Apple puts Taiwanese supplier Pegatron on probation

Apple said on Monday it has put its Taiwanese supplier Pegatron on probation after finding that the company violated Apple's supplier code of conduct by asking student employees to work night shifts or overtime.

Pegatron had mis-classified student workers and falsified paperwork to disguise the violations, and in some cases also breached the code by allowing students to perform work unrelated to their majors, the US technology giant said.

Pegatron is one of a handful of Taiwanese manufacturers on the island, alongside Foxconn, who dominate Apple's iPhone assembly chain.

"Several weeks ago, we discovered Pegatron - one of Apple's suppliers in China - violated Apple's Supplier Code of Conduct in its administration of a student work study programme," it said in a statement.

"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 did not declare the terms of the probation.

Apple's investigations had found no evidence of forced or underage labour, it said, adding that Pegatron had now fired the executive with direct oversight of the programme.

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

Pegatron's shares closed down 2.1% on Monday, underperforming a 1.2% rise in the broader Taipei market.

Pegatron said in a separate statement that student workers at its Shanghai and Kunshan campuses had been found working without complying with local rules and regulations.

They had now been taken off the production lines and given "proper compensation", it said.

It did not address in its statement how being put on probation by Apple might impact the company. Pegatron reported a T$19.3 billion ($676 million) profit in 2019, up 74% on the previous year.

Apple last month launched its next-generation iPhone 12, with faster 5G connectivity.

Apple and its suppliers have been accused of poor labour practices in the past, but the U.S. company has been trying to get a grip over such issues by releasing annual reviews of the iPhone supply chain.

In 2017, Apple and Foxconn said a small number of students were discovered working overtime in one of the latter's Chinese factories, violating local labour laws.

In July the third major Taiwanese assembler of the handset, Wistron, sold two smaller factories in China to Dongguan-based Luxshare, a fast-growing firm emblematic of China's rising home-grown suppliers which are gradually increasing rivalry with the Taiwanese giants.