Labor Conditions of Apple’s itouch Supplier All Over CCTV. Brand Destruction in Process?

Monday, February 22, 2010 2:18

Over the last couple of years, one of the firms that has popped up on the radar of firms whose labor conditions I felt were at some point going to come back to haunt them… and I think we have come a bit closer with the above CCTV report, an 11 and a half minute investigative report (in Chinese) where former employees of the Suzhou based Wintek facility speak about the physical ailments they experienced while working at the facility.

It is a report that covers all the bases. Interviews of former employees who detail the illnesses they feel come from working at the plant, people in the hospital who are still recovering, labor bureau officials, the cursory tours, some scientific facts on the chemicals used in the process of cleaning/ finishing the screens, and even a Wintek Manager interview.

It is a report, that while “unverified”, is unlike before when Apple (and its suppliers) had labor issues as it is a report that cannot be contained by suing a reporter or leveraging the brand to keep the story from entering the mainstream, and it is the “report” that I had in many ways been waiting for. That, as the reports of Apple’s supply chain issues were becoming more frequent in the international press, it was the potential spillover into the Chinese press that I was looking out for and in my opinion significantly heightens the risk to Apple locally.

Link to video (Chinese) here

Update: Shanghai Daily is reporting that Wintek admits to having 49 employeees exposed, and “taken care of”, a few months back.  That, the exposures were a failure of managers understanding the chemicals, and how to properly manage them.. and that following the 49 employees being sicked, they took immediate action. Interestingly enough, the hospital says that more than 100 employees have been received thus far, and that they are still coming in.

hmm.. I am guessing there isn’t an Apple employee with direct knowledge of the situation, but given Apple’s plans to open up a Apple store in Shanghai this summer, I would suggest they get books on the ground fast to work out what is going on.  Last thing they would want would be 2500 Wintek employees to go on another walk, but this time move the meeting point to Nanjing road.

Update 2: Turns out that Wintek is also a supplier to Nokia, and Nokia has sent out a very strongly worded message to put a lot of distance between them and the current issues at Wintek. Here are two passages that I believe are the most damning for Wintek – and ultimately Apple (emphasis mine)

#1 – Wintek is a Nokia supplier, and provides components for its mobile phones, but N-Hexane is and has NOT been used on Nokia’s production lines at this supplier. Nokia strictly forbids all use of chemicals which are illegal.

#2 – We became aware of the allegations regarding the use of n-hexane in July 2009 and started our investigation immediately. Although it was confirmed that the n-hexane was not used on our production lines at the supplier, as part of our assessment we agreed on a development plan for health and safety management at Wintek’s Suzhou factory and a series of corrective measures have been taken since then.

So, if I read this right, not only is n-hexane illegal, but this has been going on for nearly a year.

That is would have been more than enough time for Apple to have made the necessary adjustments had they put in the effort when the first Wintek strike occurred, or even the second one.  OR.. even when they did their supplier evaluations in as part of the 2009 supplier responsibility report.

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16 Responses to “Labor Conditions of Apple’s itouch Supplier All Over CCTV. Brand Destruction in Process?”

  1. Stanley says:

    February 25th, 2010 at 5:31 am

    This is complete horsecrap. Do you really expect people to believe that this company only creates products for AAPL??? It is laughable to link this companys stupidity to AAPL but not Nokia.

  2. Rich says:

    February 25th, 2010 at 5:42 am

    Stanley.

    Perhaps before you fly out of the gates like that you should do your reading.

    1) I have NEVER said that Wintek only supplied Apple.
    2) I would say that Nokia have very little in the way of market risk (given their announcement), but that they would be wise to find a backup supplier just in case as I am sure Wintek is about to go through the ringer from government inspectors.

    Regardless of all of the above, Apple by its own admission has a poor supplier compliance record (more than half were non-compliant as part of their own study), and that regardless of whether or not they are directly responsible for the conditions on the factory floor, it is the APPLE brand that is ultimately at risk.

    Were it just this supplier, and were it just this time, Apple would be in a much different position. But that time has past (their first blowup with this Wintek facility was 2-3 years ago over dormitory conditions and salary payments, and the second was last year when 2500 workers went on strike for what they said at that time was people dying from chemical exposures and failure to make overtime payments)

    It is simply long term a certainty that this will blow up in their face. China is their next big market, and their supplier has just sickened 100+ people (rumors were that several died).

    you do the math

  3. Stanley says:

    February 25th, 2010 at 6:11 am

    So you are saying that Wintek only supplies Apple and Nokia and Nokia already used their get out of jail free card, am I reading you right?

