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Apple suspends iPhone assembler in China after labour abuses

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Apple has sanctioned one of its largest manufacturers after a Financial Times investigation found that thousands of student interns had worked overtime to assemble iPhones, in breach of Chinese law.

After being contacted by the FT, Apple said it had stopped giving “new business” to Pegatron, its second-largest iPhone assembler after Foxconn. However, workers there said the factory was still manufacturing new products ahead of the holidays.

Apple is racing to make up for production delays earlier in the year caused by the pandemic. The latest revelations of supply chain abuses will come as an embarrassment to Apple during its busiest season for new product launches in years. The latest iPhone 12 models are set to go on sale on Friday, two months later than normal. At an event on Tuesday, Apple is also expected to reveal new Mac computers.

Pegatron, which is headquartered in Taiwan but has operations in China, is one of Apple’s largest manufacturers, producing iPhones, Macs, iPads and other components for several years. It has also faced recurring allegations about working conditions from campaign groups such as China Labor Watch.

“Pegatron isn’t like other factories. They will force you to work overtime: 12 hours per day,” said one former worker, adding that this was to make up for rush orders or staff quitting.

Until last month, thousands of student interns had assembled iPhones at Pegatron’s Kunshan plant and illegally worked overtime and night shifts, according to former interns and workers at the plant. Chinese government regulations prevent students from interning in factories if the work is unrelated to their studies.

The alleged coercive use of students during the factory’s peak production periods mirrors the abuses previously found by the FT at Foxconn. Schools and local governments often collaborate to ensure labour supply for big companies in China.

The latest disclosures follow the death last month of a worker in his mid-thirties after falling unconscious in a Pegatron dormitory.

“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,” Apple said.

Apple did not explain how it defined “new business”, nor what the material impact of the “probation”, if any, would be on Pegatron. The iPhone maker sought to place blame for the abuses squarely on its manufacturing partner, saying: “The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms. Pegatron has now fired the executive with direct oversight of the programme.”

However, despite saying it discovered the violations to its supplier guidelines “several weeks ago”, it only issued a statement on the matter after being presented with new evidence by the FT.

Students told the FT they had been forced by their schools to intern at the Pegatron plant in order to graduate with degrees with little relevance to factory work, such as graphic design and computer science.

“We have a rigorous review and approval process for any student worker programme, which ensures the intern’s work is related to their major and prohibits overtime or night shifts. Pegatron misclassified the student workers in their programme and falsified paperwork to disguise violations,” said Apple.

Pegatron said: “During [a] recent monitoring programme conducted by our customer, some student workers at Pegatron Shanghai and Kunshan campus were identified working night shifts, overtime and in positions unrelated to their majors, which were not in compliance with local rules and regulations.”

Apple’s main iPhone supplier Foxconn has historically been linked to labour abuses, following a series of suicides of factory workers in 2010. But in recent months, alleged abuses at Pegatron have also appeared on the Chinese internet.

In September, the company apologised after a video went viral on social media of managers at the Kunshan plant throwing workers’ identity cards on the floor during a routine roll call, forcing workers to stoop to pick them up. Chinese state media also covered the incident.

The following month, the relatives of Fu Jie, an army veteran in his thirties working at the Kunshan plant, protested at the factory gate after he died suddenly. In the absence of a public statement from the factory, news of the death spread by word of mouth and social media. Some workers formed a mutual support group on WeChat, the Chinese social media app, for those at “the internet-infamous black factory, Pegatron”.

“Once you step on to the factory floor, you can’t stop working until lunchtime. Sometimes you get orders you can’t complete — 600 to 1,000 [iPhones] per hour — and then they don’t let you eat lunch,” said the former worker. Pegatron did not immediately respond to the FT regarding the worker’s claims.

Apple’s annual new product launches are the busiest period for its suppliers in China, which have to rush to boost staff and working hours to meet a sudden increase in orders.

Pegatron’s Kunshan plant ordered students to stop working on October 23, according to a notice sent to one of the students. He said that his class of roughly 1,000 students had been transferred by their teachers to another electronics factory in the city of Chuzhou.

