A new report in The Information cites both former Apple employees and the company's internal presentations and data to make the case that Apple has failed to keep its manufacturing partners in China accountable after the Chinese government passed a new law limiting the use of temporary workers at factories.

The former Apple employees included three from Apple's supplier responsibility team, and one who was "a senior manager familiar with its operations in China."

In the mid-2010s, China introduced a new labor law that required factories to limit the portion of their workforces made up of temporary workers (also called dispatch workers) to 10 percent.

The labor law was meant in part to improve working conditions and stability for Chinese workers. Data showed that many temporary workers (often students working between school sessions) had been victims of exploitative practices.

This posed a challenge for tech companies like Apple, which work with manufacturers like Pegatron or Foxconn to assemble vast numbers of workers to mass-produce smartphones and other products in the months leading up to their launch, a process dubbed a "ramp." The workers are then not needed once the desired volume has been reached, so "these suppliers might shed as much as two-thirds of their workforce as demand slows."

Most major tech companies lean on these or similar manufacturers and their temporary workers to launch products like this. But the article in The Information indirectly suggests that Apple is particularly prone to this process because of the nature of its product marketing and launch strategy, which the company repeats each year and which is rooted in a template defined by deceased CEO Steve Jobs many years ago.

From the report:

Our 'surprise and delight' business model requires a huge volume of labor for only a short period of time as we ramp products," according to an internal Apple presentation in 2015. "We are making it difficult for our suppliers to comply with this law as 10% dispatch is simply not enough to cope with the spikes in labor demand we require during our ramps.

When the new dispatch worker law was passed in 2014, Apple surveyed 362 factories with which it worked in China and concluded that almost half of them were not compliant. It then asked its suppliers (over which it has substantial leverage) to propose plans for cutting down the amount of temporary workers to achieve compliance by a March 2016 deadline set by government authorities. But according to the report, the goals were not met.

Advertisement

In its current product strategy, Apple needs well over a million workers to assemble its products each year, many of them for just a few months at a time. But the struggle to find an adequate number of workers at a cost that would not require Apple to significantly raise the prices of its products to satisfy shareholders' profit expectations is a significant one.

Initially, China's advantage was exceptionally affordable labor for companies like Apple. But like many other countries and regions that have gone through economic and industrial transformations of this nature, standards and expectations for how much workers are paid, what their working conditions are like, and so on have risen in the wake of the country's overall economic success. That means fewer workers want to work at these factories, and more of them than before have the economic mobility to choose other options, even as the government increasingly passes laws to curtail exploitative practices or poor working conditions.

Apple debated internally on the best path forward, with the knowledge that the law would not be enforced universally since local regions were concerned about protecting their comparative economic advantages.

According to the report's sources, Apple's leadership seemed to decide only to push its supply partners to follow the new labor law if there were signs that enforcement would actually happen in the regions in question. That meant essentially turning a blind eye to violations unless they seemed they would have consequences for Apple.

Apple provided the following statement to The Information, which was included in the report:

Workplace rights are human rights and our supplier code of conduct is the strongest in the industry, and it applies equally to everyone across our supply chain... Occasionally factories use temporary labor, and we monitor this closely to ensure compliance with our code. Where we find issues we work closely with the supplier on corrective action plans.

The report does not seem to reflect the past year or two, though watchdogs like China Labor Watch say that some facilities appear to still be over the quota set by the labor law. Apple is not the only company to have this problem, but the sheer scale of its operations make it one of the most visible and influential players in this dynamic.

Advertisement

Apple has attempted to expand its pool of workers and manufacturing partners to include facilities in India and other countries. But The Wall Street Journal and others have noted that the necessary infrastructure and scale simply does not yet exist outside of China—and at the moment, it seems that achieving that scale is difficult even there.

Apple regularly publishes a report on its progress on this issue, which includes specific acknowledgement of the need for compliance with China's dispatch-worker laws. Typically, the company has a reputation for being more open and transparent on this and related problems than some of its competitors, but this new story in The Information argues forcefully that, based on these employee testimonies, Apple is still not doing enough or being sufficiently forthcoming.