  4. Stanley says:

    February 25th, 2010 at 6:19 am

    Further, Nokia admits that they knew n-hexane was being used in the plant since July 2009 and yet they were still willing to continue to work with the company?? Seems a little odd that a major Corp like Nokia would knowingly work with a plant that is using illegal chemicals? Whether it is on their product line or not.

    by the way I’ll go ahead and answer my own question since you failed to report it but Wintek supplies brands including Motorola, Nokia, Samsung, Lenovo and Huawei, in addition to Apple. Seems a little far fetched to single out Apple as if they are the only one contributing to these peoples harm, especially since the physical number of Apple handsets is dwarfed by the numbers of handsets produced by the other companies.

  5. Rich says:

    February 25th, 2010 at 6:26 am

    Stanley.

    Wintek is a large company, with a wide range or products, and I would say that each of their customers is now at a higher risk level in three ways:

    1) If their products are directly tied to this exposure, as the Apple iTouch has been reported, then they are exposed to the potential brand risk.. much like Nike, Mattel, and others have been in the past

    2) Depending on what an official investigations may find, it is feasible to say there are scenarios where a brand themselves were held accountable (i.e. Apple – or others – knew that problems existed and tried to cover them up).

    3) If their products are supplied by Wintek, but were not being products on the lines (or even at that facility), there is still a risk that government agencies comes down hard on Wintek and that their actions impact the customers.

    Finally, my posts on Apple’s issues go back a couple of years now, and in my opinion, they have used up any get out of jail free cards they had. The issues to date, even when the Foxconn employee killed himself, have been largely under reported in the news.. but this current case shows me that this is changing. It is now on the 6 o’clock news and in the Chinese print media.

  6. Rich says:

    February 25th, 2010 at 6:32 am

    Stanely,

    To your second comment

    I would agree re your comment on Nokia. It falls within #2 or 3 of my above areas of risk, but I do not see that they have a risk from the market in the same way that Apple does

    Second, many of these factories set up specific areas by product, and with the iTouch/ iPhone and other products requiring full factory complexes from Foxconn I do not think it is beyond the realm of possibilities that Apple has its own areas that would have had dedicated staff.. and could be traced easily.

    Perhaps I am wrong on that assumption (I have not been to the Wintek facility), but there is a reason why all the media reports have been focused on Apple’s iTouch line.

    … one thing I find odd. Apple has yet to respond in any way.

  7. Stanley says:

    February 25th, 2010 at 7:03 am

    Sorry, I cant continue this discussion you seem to have a raging woody for Apple on this when you should be concerned about the employees of Wintek. I would think your focus would be concerned for those employees and how they were being treated instead of whether or not Apple PR has made any comments or how Apple looks in light of the health issues at this company. There are numerous other corporations that are having their product lines worked on at Wintek and for anyone to focus on Apple is ridiculous. As it is this just seems like another hitpiece singling out Apple for attention, hits and/or both. I would hope that employees at Wintek are treated well and are able to work in safe conditions however focusing on Apple is not going to get that accomplished. Unless you have facts that you can back up showing that Apple has the highest percentage of product coming out of Wintek, blame if any at all should be spread equally among all companies doing business with them. To do otherwise is simply sensationalism.

    Regarding oddities……
    One thing I find odd is that Samsung has yet to respond in any way.
    Another thing I find odd is that Motorola has yet to respond in any way.
    Another thing I find odd is that Lenovo has yet to respond in any way.
    Another thing I find odd is that Huawei has yet to respond in any way.
    Your bias is too obvious try a little harder next time.

    p.s. dont know if you are aware or not but as of Jan 2010 Apple is now Greenpeace’s Number One green computer/electronics company.
    http://www.9to5mac.com/apple_is_green

  8. Rich says:

    February 25th, 2010 at 7:32 am

    Stanely.

    If you were to have read my earlier posts, you would see that I have been clear that firms in general need to begin acting far more responsibly in terms of their environmental, labor, and governance systems.

    Why do I have a woody for Apple? simple, they make it easy for me. they have had multiple violations (by their own admission), multiple public incidents, and yet they still stick with Wintek… My honest hope was that they would have acted more responsible and either forced Wintek to address the problems, or moved. but they haven’t. They added business as the problems got worse.

    In the end, you are correct in that there are other firms involved as buyers, and you are correct that they should each be building responsible supply chains. I totally agree… but for me what matters is that they themselves have not taken the steps they should have to (1) develop suppliers who have a history of responsible labor practices (wintek and Foxconn are well know for being hard on their people) (2) they did not put in the controls to manage their suppliers in a way the ensure their line workers were being paid on time (as evidenced through the Apple 2009 supplier responsibility report) and (3) they did not act to move their supply base when the above was clear, and further subjected their line workers to more risk.

    As for Greenpeace’s report, I have not read it and cannot comment on it. however, what I will say is this. Apple’s environmental record is separate from its labor record. both at the end of the day are issues that have the potential to build/ destroy brand depending on the actions that a firm takes (taking it beyond apple). However, you can find a lot of articles that would dispute Apple’s environmental record as well – a statement that is true for anyone in the electronic business.