After being interviewed by the FT over WeChat, one factory employee was warned by his manager. The incident suggested collaboration between Pegatron and local government bureaus with powers to surveil citizens’ communications. Pegatron declined to comment on the issue of surveillance.

Additional reporting by Qianer Liu in Kunshan and Tim Bradshaw in London



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Ukraine accuses Russia of blocking talks to ease military tensions

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Kyiv has accused Moscow of blocking attempts to begin talks aimed at calming military tensions sparked by the deployment of tens of thousands of Russian troops close to the Ukrainian border.

Ukraine’s president Volodymyr Zelensky has not received a response to his request for a telephone call with Russia’s Vladimir Putin, his spokesperson said, amid concerns from the US and other European powers that an escalation in military deployments could result in full-blown conflict.

More than 14,000 people have been killed in eastern Ukraine since 2014 in fighting between Russian-backed separatists and Ukraine’s army for control of Donbas, a region in the east of the country bordering Russia. The fighting first erupted after Moscow’s annexation of Ukraine’s Crimea peninsula.

“The request has been forwarded from the office of the president of Ukraine to the office of Vladimir Putin to have a conversation, a telephone talk. And we have not received an answer yet,” Zelensky’s spokesperson Iuliia Mendel said on Monday.

“The office of the president of Ukraine hopes that it doesn’t mean that Vladimir Putin refuses to have a dialogue with Ukraine,” she said, adding that the request was made on March 26.

Separately, Ukraine’s foreign ministry said on Monday that Russia had refused to engage “in consultations aimed at reducing security tensions” and boycotted an OSCE meeting on Saturday where the troop build-up was scheduled to be discussed.

Volodymyr Zelensky
Ukraine president Volodymyr Zelensky (above) made a request for a telephone call with Russian counterpart Vladimir Putin on March 26 © Gints Ivuskans/AFP/Getty Images

Putin’s spokesperson responded by saying that he was not aware of any recent requests for talks from Zelensky.

“In recent days, I have not seen any requests. I am not aware that there have been any requests in recent days,” Dmitry Peskov told reporters.

“In terms of defusing tensions and preventing a potential war, Vladimir Putin always has something to say,” he added, when asked whether Putin had anything to say to his Ukrainian counterpart. “We hope that political wisdom will prevail in Kyiv, and the matter will not take a serious turn.”

Mendel said Russia had stationed more than 40,000 troops on the eastern border area and sent another 9,000 to Crimea, in addition to the 33,000 troops already there.

That build-up, supplemented by tanks and other armed vehicles, has led to accusations that Moscow plans some form of military intervention. The Kremlin said it is permitted to station its soldiers wherever it likes, and that they are no threat to any other country.

Both Ukraine and Russian-backed separatists in Donbas accused the other side of sporadic violations of a ceasefire agreement over the weekend.

Kyiv says 28 of its troops have been killed so far this year, more than half the number who died over the whole of 2020.

Russian officials have dramatically increased their belligerent rhetoric towards Ukraine in recent weeks. Putin has warned that the situation could provoke a repeat of the 1995 Srebrenica massacre in Bosnia, while his deputy chief of staff said any escalation by Kyiv would be “the beginning of the end” for the country and provoke from Russia “not a shot in the leg, but in the face”.

Ukraine has responded by calling on Nato to speed up its membership application, while US president Joe Biden has pledged his support to the country.

In addition to the US and European powers, concerns over the military build-up have drawn in regional power Turkey, which lies across the Black Sea from Crimea. The Nato member has deepened ties with Russia in recent years but opposes Russia’s annexation of the peninsula and in 2019 sold military drones to Kyiv.

Zelensky on Saturday held talks with Turkish president Recep Tayyip Erdogan in Istanbul, who called for dialogue and for a peaceful resolution
in line with Ukraine’s “territorial integrity”. Those talks came a day after a telephone call between Erdogan and Putin, in which the Russian leader accused Ukraine of “dangerous provocative actions”.

