Apple suspends business with Pegatron due to labor violations

The Taiwanese supplier will not receive any new business from Apple.

Apple freezes new business for Pegatron – the second-largest iPhone manufacturer based in China – after discovering the labor law’s violation concerning the student worker’s program. As announced by Apple Inc. on Monday, the Pegatron Co. falsified paperwork to disguise about the student worker program by putting the student employees to work night shifts and overtime — which violates Apple’s Supplier Code of Conduct.

“Several weeks ago, we discovered Pegatron violated Apple’s Supplier Code of Conduct in its administration of a student work-study Programme,” the Cupertino based company said in a statement.

Some of the student-workers have been performing work unrelated to their majors at Pegatron. It was cleared by Pegatron that these violations took place at only its Shanghai and Kunshan campuses in eastern China.

Pegatron further said, “students working night shifts, over – time and in positions unrelated to their majors were not in compliance with local rules and regulations.”

Pegatron is one of Apple’s major supply chain partners from Asia along with Foxconn and Hon Hai Precision Industry Company.

Apple is currently working on designing four new iPhone models that support 5G and extending their iPhone assembly outside China with Pegatron. Apart from this company – Pegatron – being a major product supplier, Apple takes its Supplier Code of Conduct very seriously as it dropped 20 companies in 2019 due to violations and suspended all due operations after this issue aroused.

Apple confirmed that Pegatron is under probation now, and it will not win any new businesses until the matter is resolved. It has also been observed that this company has been a target of criticism by labor activists over the years.

“Upon discovery of this non-compliant activity, we immediately took the student workers off production lines and worked with our customer and third-party experts to make appropriate arrangements for them to return to their homes or schools with proper compensation alongside all necessary support and care” Pegatron proposed this statement as to explain the corrective measures they took and also fired one of its executives.

READ: US Places Restrictions on Chinese biggest chipmaker SMIC

After this issue been brought forward, Apple has started audits for hundreds of companies producing components for its devices, and it is made clear that any business seen defying labor laws will no more be a part of the iPhone-makers supply chain.

Pegatron’s shares closed down to 2.1% on Monday. On another note, Luxshare Precision Industry Co., a different company that signed a deal on assembling iPhones, observed a 1.2% rise.

It is likely that Pegatron will lose some orders for Apple’s new handsets next year to Luxshare, which is poised to become a new iPhone assembler in 2021, as reported by GF Securities analyst Jeff Pu.

Featured image: Tom Pennington/Getty/AFP

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