Vital Statistics: Labor issues in the computer industry

Tuesday, June 20, 2006

Vital Statistics: Labor issues in the computer industry
By Bart Slob, SOMO


A recent Mail on Sunday report into alleged labor issues at iPod factories has added fuel to the growing debate of factory workers' rights in countries such as China.
Earlier this year the Center for Research on Multinational Corporations (SOMO) published a report on labor issues in the wider information and communications technology (ICT) sector that covers consumer electronics products such as desktop and notebook computers.


Going with the territory

The ICT sector is characterized by high levels of outsourcing to countries including China and Taiwan, with major brand name companies including Acer and Fujitsu-Siemens outsourcing major parts of their production process to contract manufacturers who then sub-contract. Here, SOMO's Bart Slob identifies seven key statistics of the research.

Nine Taiwanese and Chinese contract manufacturer factories for Acer and Fujitsu-Siemens were researched for the SOMO report. At these factories, ICT products were also being manufactured for nine other companies – also called original equipment manufacturers or OEMs – including: Dell, Apple, HP, Sony, Philips, Lenovo, Nokia, Microsoft and IBM. These companies often use the so-called "barebone" strategy, meaning to reduce lead times they purchase almost readymade computers from contract manufacturers (CMs) and add modules such as hard drives, RAM and other optional accessories closer to consumer markets.

Brands use different CMs to ensure constant supply but a relatively small number of CMs supply to nearly all the leading OEMs. In fact, in 2004, Quanta and Compal, two of the world's largest original design manufacturers (ODMs - meaning they own the intellectual rights to the designs of the products but they also use contract manufacturers), manufactured some 54.4 percent of all notebook computers available on the world market.

Many of the OEM brands sell near identical computers with identical specifications. For example, the same barebone notebook computers are used for some models in the Acer Aspire, Hitachi Flora, Dell Smartstep and the Fujitsu-Siemens Amilo ranges.

Factory issues

Across the original nine factories it researched, SOMO uncovered the following issues:
Excessive hours: During peak production season, workers have 12-hour days, six days a week.
However, at one contract manufacturer in China, workers complained of not having a single day off for several months.

Wages of most workers at the factories researched by SOMO are insufficient to cover expenses related to food, let alone rent, clothing and education. In four factories researched in China, basic wages are below the local minimum wage.

Health and safety: Workers in the sector often have to work with hazardous materials and substances without proper protection or health and safety measures. In the factories researched, there were 10 different complaints related to working conditions: excessive hours, work-related stress, noise, poor ergonomics, chemical exposure, skin allergies, respiration problems, noise hazards, dizziness and nausea.

After the thorough shake-up caused by Catholic Agency for Overseas development’s (CAFOD) “clean up your computer” campaign in 2004, some companies began acknowledging the labor issues in their supply chains. In late 2004, several leading companies developed the Electronic Industry Code of Conduct (EICC). The code is currently endorsed by HP, IBM, Dell, Cisco, Intel, Microsoft, Sony, some key contract manufacturers and Apple, who's supplier code of conduct (PDF) is modelled on the EICC standard.

The EICC organizers share a vision of creating enhanced social, economic and environmental conditions for all workers in the technology industry’s supply chain and making it more efficient for common suppliers to comply with a single set of agreed-upon high standards.
In the code, clear reference is made to responsible supply chain management: “At a minimum, participants shall require its next-tier suppliers to acknowledge and implement the code.”
Failing to comply

In spite of the relevance of this initiative, some major companies like Acer and Fujitsu-Siemens Computers, refrain from endorsing the code.

The development of the EICC certainly is a step in the right direction, although it’s not clear how compliance with the code is to be monitored. Most of the companies that have endorsed the code are still in the early stages of implementation.

Notwithstanding the ambition and the good intentions of its developers, there is an eminent credibility gap. At least one of the CMs that endorse the EICC is known to have its employees in China work 12 hours a day for months without a single day off.

Excerpted from the article, Labor issues continue to blight computer industry in the Feburary/March 2006 issue of Corporate Responsibility Management. For access to the online archive, visit Melcrum.

Blogged on 10:08 AM by Upay

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