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Apple suspends new business with iPhone supplier over labor violations

One of Apple's key suppliers went to "extraordinary lengths" to cover up the violations, the company said.

Pegatron is a key iPhone supplier.
Richard Peterson/CNET

Apple has frozen the signing of any new business contracts with Pegatron, one of its key suppliers, after the Taiwanese company was found to be breaking the iPhone maker's supply chain rules. Apple discovered that Pegatron had falsified paperwork and misclassified workers in order to cover up labor violations, Bloomberg reported on Monday.

Pegatron, which supplies parts for Apple's iPhones, had asked students at one of its mainland China plants to work overtime and night shifts, which they are prevented from doing under Apple's Supplier Code of Conduct. These rules also stipulate that student interns are only allowed to conduct work that is directly related to their studies, which Pegatron had also not enforced, according to Apple.

"The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms," said a spokesman for Apple in a statement.

Apple said that once it learned of the violations it "worked quickly" to ensure students were safely returned to their homes and schools, as well as to give them proper compensation. 

Pegatron told Bloomberg that it fixed the issue as soon as it became aware of the violation.

Pegatron didn't respond to a request for comment, but according to Apple, the executive charged with oversight of the student program at the Taiwanese company has been fired.

"Apple has placed Pegatron on probation and Pegatron will not receive any new business from Apple until they complete all of the corrective actions required," the company said. Ongoing contracts between Apple and Pegatron will still be fulfilled. Apple was keen to stress that its investigations have found no evidence of forced or underage labor.

"While our systems ultimately uncovered these violations, we will never stop working to strengthen our oversight mechanisms even further," said Apple. "As always, our focus is on making sure that everyone in our supply chain is protected and treated with dignity and respect."

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