Chinese OEMs still not auditing for labour rights abuses

China watchers will be well aware of the story by now. Most of the shiny tech kit we buy in the western world is produced in conditions ranging from ‘challenging’ to downright miserable. Apple provider Foxconn is often highlighted as a prime offender but the depressing truth is that it is one of the better employers. As long as labour rights abuses continue, though, they should continue to be reported.

The below is a piece I wrote up from my chat with IHS analyst Tom Dinges:

Half of China-based OEMs still don’t require third party audits of their manufacturing providers despite many high profile cases emerging this year involving serious breaches of labour laws and widespread strikes, according to market watcher IHS iSuppli.

The supply chain analyst revealed the news as part of a wider survey of the global technology industry.

Over the past year incidents at factories belonging to Apple supplier Foxconn, as well as plants run by contract manufacturer VTech and Samsung provider HEG Electronics, among others, have highlighted the poor level of compliance with local laws at many plants.

Although China has strict labour laws which prevent children under the age of 16 working, keep working hours and overtime to manageable levels and prohibit discrimination, they are poorly enforced.

Not-for-profit groups including China Labour Watch and Hong Kong-based SACOM have time and again uncovered incidents alleging such rules have been broken, with reports claiming physical violence, bullying and filthy living conditions are the norm in many factories.

Staff dissatisfaction comes to a boil periodically in the form of strikes or bouts of violence. In October it was claimed that thousands staged a walk out at Foxconn’s Zhengzhou factory where the iPhone 5 was being made, while a month earlier, scores of workers were hospitalised after a mass brawl at a managed dorm near Foxconn’s Taiyuan plant.

“There are aspects of the labour laws many firms turn a blind eye to for the sake of satisfying their customers and getting products out of the door,” IHS analyst Tom Dinges told me.

“Considering how much of the supply chain is embedded in China it’s too costly to move to another region so the issue is ‘what do we do to ensure our suppliers adhere to the local labour laws they’re supposed to?’.”

Dinges added that the ‘headline risk’ of bad publicity, especially as it filters down to middle America through regional media outlets, should be forcing change on this front.

Foxconn is one notable supplier which seems to be taking a lead on this, having agreed with Apple to on-going audits by the Fair Labor Association, although worrying cases of rights abuses continue to emerge at some of its plants.

China Labor Watch also claimed at a Congressional hearing in the summer that the audit process is flawed in many cases, with widespread bribery and collusion on the part of suppliers and auditing companies.

Dinges said that as the industry matures this situation should improve, with auditors taking their cue from financial investigators.

“These organisations will have to meet a certain expected level of authenticity, vigour and independence,” he added.

“We’re past the stage of hyper growth. Now a lot of what is produced there ends up staying in China. If that’s the case then the factory employee is also a customer and you want to be sure to treat your customers well.”

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More Foxconn woes – the price of your iPhone 5

factoryAll the tech talk this week has been on the brand spanking new iPhone 5, which neatly shines the spotlight once again on the conditions at the Foxconn factories where it is assembled.

Now we all know Foxconn is regularly harangued by the NGOs for one misdemeanour or another. Labour rights violations at its plants have been highlighted time and again so I won’t go into them all again now.

The landmark agreement with the FLA and Apple was meant to set the tone for an improvement in pay and conditions, and at the three plants audited by the FLA things do seem to be progressing pretty well.

However, outside those factories there are still some disturbing reports.

The latest came from an undercover reporter from the Shanghai Evening News who lasted 10 days as a newbie worker at Foxconn’s Yu Tian plant, making iPhone 5 devices. Filthy living conditions, bullying by staff, forced overtime – the list of misdemeanours was usual Chinese tech factory fare, although interesting to hear it from a source other than an NGO.

Maybe that’s why Foxconn broke with usual tight-lipped tradition and issued a lengthy statement on this saying it would investigate and address any issues such as those found by the hack, adding in a rare admission of fallibility, that it is “not perfect”.

More disturbing news still came to me from an unnamed source, who claimed that 100 workers at the Taiwanese ODM giant’s Zhengzhou plant – also producing iPhone 5s – have been hospitalised after a food poisoning incident.

Now I must stress that Foxconn has completely denied this with the following statement:

Foxconn has checked with the relevant departments and medical facilities at their Zhengzhou campus and they have confirmed that there has been no such incident.

I haven’t been able to verify independently with the local hospital so for now I’m keeping an open mind.

However I think it’s pretty obvious that the labour problems in Chinese tech factories are far from over and will require the continued scrutiny and determination of the big name brands as well as the not-for-profits for some time to come if genuine change is going to happen across the board.

A final, if rather depressing footnote: Foxconn is still pretty widely regarded as a leader in the tech ODM space when it comes to pay and conditions in China.