Apple doles out some serious punishment to iPhone assembler Wistron

Last week we told you that iPhone production at Apple contract manufacturer Wistron's Indian facilities had been temporarily halted. A week ago today a riot had broken out during the night shift as nearly 2,000 employees protested that their pay was less than the amount that Wistron had promised them. Published reports indicated that these workers destroyed some of the facilities used to manufacture Apple products like the iPhone. This action could lead to delays in production of the handset.

Also damaged in the riot was office furniture and employees' vehicles. The damage was originally estimated at $57 million although that figure was later dropped to a range of $3.5 million to $7 million. Wistron is one of three Taiwan based companies that are paid by Apple to assemble the iPhone. Another assembler could soon be the first on China's mainland to build the iPhone, and that company is Luxshare. The latter purchased two small factories from Wistron that could be used to move iPhone production to the mainland.

Today, Apple announced that it is escalating the entire incident by placing Wistron on probation and said that it will no longer award the supplier any new business until the firm makes the proper changes to guarantee to Apple that its workers will be treated correctly. As with most fights between labor and management, the argument was all about money. Wistron had reportedly promised engineering graduates Rs 21,000 ($285) per month, but instead they had paid them only Rs 16,000 ($217) at first.

Reuters reports that the results of an audit conducted by Apple revealed violations of its 'Supplier Code of Conduct' were committed by Wistron. The manufacturer admitted on Saturday that some workers at the Narasapura factory had not been paid on time or properly. Apple said that its supplier failed to use proper working hour management processes. This "led to payment delays for some workers in October and November." As a result, Wistron canned a top executive who was in charge of its business in India.

Putting Wistron on probation and not allowing it to receive new business from Apple for the moment is a major setback for the contract assembler since it was supposed to get the job to assemble another iPhone model in India. Wistron was planning to hire another 20,000 workers over the course of the upcoming year. Karnataka state officials investigated the factory after the riot and found that the Wistron facility broke several laws in an attempt to add more workers. The investigation found that the number of workers at the factory rose quickly from 5,000 to 10,500. The report accused Wistron of underpaying contract workers and housekeeping staff, and forcing female employees to work overtime without legal authorization.

Wistron was the first contract manufacturer to assemble iPhone models in India back in 2017. Foxconn also produces iPhone models in the country and Pegatron will soon follow. In a statement, Apple said, "Our main objective is to make sure all the workers are treated with dignity and respect, and fully compensated promptly." Wistron is setting up 24 hour hotlines that will accept anonymous complaints. In a statement of its own, the company said, "This is a new facility and we recognize that we made mistakes as we expanded. Some of the processes we put in place to manage labor agencies and payments need to be strengthened and upgraded."

Neil Shah of Hong Kong-based Counterpoint research stated, "Apple has sent a strong message to its suppliers, telling them unequivocally that they need to adhere to its standards. In the long-run it should make suppliers more cautious and likely create fewer such public-relations headaches for Apple."

Apple's response to Wistron's treatment of its employees can hurt the supplier's plan to invest as much as 13 billion rupees ($177 million) over the next five years as part of New Delhi's production linked plan to manufacture smartphones in the country.