Apple secretive about its supply chain

China Daily, January 21, 2011

Chinese environmental groups on Thursday singled out iPhone maker Apple Inc for failing to properly oversee its Chinese suppliers, leading to poor environmental and work conditions, and dozens of factory workers being poisoned.

A report by 36 groups, The Other Face of Apple ranks the United States-based consumer electronics giant as the least responsive among more than 29 multinational technology companies that were surveyed about pollution and work conditions at factories in their supply chain in China.

"We found Apple did not fulfill its commitment in ensuring its supply chain's work safety and environmental standards, and treating workers with respect and dignity," said Ma Jun, director of the Institute of Public and Environmental Affairs (IPE), the main author of the report that was released on Thursday.

The criticism came amid Apple's rising popularity and firmer foothold in the Chinese market, as the opening of more stores on the mainland bears witness. The company announced this week that sales revenue from the mainland, Hong Kong and Taiwan totaled $2.6 billion, about 10 percent of its total revenue.

However, it is accused of aggressive pricing and being secretive about the management of its supply chain in Chinese factories, which have assembled most of Apple's products to date.

One incident cited by the report was when 49 workers fell sick at Lianjian Technology Company in the eastern city of Suzhou, owned by Taiwan-based Wintek, which reportedly makes touchscreens for Apple. Lianjian was accused of using N-Hexane, a toxic solvent, to clean screens.

The report said Apple declined to respond to this particular incident and insisted it would not disclose any information about its suppliers.

Last year, Apple's main supplier on the mainland, Taiwan-based high-tech company Foxconn, was hit by more than a dozen suicides that critics blamed on harsh working conditions and a militaristic culture.

Apple's CEO Steve Jobs denied the allegations, saying Foxconn is not a sweatshop. "Although every suicide is tragic, Foxconn's suicide rate is well below the China average," the report quoted Jobs as having written in response to an Internet user's question about its credentials for social responsibility.

Apple's emphasis on price and quality has somehow driven suppliers in the global chain to win their contracts at all costs, sidelining issues about the environment and social responsibility, Ma said.

The report commends Hewlett-Packard, British telecoms operator BT, Toshiba, Sharp, Sony, Siemens and Lenovo for having responded positively and taken measures to amend poor practices or step up supervision of their suppliers.

"We have no intention of singling out Apple or releasing secretive information about its suppliers. What is troublesome is Apple's lack of responsiveness and refusal to disclose information on its suppliers," Ma said.

Apple has largely ignored the accusations. The complacency can be explained by the strong consumer loyalty it continues to enjoy in the US as well as in China, according to Alex Klikunas, an American volunteer at the IPE.

"Apple has a good reputation in the US. It represents high standards and good environmental practices. Very few Americans know what is happening in Apple's Chinese manufacturing factories. People actually tend to expect more of it in terms of carrying out social and environmental responsibilities," Klikunas said.

"So long as its sales outlook stays upbeat, it can sit comfortably while ignoring these accusations raised by Chinese environmental and labor rights groups," he said.

As of press time on Thursday, Apple could not be reached for comment.