Labor • Investigation means hours will be cut, wages raised.
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The Chinese workers who often spend more than 60 hours per week assembling iPhones and iPads will have their overtime curbed and their hourly wages raised after a labor auditor hired by Apple Inc. inspected their factories.
The Washington-based Fair Labor Association says Hon Hai Precision Industry Co., the Taiwanese company that runs the factories, is committing to reducing weekly work time to the legal Chinese maximum of 49 hours.
That limit is routinely ignored in factories throughout China. Auret van Heerden, the CEO of the FLA, said Hon Hai is the first company to commit to following the legal standard.
Apple's and FLA's own guidelines call for work weeks of 60 hours or less.
The FLA found that many workers at the Hon Hai factories want to work even more overtime, so they can make more money. Hon Hai, also known as Foxconn, told the FLA that it will raise hourly salaries to compensate workers for the reduced hours.
Heerden said that it's common to find workers in developing countries looking for more overtime, rather than less.
"They're often single, they're young, and there's not much to do, so frankly they'd just rather work and save," he said.
The FLA auditors visited three Foxconn complexes in February and March: Guanlan and Longhua near the coastal manufacturing hub of Shenzhen, and Chengdu in the inland province of Sichuan. They employ a total of 178,000 workers, with an average age of 23.
Average monthly salaries at the factories ranged from $360 to $455. Foxconn recently raised salaries by up to 25 percent in the second major salary hike in less than two years.
Foxconn employs 1.2 million workers in China to assemble products not just for Apple, but for Microsoft Corp., Hewlett-Packard Co. and other pillars of the U.S. technology industry.
Foxconn's move to lift wages is likely to have an impact across the industry. Given Apple's unusually high margins, it's able to absorb higher manufacturing costs. But other electronics companies, particularly PC makers, have very slim margins, and may need to look elsewhere to have their products assembled.
Workers who make Apple products have been the subject of increasing scrutiny, in part due to a one-man Broadway play by Mike Daisey. Public radio program "This American Life" used Daisey's monologue in a show about Foxconn on Jan. 6, but retracted it two weeks ago, saying that Daisey had fabricated key parts of it, including that he saw underage workers emerging from Foxconn factories.
The FLA didn't find instances of child or forced labor.
Apple has kept a close watch on its suppliers for years, and in January took the further step of joining the FLA. The organization has audited overseas suppliers for clothing manufacturers, but Apple was the first electronics company to join. It also commissioned the FLA to produce a special audit of Foxconn's factories.
"Our team has been working for years to educate workers, improve conditions and make Apple's supply chain a model for the industry, which is why we asked the FLA to conduct these audits," Apple said in a statement.
Apple CEO Tim Cook visited a Foxconn factory in Zhengzhou, China, on Wednesday.
The FLA has its roots in a 1996 meeting of multinational companies and nonprofits convened by President Bill Clinton, who challenged them to improve conditions for garment and shoe workers. Its 19-member board is composed equally of representatives from member companies, universities and nonprofits like the Global Fairness Initiative. The organization is funded by participating companies.
Labor unions have criticized Apple's use of the FLA, insisting that audits are a "top-down" approach. Foxconn's workers would be better served, they believe, by being able to organize.
"The report will include new promises by Apple that stand to be just as empty as the ones made over the past 5 years," said SumOfUS.org, a coalition of trade unions and consumer groups, ahead of the release of the report.
The FLA found few safety violations, noting that the company had already dealt with problems like blocked fire exits and defective protective gear. It's also taken step to reduce the amount of aluminum dust in the air, after the metal created an explosion at the Chengdu factory last year, killing four workers.
The FLA said Foxconn has been recording only accidents that caused work stoppage, but is now committing to recording and addressing all accidents that result in an injury.
Heerden said his auditors found Foxconn workers are the happiest with their jobs when they work 52 hours a week, well below the amount they often put in. Reducing their hours to 49 hours should help Foxconn retain workers in the long run, he said.
The auditors examined one years' worth of payroll and time records at each factory, conducted interviews with some workers and had 35,000 of them fill out anonymous surveys.
Apple has started tracking the working hours of half a million workers in its supply chain and said that 89 percent of them worked 60 hours or less in February, even though the company was ramping up production of the new iPad. Workers averaged 48 hours per week.
The Foxconn factories are the last step in the process of manufacturing an iPhone or other Apple device, most of which have hundreds of components. Research firm IHS iSuppli estimates that Apple pays $8 for the assembly of a 16-gigabyte iPhone 4S and $188 for its components. It sells the phone wholesale for about $600 to phone companies, which then subsidize it to be able to sell it for $200 with a two-year service contract.