    End of day. this is an issue that many face, and even if you look at Nike.. they are still facing it. But Apple has not taken the steps that they needed to, and because of that 100 people ended up in the hospital. It should have ended with the 2009 report, but it didn’t. Their suppliers were allowed to continue on..

    Thanks for the comments. welcome more.

    R

    p.s. – I am not someone who writes for attention or for hits. Had this been a one off, then maybe that would be a fair conclusion, but I have 6-7 posts spanning 2.5 years on this single topic. It was about trying to show readers how firms can easily get in trouble should they act irresponsibly in China.

  9. Adam Minter says:

    February 25th, 2010 at 8:10 am

    Stanley doesn’t strike me as your average, just passing through, sort of blog commentator. Care to share his IP and/or origins?

  10. Rich says:

    February 25th, 2010 at 8:22 am

    Adam

    Sorry can’t do it, but would agree that he seems to have a personal interest, depth, angle to the story. I have my theories, but I’ll leave those to myself.

    BTW – nice pic on the forklift the other day. crazy stuff.

    R

  11. Shanghai Scrap » Why are the fanboys rushing to defend Apple’s child labor record? says:

    March 1st, 2010 at 10:52 pm

    […] contractors in China. So far, there’s been little call for Apple to rectify that situation. But as the self-reported violations pile up, I have no doubt that Chinese consumers will start to wo…, and Apple’s advantages – whatever they might be – will start to erode in a […]

  12. Stanley says:

    March 2nd, 2010 at 3:56 am

    I notice you haven’t bothered to mention this.

    http://www.apple.com/supplierresponsibility/

  13. Stanley says:

    March 2nd, 2010 at 4:11 am

    exactly how would showing my ip address change someone’s thoughts about what I have written Mr Minter? I will freely tell you I live in South Florida, is there a conspiracy afoot now lol. “Quick he is disagreeing with Richard Brubaker, string him up, he’s a witch! Burn the witch, BURN THE WITCH!!!!” lol

  14. Rich says:

    March 2nd, 2010 at 7:59 am

    Stanley.

    I reference that site, and the reports, on it in every post. however, if your comment is directed at the recent release they made, then you are correct. I have not written a post on it.

    That is not because I do not think it merits a post. In fact, I have tweeted a number of comments about it under my @allroads and @chinacsr handles, but I have not had the time to write my thoughts out in full post.

    In short, what I will say is that the report is a step backwards ffrom their 2009 report in many ways, and is less transperant. I am particularly bothered by the fact that they make no mention of the big incidents (2 strikes and 1 suicide) at all, and that at the end of the report say that they end relationships where problems exist. The former is simply an efort to gloss over the conditions that exist on the ground, and the second is an outright lie.

    One thing that I am working to confirm is their assertion that they are the only ones who have inspected the factories. I believe this statement to be false, however there are 2 conditions where this could be true. (1) this is based on what suppliers told them, and clearly they did not speak to others who have sourced there – Nokia, Dell, Moto, etc. So, they are not necessarily lying if this is the case, but certainly are happy not digging further or (2) that this statement is within the context of the exact building (i.e. Nokia has its own warehouse seperate from Apple, and Nokia never inspected Apple’s real estate). Again, they are not necessarily lying, but it is not very transparent.

    A second thing that really stood out was that their scorecard on page 22. I must say that this was the most honest piece in the report, but what hit me was that the scores in ethics are so high when everything else seems to vary between the downright alarming and making god progress. I am not saying that their suppliers are without ethics, but giving them a 95% over all when paying wages on time/ child labor/ chemical exposures are in the state they are … well, if doesn’t jive.

    My final thought is that I am shocked by the coverage that it has received. the Media has done absolutely no research outside of reading the 2010 report, and is giving Apple a pass.

    Would be interested in your thoughts. Again, I have made a single pass on it, and not had the time to really devote to a full analysis… but my thoughts right now are simply that it is a step back from 2009 and that it glosses over the conditions on the ground.

    R

  15. Stanley says:

    March 2nd, 2010 at 10:35 am

    I appreciate your thoughtful response. I was not aware of your twitter accounts I will stop by and check them out.

    I think you will find that with their recent announcement of up to 25 new stores to open in China over the next 2 years that there will be a large incentive to make appreciable gains in relations with the workers and consumers in China as well as the way they are perceived outside of China on these issues brought up here.

  16. Rich says:

    March 2nd, 2010 at 10:46 am

    Stanley.

    I would agree 100% on your second statement. That for Apple, it will be a desire to drive sales that will force them to take control of these issues… and if they do not take control, they are basically going to throw away their chances in China.. and possibly see a wider global push back (I have heard the Europeans are looking at this more closely than Americans at this point. Like in labor friendly European markets…

    R