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Norio Chan is a researcher of Chinese companies and specializes in uncovering corporate fraud and labor abuse. As a labor champion for four decades, Norio has published numerous articles in Chinese about abusive practices at foreign corporations operating in China. Norio has made it his mission... More
  • Apple's Secret Child Labor Camp: Catcher Technology Makes Apple iPads, iPhones, and MacBooks Using Child Labor 0 comments
    Jul 27, 2011 3:21 AM | about stocks: AAPL, DELL, SNE, GOOG, IBM, AKCPF, ASIYF, CTHH
    While Apple is becoming one of the most popular brands in the world, few are questioning its egregious labor practices in China. Apple outsources production of its MacBook Air, iPhones, and iPads to Catcher Technology (TW 2474), a Taiwan based company that runs a child labor camp in Suzhou China making iPhone cases, MacBook Airs, and iPads for Apple.

    According to Child Labor Watch, a Chinese non-profit, Catcher is using underage labor and violating pollution laws in China, and engaging in aggressive accounting practices to manipulate its stock price. The stock price of this child labor camp has rocketed 30% in the past month alone with significant upgrades by global investment banks such as Goldman Sachs (NYSE GS), Credit Suisse, and Citigroup (NYSE C), which have all looked past the egregeous labor practices of Catcher while promoting the stock. These are the same investment banks that underwrote the convertible bond offering of Catcher Technology 2 months ago.

    Catcher Technology intentionally violates Chinese laws. Employees last no longer than 6 months at Catcher in order to skirt labor laws which produce social protection and benefits after a probation period. According to Child Labor Watch, a non profit watchdog, "Although the factories directly employ some workers, they sign labor contracts with a separate labor dispatch agency. As a result of this inconsistency, the factories may arbitrarily fire workers, providing workers with almost no job security." In a word, Catcher Technology runs electronics sweatshops for Apple (Nasdaq AAPL).

    Catcher Technology (Suzhou) Co., Ltd.

    Primary Findings

    Of the violations discovered throughout the Catcher Technology investigation, the most serious concerns include:

    • Catcher uses seven different intermediary recruitment agencies. Male candidates must pay a $7.50 USD recruitment fee, while women do not have a pay any fee for recruitment.

    • The medical examination fee is $10.50 USD, which the candidate must pay themselves in direct violation of PRC law.

    Article 32 of Law of the People's Republic of China on Prevention and Control of
    Occupational Diseases stipulates: "With regard to the workers who engage in operation exposed to occupational disease hazards, the employer shall, in accordance with the regulations of the public health administration department under the State Council, make arrangements for pre-service, in-service, and job leaving occupational health checkups, truthfully informing the workers of the results of the checkups. The expenses for occupational health checkups shall be borne by the employer.‖

    • Normal resignation in the factory is especially difficult. Most general workers are forced to voluntarily resign. The normal resignation process requires an interview, only after which workers receive verification of resignation and receive final wages. Article 37 of Labor Contract Law of the People‘s Republic of China stipulates: ―A worker may cancel the labor contract if he informs the employer in written form 30 days in advance. During the probation period, a worker may cancel the labor contract if he informs the employer three days in advance.‖

    • Workers filling out the resignation forms reported that their common reasons for leaving included poor quality of the workshop environment, resignation not approved, work was extremely exhausting, harsh treatment and scolding from the managers, and poor quality of food and accommodation.

    • Through interviews with workers, investigators learned that the longest term of service at Catcher Technology is approximately 6 months and the shortest is one day.

    Format: Off-site Interviews
    Date of Investigation: December, 2010, reinvestigated in April 2011.
    Factory Introduction:
    Catcher Technology (Suzhou) Co., Ltd. is located in the Suzhou industrial park. It was founded with an investment of 100 million USD. The factory covers an area of 180 acres. The company is the Chinese leader in magnesium alloy die-casting. The Suzhou plant was officially put into operation in April 2002 and has rapidly grown in recent years. In the first quarter of 2011 it continued to surge forward with a quarterly profit of $65.7 million USD. Its quarterly earnings were 237% higher than one year ago. Catcher (Science and Technology) is also located in Suzhou and the two are sibling companies.

