Microsoft Corp. and Samsung Electronics Co. may face greaterscrutiny of their labor practices as Apple Inc.'s biggest supplierimproves conditions at its Chinese plants after protests by rightsactivists.

Foxconn Technology Group, the world's biggest assembler ofelectronics products for other companies, has cut working hours andenhanced safety, the Fair Labor Association said in its firstreport following an audit of three of the manufacturer'sfacilities. Taipei-based Foxconn is ahead of schedule in its15-month plan to improve working conditions, the associationsaid.

Apple turned to the Washington-based labor monitoring groupafter suicides of Foxconn workers and an explosion at anothersupplier soiled public perceptions of the world's most valuablecompany. Foxconn pledged to cut hours to 49 a week by July 2013,raise wages and give employees more say in management, measuresthat are shifting activists' focus to rival companies.

“The pressure is definitely going to be on other companies,including Samsung and other U.S. brand names,” said Alberto Moel, aHong Kong-based analyst at Sanford C. Bernstein. “Samsung may beresistant, while companies such as Microsoft are likely to be morepragmatic and proactive in opening up.”

At least 50 violations of Chinese regulations were found whenthe FLA inspected Foxconn campuses at Chengdu, Guanlan and Longhuain February and March. The company more than doubled wages afterprotests from rights groups including China Labor Watch andStudents & Scholars Against Corporate Misbehavior.

The FLA logged 284 changes made by Foxconn this year, 89 morethan it was required to complete, the group said in a reportreleased today. Foxconn, which has about 178,000 workers makingApple devices in China, reduced the number of working hours perweek to 60, including overtime; redesigned equipment to protectemployees; and is working with authorities to get migrant workersunemployment insurance.

Chief Executive Officer Tim Cook brought Apple into the FLA inJanuary after suicides by at least 10 Foxconn employees in 2010highlighted conditions at the supplier. Three people died and morethan 70 were hurt last year in blasts at two iPad facilities, oneof which was owned by Foxconn.

Apple is the first electronics company to join the FLA, whichwas set up in 1999 in an initiative by former President BillClinton after Nike Inc. was accused of rights abuses at factoriesin Asia. Nike, the world's largest sportswear maker, Puma SE,Hennes & Mauritz AB and Juicy Couture owner Liz Claiborne Inc.are among 35 participating companies that submit to random FLAinspections of their suppliers.

FLA Model

“With globalization, the types of labor issues found in theapparel and sporting-goods supply chains are prevalent across allmanufacturing supply chains,” said Kerstin Neuber, a spokeswoman atHerzogenaurach, Germany-based Puma. The FLA's experience can beexported to other industries, she said.

Foxconn hopes its efforts “will also serve as a model for othercompanies,” Louis Woo, a spokesman, said in a statement.

Labor groups have already focused on Suwon, South Korea-basedSamsung, the maker of Galaxy smartphones and an Apple supplier.

China Labor Watch, a New York-based group headed by activist LiQiang, earlier this month accused a Samsung assembler in China ofhiring child workers and having conditions “well below” those atother Apple suppliers.

Samsung, which sent a team to HEG Electronics (Huizhou) Co. toexamine the claims, is still investigating, spokesman James Chungsaid by phone Aug. 20. The company is “in full compliance withinternational and local industry standards,” Nam Ki Yung, anotherspokesman, said in an e-mailed statement.

“We hope that there can be a ripple effect in the industry,”said Debby Chan, project officer of Students & Scholars AgainstCorporate Misbehavior, a Hong Kong-based labor group. “Many otherbrands also deserve attention.”

In 2010, Microsoft supplier KYE Systems Corp. was accused by theNational Labor Committee of harsh working conditions that includedlong hours, child labor and strict quotas for making computer micefor the Redmond, Washington-based company.

“Microsoft's hardware suppliers are required, under terms of ourcontract, to provide Microsoft and third-party auditors on-siteaccess to each facility,” the company said in an e-mailed responseto questions today.

The company currently works with the FLA on a project basiswhile “a deeper engagement with the organization has not beenconsidered.”

Labor Watch

The pressure hasn't entirely lifted from Apple. China LaborWatch said that while hours at Foxconn have been reduced to 60 orfewer per week, employees are required to complete the same amountof work as before.

Employees “have to work much harder and they are not satisfied,”Li said in an e-mailed statement.

Foxconn employees continue working excessive overtime, with areduction of hours likely to be the biggest stumbling block in thecoming year, the FLA said. Foxconn has committed to meeting theChinese legal limit of 40 working hours a week plus an average ninehours of overtime, while still “protecting worker pay,” the groupsaid.

The inspection at Foxconn, whose shares trade in Taiwan underits flagship Hon Hai Precision Industry Co., means audits may beginat other Apple suppliers, including Samsung, Quanta Computer Inc.and Pegatron Technology Corp., Van Heerden said.

“We've been making steady progress in reducing excessive workhours throughout our supply chain,” Steve Dowling, a spokesman forCupertino, California-based Apple, said in an interview.

The company has achieved 97 percent compliance with its mandateof a 60-hour maximum work week for more than 700,000 people whowork on its products.

Having already opened up its supply chain to outside inspectors,Apple could have made it easier for other technology firms toensure conditions meet stricter standards. The company in Januarynamed 156 suppliers, many of which also sell to its rivals.

Quanta, the world's largest custom maker of laptops, also countsHewlett-Packard Co. and Dell Inc. among its clients. Pegatron'scustomers include Asustek Computer Inc. and Microsoft.

Pegatron, the Taipei-based second-biggest supplier of iPhones,has upgraded its dormitories, added more recreation facilities andincreased wages, Chief Financial Officer Charles Lin told BloombergNews on Aug. 16. An explosion at an affiliate last year promptedthe company to buy new equipment and amend its production processto boost safety, he said.

“Attention is inevitably going to shift to the competitors,”Auret van Heerden, president and chief executive officer of theFLA, said in an interview. “People are going to be saying: IfFoxconn's doing it, why can't you?”

Bloomberg News

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