Iphone Factory ChinaSource: Apple

What you need to know

  • Pegatron is alleged to have violated Apple's Supplier Code of Conduct.
  • Apple has suspended new business with the firm after it emerged it was using student workers, some of whom worked nights and overtime.
  • A new report says the 'surprise' violation may have been fuelled by pressure to fulfill iPhone 12 orders and a 'severe labor shortage' in the country.

A new report says an alleged violation of Apple's Supplier Code of Conduct by Pegatron may have been fuelled in part by a need to fulfill iPhone 12 orders and a lack of labor in China.

Reported yesterday, Apple has suspended new business with Pegatron after it emerged the company violated Apple's Supplier Code of Conduct. From Bloomberg:

The Cupertino, California-based technology giant said it discovered several weeks ago that the Taiwanese manufacturer misclassified student workers and allowed some to work nights and overtime in violation of Apple's Supplier Code of Conduct. Employees then "went to extraordinary lengths" to cover up the violations. It's since placed its partner on probation until corrective action is completed, the U.S. company said in a statement.

Pegatron is alleged to have misclassified student workers, falsifying paperwork to disguise the violations. Student workers were reportedly allowed to work nights and overtime. Apple claims individuals responsible went to "extraordinary lengths to evade our oversight mechanisms."

According to a new report from DigiTimes, the pressure to fulfill iPhone 12 orders and severe labor shortages may have played a part:

Pegatron's alleged violation of Apple's supplier code of conduct by using student workers was probably the result of needs to fulfill strong orders for iPhone 12 amid a serious lack of labor in China that has been compounded by the coronavirus pandemic, according to industry sources.

DigiTimes describes the violations as a "surprise", and that the incident "highlights the pressure of Pegatron and others from severe labor shortages in China, compounded by the coronavirus pandemic." According to DigiTimes, Pegatron remains confident it can improve on the situation, but that there is industry speculation Apple may remove the manufacturer from its iPhone supply chain. The report says Pegatron could see its business handed over to rivals including Foxconn, Luxshare, and Wistron "should it fail to remedy the violations."