Analyzing labour conditions of Pegatron and Foxconn: Apple’s low-cost reality

China Labor Watch (CLW) published a new report that investigates labour costs and conditions at two major Apple supplier manufacturers, Pegatron (Shanghai) and Foxconn (Longhua).

Analyzing labour conditions of Pegatron and Foxconn: Apple’s low-cost reality

China Labor Watch (CLW) published a new report that investigates labour costs and conditions at two major Apple supplier manufacturers, Pegatron (Shanghai) and Foxconn (Longhua). Ever since Foxconn's labour costs increased in 2010, Apple has been more greatly engaging lower cost suppliers like Pegatron, which gain their competitive edge against through lower labour cost, leading to poorer labour conditions.

Although Apple claims they have strict internal auditing of supplier labour conditions, our investigation and analysis found that labour conditions at major suppliers are still substandard. Workers still do overtime far in excess of even Apple's own standard. Under this competition structure, suppliers that improve labour conditions are at a disadvantage. Apple is the major beneficiary of this supply chain structure. Below is the summary of the report. The full English and Chinese report versions, with charts, graphs, and raw data, can also be found here in CLW's report database.

 

1. Apple consistently suppresses labour costs by shifting production to cheaper manufacturers

  • While Apple earns huge profits, labour costs are relatively low.
  • Apple shifted production orders from Foxconn to cheaper Pegatron in order to offset Foxconn’s rising labour costs.
  • In 2014, Pegatron Shanghai still possessed about an 8% cost advantage over Foxconn Longhua, translating into a $61 million annual advantage at just one of many Pegatron factories that service Apple.

 

2. Apple is unable to effectively monitor its supply chain; Pegatron still has excessive working hours

  • Apple constantly claims that it is monitoring suppliers’ compliance with Apple labour standards.
  • Research of Pegatron workers’ pay stubs reveals average of 60+ working hours per week, 52% of workers completed more than 90 hours of overtime per month, even working as many as 132 hours of overtime.
  • Workers desire overtime because their base wages are too low; base wages cannot meet the local living standard.


3. It is media attention that has improved labour conditions, not Apple’s self-monitoring

  • Media reports in 2010 and 2012 influenced changes in Foxconn’s labour conditions.
  • Apple responded to the reports by hiring a third-party organization to improve public relations, though important promises remain unfilled.
  • Receiving little attention previously, Pegatron’s excessive working hours reduced quickly after a 2014 BBC report.


4. Apple must take more responsibility for improving labour conditions

  • Apple has sufficient profits to improve workers’ treatment.
  • Apple executives make public commitments to workers, yet poor labour conditions remain unresolved.
  • Earning three-fifths of the profit in the industry, and with $178 b in cash reserves, if Apple doesn’t reform labour conditions, who will?