Cutting corners: iPhone 12 manufacturing is already suffering from shortages of essential components, and Apple is struggling to produce enough units to meet high seasonal demand. Pegatron may have shot itself in the foot with poor oversight over its labor practices as Apple is already looking at alternatives.
Apple recently stopped placing orders with Pegatron – one of its largest manufacturing partners – amid reports of student labor violations. This wouldn't be the first time the Cupertino company caught one of its key partners abusing workers and using illegal tactics to string them along, but now it's taking more serious measures against the offending company.
According to a Bloomberg report, Apple discovered that Pegatron misclassified workers in a way that allowed them to work night shifts and overtime. Furthermore, Pegatron went to great lengths in falsifying paperwork to cover up actions that are in clear violations of Apple's code of conduct for suppliers.
Apple said it found out about the issue a few weeks ago, and has since placed Pegatron on "probation." This won't affect its current contracts with Apple, but the manufacturer will have to address the problem if it wants to continue their business relationship.
Pegatron acknowledged the findings and fired the individuals that were in charge of the student interns at its campuses in Shanghai and Kunshan. The manufacturer also found the students were working in positions unrelated to their majors, so it took them off production lines and offered them "proper compensation alongside all necessary support and care."
It's unclear how long it will take to gain back Apple's trust, in the meantime the company is trying to meet high demand for the iPhone 12, and production is already being affected by shortages of power chips. Pegatron may well lose next year's orders to other manufacturers such as Luxshare, which recently bought two Wistron factories and is backed by the Chinese government.