Additional reporting by Ayla Jean Yackley in Ankara



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Technology will save emerging markets from sluggish growth

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The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’

Emerging economies struggled to grow through the 2010s and pessimism shrouds them now. People wonder how they will pay debts rung up during the pandemic and how they can grow rapidly as they did in the past — by exporting their way to prosperity — in an era of deglobalisation.

The freshest of many answers to this riddle is the fast-spreading digital revolution. Emerging nations are adopting cutting-edge technology at a lower and lower cost, which is allowing them to fuel domestic demand and overcome traditional obstacles to growth. Over the past decade, the number of smartphone owners has skyrocketed from 150m to 4bn worldwide. More than half the world’s population now carry the power of a supercomputer in their pockets.

The world’s largest emerging market has already demonstrated the transformative effects of digital technology. As China’s old rustbelt industries slowed sharply over the past decade, and ran up debts that threatened to explode in crisis only a few years ago, the booming tech sector saved the economy.

Now, often by adopting rather than innovating, China’s emerging market peers are getting a push from the same digital engines. Since 2014, more than 10,000 tech firms have been launched in emerging markets — nearly half of them outside China. From Bangladesh to Egypt, it is easy to find entrepreneurs who worked for Google, Facebook or other US giants before coming home to start their own companies.

As well as the so-called Amazon of China, there are Amazons of Russia, Poland, Latin America and south-east Asia. Local firms dominate the market for search in Russia, ride-hailing in Indonesia and digital payments in Kenya. 

By one key metric, the digital revolution is already as advanced in emerging economies as developed ones. Among the top 30 nations by revenue from digital services as a share of gross domestic product, 16 are in the emerging world. Indonesia, for example, is further advanced by this measure than France or Canada. And since 2017, digital revenue has been growing in emerging countries at an average annual pace of 26 per cent, compared with 11 per cent in the developed ones.

How can it be that poorer nations are adopting common digital technologies faster than the rich? One explanation is habit and its absence. In societies saturated with bricks-and-mortar stores and services, customers are often comfortable with and slow to abandon the providers they have. In countries where people have difficulty even finding a bank or a doctor, they will jump at the first digital option that comes along. 

Outsiders have a hard time grasping the impact digital services can have on underserved populations. Nations lacking in schools, hospitals and banks can quickly if not completely redress these gaps by establishing online services. Though only 5 per cent of Kenyans carry credit cards, more than 70 per cent have access to digital banking. 

The “digital divide” is narrowing in many places. Most of the big countries where internet bandwidth and mobile broadband subscriptions are growing fastest are in the emerging world. Last decade, the number of internet users doubled in the G20 nations, but the biggest gains came in emerging nations such as Brazil and India.

The digital impact on productivity, the key to sustained economic growth, is visible on the ground. Many governments are moving services online to make them more transparent and less vulnerable to corruption, perhaps the most feared obstacle to doing business in the emerging world.

Since 2010, the cost of starting a business has held steady in developed countries while falling sharply in emerging countries, from 66 per cent to just 27 per cent of the average annual income. Entrepreneurs can now launch businesses affordably, organising much of what they need on a smartphone. Lagos and Nairobi are rising as local fintech hubs, where leading executives vow to raise Africa’s “digital GDP” by widening access to internet financing.

It’s early days, too. As economist Carlota Perez has shown, tech revolutions last a long time. Innovations like the car and the steam engine were still transforming economies half a century later. Now, the fading era of globalisation will limit the number of emerging economies that can prosper on exports alone, but the era of rapid digitisation has only just begun. This offers many developing economies a revolutionary new path to catching up with the living standards of the developed world. 



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China’s wolf warriors refuse to back down

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Late last month the EU, acting in concert with the US, UK and Canada, imposed sanctions on four obscure Chinese officials for alleged human rights violations in Xinjiang, where hundreds of thousands of Muslims have been systematically detained over recent years.

China retaliated immediately, imposing counter-sanctions on 10 European individuals, including five EU parliamentarians from five different political parties.

In doing so President Xi Jinping’s administration threatened a contentious trade deal provisionally agreed on last year between the EU and China, despite US opposition. The sanctioned parliamentarians’ parties are now reluctant to start reviewing the deal unless Xi’s counter-sanctions are lifted.

