The factory makes inductors, a tiny component that goes into the circuit boards of Apple products. And in that factory, Apple found 74 underage workers -- some as young as 13.
Williams says Apple immediately terminated its business relationship with the supplier and alerted government officials.
"It's a terrible situation when you find child labor, but we're going to continue to be transparent about it until we can eradicate it from the industry," he says.
In the past year, Apple has raised its corporate social responsibility staff from 10 to 30. It's teamed up with environmental and labor groups to inspect its Chinese suppliers. And last year, Apple joined the Fair Labor Association, which has inspected the working conditions of Apple's largest supplier in China, Foxconn.
FLA director Auret Van Heerden says Foxconn has made dramatic changes.
"They really are far more on top of their hours of work than any other company I can think of," Van Heerden says.
The problem is, many Foxconn workers aren't happy about working fewer hours. Outside the gates of one of the company's largest factories in the city of Shenzhen, employee Li Shihong complains about the new rules with his friends.
"It's close to Chinese New Year, so we would like to work some more overtime, but we can't," Li, who helps assemble iPads, says. "Because of these new rules, I'm making even less money than I did last year!"
Li and his friends say they've come here from hundreds of miles away to make as much money as possible in as little time as possible before returning home -- and overtime pay is essential to that equation.
The FLA's audit requires Foxconn to, by July, reduce workers' hours from an average of more than 60 hours to just 49 hours per week. The FLA's Van Heerden says he thinks it's possible this could lead to an unusual scenario of workers going on strike to demand more hours.
And for Foxconn, hiring new workers in what is becoming a dwindling labor supply in China is even more troublesome.
"Retention is going to become an art. It really is," says Van Heerden. "Nobody's paid attention to it before, but now it's make or break. It's what distinguishes the successful companies from the rest."
And that's why Foxconn has plans to replace much of its lowest skill work with machines, training much of its assembly line workforce for higher skilled jobs.
Two years ago, four workers died in a Foxconn plant after aluminum dust ignited, causing an explosion. Van Heerden says the part of the assembly line which created that dust, where workers polished the aluminum backs of iPads, is now done by machine in a contained area away from people.
Back outside the gates of Foxconn, iPad assembly line worker Ma Jingwei says besides the hours, he's enjoyed most of the changes at Foxconn.
"When I first joined the company, the management style was militaristic, very strict," says Ma. "In the past year, our managers are becoming friendlier and we often go on planned activities together."
Retaining workers is the new norm for Chinese manufacturers. And if Foxconn, China's largest private employer, can successfully make these changes, the world's largest labor force -- the Chinese people -- will never be the same.