    Primary Products: Notebook computers, cell phones, MP3 players‘ aluminum/magnesium alloy shells
    Primary Customers: Dell (Nasdaq DELL), Apple (Nasdaq AAPL), Motorola (Nasdaq MMI), Nokia (Nasdaq NOK), ASUS (TW 2357), Acer (TW 2353), IBM (Nasdaq IBM), Sony (Nasdaq SNE)
    Address: No. 201 Jiangzhong Rd., Suzhou Industrial Park, Suzhou, Jiangsu Province
    Total Number of Workers: ~5,000
    Number of Workers during Busy Season: 7,000+

    I. Entrance and Resignation
    There are two channels through which workers may enter the factory. The first is through introduction at the talent market and recruitment. Every Tuesday through Saturday, a loudspeaker advertises Catcher‘s recruitment at the Shuzhou Industrial Park Talent Market.

    An introduction to the factory at the talent market is free for candidates. The second method is through an intermediary recruitment process. Catcher entrusts seven different companies to recruit for them. Through these agencies, male candidates must pay a $7.50 USD recruitment fee, while women do not have a pay any fee for recruitment.

    There is no regional, race, gender, or education level discrimination in the recruitment process. Candidates must be over the age of 18. Candidates seeking recruitment are only required to bring their identification card, 4 photos, and a completed application form. The second day of the recruitment process there is a medical examination. The medical examination fee is $10.50 USD, which the candidate must pay themselves.

    After successfully passing the medical examination workers enter the factory. There is a half- day of training. The primary components of the training include an introduction to the specific situation of the factory, what rules and regulations must be respected, and fire and safety knowledge. The factory provides work uniforms. Two uniforms cost $10.50 USD, which the factory pays for.
    For recruitment of general workers into the factory, there is no probation period. Normal resignation in the factory is especially difficult. Workers must first ask their line leaders for their resignation slip. The line leader must then give the resignation slip to another manager, eventually returning it to them later. In reality, this process only serves to deflect the responsibility between the two managers, as neither is very willing to approve a resignation slip. As a result, the vast majority of workers are forced to voluntarily resign. The normal resignation process requires an interview, only after which workers receive verification of resignation and receive final wages.

    The resignation interviews are held on Tuesday and Thursday afternoons beginning at 1:30pm. Workers must fill out a resignation and interview form. The interview concerns why they are leaving the company. When CLW investigators visited the factory on a Thursday, employees were lined up for resignation interviews. There were likely 100 people interviewing. Workers reported that because the weather was especially cold that day, there were many fewer workers completing resignation interviews than average.

    Through interviews with workers, investigators learned that the longest term of service at Catcher Technology is approximately 6 months and the shortest is one day. It is clear the worker turnover rate is extremely high. Many workers complete only a few days of work at Catcher, before concluding that they want to leave.
    The workers who were resigning were extremely dissatisfied with Catcher. They said that entering Catcher was like entering a prison. Some of the workers filling out the resignation forms described that their reasons for leaving included the poor quality of the workshop environment, work is extremely exhausting, harsh treatment, scolding from the managers, poor quality of food, and poor quality of accommodation. During the on-site interviews, investigators learned that one worker‘s normal resignation form was switched into a voluntary resignation form, however the factory would not respond to his inquiries. There were other
    workers who had gotten into squabbles with the management. Workers clearly had many complaints and negative assessments of the factory conditions. After processing a normal resignation with an interview, workers‘ wages are not deducted. A voluntary resignation will result in wage deductions. Although, after completing three months in the factory, they will not deduct wages. After workers resign from the factory, workers‘ wages will be distributed on the 10th of the following month through the company‘s arranged account for the employees at the Pudong Development Bank.