Before Beijing imposed sanctions on the EU MPs, it was expected that the European parliament would eventually ratify Xi’s geopolitical coup, which had strong backing from France’s Emmanuel Macron and Angela Merkel, the German chancellor.

But when Merkel and Xi spoke on Wednesday, China’s official account of the call did not mention the trade deal or Xinjiang.

“We had seven years of negotiations for the deal,” said Joerg Wuttke, head of the European Chamber of Commerce in China. “Now it looks like it will take another seven years.”

The Xinjiang sanctions exchange is just the latest diplomatic dispute that Xi’s pugnacious “wolf warrior” foreign ministry officials are embroiled in. Chinese diplomats are sparring with countries and organisations that Beijing enjoyed relatively good relations with during Donald Trump’s one-term presidency. But they are expressing no regrets.

Chinese vessels anchored at Whitsun Reef off the Philippines’ Palawan Island © Philippine Communications Operat/AFP

Yang Jiechi, China’s top diplomat, set the tone for Beijing’s clashes with a long lecture to his US counterpart on March 18 in Alaska, where he told Antony Blinken that no country would ever again “speak to China from a position of strength”.

Victor Gao, a former Chinese diplomat who worked for Yang, said his former boss’s diatribe was “groundbreaking”. “Chinese leaders believe they have momentum and time is on their side,” he added. “Nothing can stop their rise.”

Chinese state media contrasted Yang’s comments with paintings of foreign colonial powers lording it over late Qing dynasty officials, who were repeatedly humbled in a series of conflicts with European, Japanese and American enemies.

The country’s “century of humiliation”, according to the Chinese Communist party, ended only after its revolutionary victory in 1949.

“China today is not the China of 1840,” Xu Guixiang, a senior party official in Xinjiang, said last week. “The days of Chinese people being bullied by the west have passed. We are not an easy target any more . . . We will fight tooth for tooth until the end.”

Many Chinese officials viewed Trump’s years in office as an unprecedented “strategic opportunity” to build bridges with Washington’s frustrated allies. But analysts said that, like Trump, those officials also believed that the Chinese Communist party could benefit domestically from diplomatic confrontations.

“Heated nationalism is good for strengthening the legitimacy and authority of the central government and [Xi],” said Yun Sun, a Chinese foreign policy expert at the Stimson Center in Washington.

“It all comes back to [Xi’s] mentality and the course he has charted,” she added, especially as the CCP prepares to celebrate the centennial of its founding in July. “The party needs to demonstrate its strength and achievements. A soft approach is not going to work.”

Last week Beijing challenged comments by Tedros Adhanom Ghebreyesus, the World Health Organization director-general who had previously been criticised for his reluctance to confront Beijing. Tedros said that Chinese officials had withheld information from WHO experts investigating the origins of coronavirus.

“After coming under pressure from the Europeans, Canadians and Americans, Tedros didn’t want to give China a pass because that would have provoked a crisis with the west,” said a diplomat involved in the WHO’s deliberations.

“Meanwhile the Chinese had to stick to their rhetoric that ‘[Covid] is a bigger problem, we had it and we dealt with it, but now we have to look elsewhere [for its origin]. They have bats in Myanmar and Laos, too’,” the diplomat added.

“It also has to be seen in the context of what had just happened in Alaska where they said don’t lecture us and don’t talk down to us.”

Chinese diplomats have recently clashed with Manila, too, over an alleged incursion of Chinese fishing vessels in Philippine territorial waters, as well as Tokyo over Japan’s concerns about the Xi administration’s policies in Xinjiang and Hong Kong.

Wang Yi, China’s foreign minister, warned his Japanese counterpart on Monday not to join US efforts targeting China.

“A certain superpower’s will does not represent the international community,” Wang said. “As a neighbour Japan needs to show at least a modicum of respect towards China’s internal affairs.”

Steve Tsang, director of the Soas China Institute in London, sees no end to such disputes. “Xi has said multiple times that Chinese officials and diplomats must unsheathe swords to defend the dignity of China,” he said. “The wolf warriors are just acting on Xi’s call to arms.”

Additional reporting by Xinning Liu in Beijing



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