Apple has suspended its partnership with Pegatron, a major iPhone supplier, after finding labor violations at a student workers' program. Pegatron will be banned from new Apple contracts until it takes action to resolve the violations of Apple's code of conduct for suppliers.
Apple itself has already started to branch out as far as its plans to manufacturer iPhones around the globe is concerned. Now, Foxconn and other supply partners are eyeing Mexico as another potential manufacturing location.
Foxconn Electronics is now tasked with producing more of Apple's iPhone XR devices. Originally, rival Pegatron was supposed to produce 5o to 60 percent of the LCD-based handsets. Capacity constraints and delayed shipments of critical components lead to the change, according to DigiTimes.
Shares in several of Apple's Asian suppliers fell for a second straight day on Tuesday following a report from Taiwan's Economic Daily and some analysts saying that iPhone X demand could come in below expectations during the first quarter of next year.
Apple's legal battle with Qualcomm over excessive smartphone royalties has taken a turn for the worse as several Apple suppliers have officially sided with their key client to allege that Qualcomm has violated two sections of the U.S. antitrust law.
As part of his summer project, NYU grad student Dejian Zeng spent six weeks working undercover in a Chinese factory operated by iPhone manufacturer Pegatron. In a video interview with Business Insider's Kif Leswing, he reveals some of the security measures designed to prevent unwanted leaks as part of preparations ahead of iPhone 7 production.
Here's an interesting excerpt from the interview:
In the workshop, we were originally producing iPhone 6s and during that time that we were in the workshop they were already building up some facilities or infrastructure to build the assembly line for iPhone 7.
And they had this big curtain that blocked everything.
While we were in the same workshop, we saw nothing. And later on, we were moved to another sub-factory building to do work there for a while, because they need to rebuild the assembly line that we are working on also.
The following points from the interview stood out for me:It's “impossible” for workers to take photos, let alone carry some components out Workers are required to leave their phones, keys and other metals in a locker room No metal is allowed inside the factories There are security cameras in every assembly line Security involves access cards, facial recognition cameras and metal detectors
The security level increased sharply ahead of iPhone 7 production.
For starters, management at the factories installed two metal detectors and increased their sensitivity, in turn creating problems for female workers wearing bras.
“All of a sudden, on that specific day, they couldn’t pass the security door, and they needed to go back and change everything,” said Dejian.
He says regular assembly line workers were strictly prohibited from bringing their cameras or phones inside the factories, unlike high-level managers who could bring their phones.
“I’m not sure whether photos can get leaked by that,” he said.
But even high-level managers were asked to wake up their phone's screen every time they went through the metal detectors so that security personnel could determine that they weren't carrying an unfinished iPhone unit concealed in a fake phone case. And if a worker does get caught attempting to carry an iPhone out of the factories, they're sent to the police.
In spite of all the security, leaks do happen and they're a fact of life.
Who's to stop a person from running to the press to tell them what they saw inside the factories? After they started building iPhone 7, some employees were able to confirm to the media that the device would come without headphone jack and with two cameras on the back.
“Those are some things that we can see and we can remember and we can tell the media later on,” said Dejian. Apple is known for holding its contractors to the highest security standards.
In that regard, the following excerpt is revealing:
When I was producing iPhone 6, I did see Apple come for audits. I think it was two or three times.
And every time when they come, the manger in the factories got very nervous. They would tell us you need to follow the procedure and sit straight, and don’t talk.
When they kicked off iPhone 7 production, Apple staff was there “every single day”.
Factory workers are reportedly aware of how popular the iconic smartphone is and think it’s “very cool” that they get to see Apple's unreleased products before anyone else.
The full video interview is available on Business Insider.
Hedging its bets, Apple has apparently commissioned a third contract manufacturer to build iPhone 8 alongside established suppliers and longtime partners Foxconn and Pegatron. According to a Chinese-language report in the Economic Daily News newspaper, quoted by Taiwanese trade publication DigiTimes, Apple supplier Wistron will get to build some of the future iPhone units.
U.S. President-elect Donald Trump repeatedly said during his campaign that he would force domestic technology companies like Apple to build its “computers and things” in the United States.
One time, he even openly called for boycotting Apple products unless the company doesn't bring back manufacturing jobs it had outsourced to China many, many, many years ago.
Japanese outlet Nikkei is reporting today that iPhone contract manufactures Foxconn and Pegatron were approached recently by the Cupertino firm regarding the possibility of establishing iPhone manufactories in the United States.
The CEO of Pegatron, a Taiwanese contract manufacturer that assembles Apple handsets along with Foxconn, told Nikkei Asian Review he remained “cautiously optimistic” about iPhone 7 sales.
His comment targets a recent analyst report from KGI Securities' Ming-Chi Kuo predicting fewer iPhone 7 sales in 2016 than the iPhone 6s garnered in 2015. Analyst firm Piper Jaffray, too, downplayed Kuo's negative report in an interview with AppleInsider, saying it's seeing similarities to the monster iPhone 6 upgrade cycle.
Taiwan-based Pegatron Corporation, which has long been Apple's secondary product manufacturer after Foxconn, has begun automating production lines where gadgets for other companies are being assembled. As a result of increased automation at the Shanghai plant, the company cut back on new hires, said its chairman TH Tung according to Chinese media quoted Thursday by DigiTimes.
With a little more than two months before its assumed September release, contract manufacturer Pegatron is reportedly in the process of hiring as many as 40,000 workers as it makes preparations to kick off assembly work on Apple's iPhone 6s and iPhone 6s refresh, according to a DigiTimes report this weekend.
Protek, a Pegatron subsidiary in eastern China, reportedly began recruiting workers at the end of June and will continue to do so until October, one month after the expected launch of the new iPhones.
Protek is planning to hire 40,000 workers in total, said the Taiwanese trade publication.
Pegatron, the Apple supplier at the center of a blistering BBC report last week, said in a statement Monday it will inspect all the negative claims carried in the report and will start implementing improvements to ensure the problems are solved.