    2. Labor Contract
    After entering the factory, employees sign a labor contract with the factory. Workers who were recruited through a labor dispatching agency sign a contract with that agency. These agencies sign a one-year contract with employees with no probation period. Workers directly recruited at the talent market are considered normal workers and normal workers‘ probation period is six months. They will sign a 3-year contract. Workers receive a copy of the contract. Workers were unsure what detailed information was contained in the labor contract.

    3. Working Hours
    There are 8 normal working hours each day, 2.5 hours of overtime, and 7 days of work each week. Each month, there is practically no rest days. The factory does not have an obvious peak or off season. All normal workers work in a two-shift system, which is rotated once a month. It is only during the rotation of shifts that there is a consecutive 24 hours of rest.

    Working Hours: Day Shift: 8am-12pm, 1pm-5pm, and 5:30-8pm
    Night Shift: 8pm-12am, 1am-5am, and 5:30-8am

    Workers are allowed to not work overtime, yet they must submit a written request for leave and wait for the line leader‘s approval. Otherwise, not working overtime is regarded as an absence. An absence of three days is considered voluntary resignation.

    When workers begin and end their work shift they must swipe their electronic work card. If there is an error, they must go to the line leader who will make the appropriate changes. Workers are not guaranteed one day of rest every two weeks. There is one hour for eating lunch in the middle of the day, yet workers report they usually have to wait in line for 15-20 minutes to get food in the cafeteria, and in some cases there is no rice or the food is cold by the time they are able to eat. There is a production quota every day. The target is not fixed and is made according the situation; if it is not met, it is not a problem. The line leader continuously urges the workers to complete their tasks faster and if they are slow, they will be scolded very nastily, ―if you don‘t work faster, I‘m going to make you scram, if you don‘t do
    your work well I‘m going to fire you, you are a pig of a person, even pigs aren‘t this slow…‖ The line leaders frequently use this kind of language to scold workers and workers say that the factory is a completely inhumane place. The factory regulates that workers begin work at 8am, yet workers must frequently arrive by 7:45am and arriving later than 7:45am is considered late. If they arrive within 10 minutes after the stipulated arrival time, it is recorded as a one-time preliminary written warning. If a worker receives one written warning, they are no longer eligible for that month‘s $15 USD perfect-attendance reward. If workers arrive more than 10 minutes late, it is considered a half- day absence. They will not receive wages and are ineligible for the perfect attendance reward.

    There is only 30 minutes for lunch, but the factory states they want workers to eat within 20 minutes and return to work. Many workers end up working overtime without eating. Workers feel that conditions in the factory are too harsh. They feel
    the factory only focuses on production output and quality and do not at all consider if the workers can withstand such a poor quality of life.

    4. Labor Remunerations and Benefits
    The factory distributes wages on the 10th of each month, directly distributing it into the workers‘ bank accounts. Because of excessive overtime work, workers‘ salaries are on average approximately $462 USD. The wages include a base minimum wage of $175.56 USD per month, overtime wages, and a possible perfect attendance allowance of $15.4 USD per month. After completing 6 months of work in the factory, the minimum wage rises to $157 USD per month. Workers‘ wages are calculated according to an hourly wage and overtime rates are calculated in accordance with national labor laws. At the time of wage distribution, workers
    also receive a pay slip. The pay slip and the actual received wages are the same. Deductions include living expenses, dormitory fees, and a housing fund.
    There are no wages for sick leave. In order to receive official sick leave, workers must obtain an original medical verification from the hospital clinic. If they are unable to obtain this verification, their sick day is considered an absence. The factory purchases medical insurance for workers. The Suzhou Park insurance is considered a public fund and the factory pays 10%, and the workers‘ pay 10%.

    The factory has a paid annual leave, maternity leave, and marriage leave. However, according to the first page of the factory regulation to normal workers, the annual leave is not really considered a benefit, because very few workers stay in the factory for over one year. The factory worker dormitory has a basketball court and internet cafe. During working hours, lunch, and evening break, workers may not re-
    enter the dormitories and are only allowed to return when the workday is over.

    5. Dormitory and Food Conditions
    The factory offers room and board. Each day includes lunch and dinner meals, which are deducted from workers‘ wages at $0.67 USD each. There is a monthly food subsidy of $22 USD. Workers can choose to eat in the factory cafeteria or elsewhere. For the factory meals, each meal has three dishes and one soup, such as radish, cabbage and home-style tofu. The workers state that the food is usually the same and not of high quality. Sometimes rotten rice that has turned black and tastes awful is served.

    The dormitories are either four person or ten person rooms. The four person rooms are $15 USD each month and the 10 person rooms are $7.50 USD per month. Male workers do not have any four-person dormitory rooms. There is a person who cleans the dormitory. Each dormitory room has workers from different departments. The rooms are very dirty. As a result, the majority of factory workers live off of factory grounds. The factory has cars which pick- up workers every day. If workers do not live in the dormitories, there is no housing subsidy. The dormitories have private bathrooms and showers, wardrobes, air conditioning and fans.

    6. Occupational Safety and Labor Protection
    Workers were unsure if the factory has an environmental health and safety committee. Before workers begin in the factory, there is no introductory training with regards to environmental and health conditions of the factory. The only safety precautions workers are given is a simple explanation of being careful while at work, not to run around, don't move products and wires, and do what the leader instructs. If a worker has an accident, it is their own problem. There is no systematized health and safety education training. There is air conditioning in the workshops and the safety access ways are always clear.

    Workers wear masks during working hours, although the masks do not serve much of a purpose. Workers report that especially the grinding of the cell phone case creates very fine powder which is extremely easy to inhale into the nose and lungs. There is also a lacquer paint department and the lacquer is said to be very concentrated. Workers reflect that although
    they wear masks, they still cannot stand the smell. The workshop is ventilated, but the ventilation is not sufficient enough to dull the strong toxic odors. Workers may have an in-service health examination, but there is no exit health examination. There is no first aid kit in the factory workshops or in the dormitories. The workshops have toxic products chemicals, dust, trash, and paint cans. There is a special sign for the garbage area. There are fire extinguishers.

    7. Fire Safety
    The workshop pathways and channels have clear signs and are sufficiently lit. There is no debris blocking the passageways. The dormitory has an emergency exit and access ways. In the past six months, the factory has not held a fire drill. The factory has sufficient fire extinguishers and each month there are specialized inspectors who test them.

    8. Miscellaneous
    The workers were not sure if the factory has a union or worker representatives. They were also not sure if the factory had a worker hotline. When the workers have a problem, they call the HR department. They are always referred to lower management though and are told to take up the problem with the department manager or line leader. It is very difficult for workers to resign and the factory lacks any efficient resignation process. Within the factory‘s administration, management frequently passes the buck as to who makes decisions about the formal resignation of workers. The production line leaders and workshop leaders will berate workers and the department head will sometimes use corporal punishment, physically hitting workers.

    All of the interviewed workers expressed dissatisfaction and disgust with the factory‘s management practices. Workers think Catcher is unpopular in the talent market. Factories like Youda Electronic and United Win have no difficulty in recruiting workers. Workers feel that their current salary does not match the effort they have to exert at work. Every day at work there is a lot of pressure and it is exhausting. They are not satisfied with the working hours and would expect to be able to rest one day each week. Those who work grinding the cell phone cases think that they are susceptible to contracting pneumoconiosis.
    The workers also find the factory management system to be unacceptable. The management is extremely militarized. Younger workers are especially not able to handle it.

    Workers state that after leaving Catcher, they will never again re-enter their factories to work. The workers felt that if the management at Catcher did not improve, it would become more and more difficult for them to recruit workers.
    Customers often visit the factory. The factory will warn the workers in advance and ensure they are following all relevant and proper rules.


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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