An Investigation of Eight Samsung Factories in China

Is Samsung Infringing Upon Apple’s Patent to Bully Workers?

Table of Contents

• I. Introduction
• II. 16 major sets of labor mistreatment
• III. Supplier factories are the worst violators
• IV. Samsung can and must improve labor conditions

I. Introduction

In June 2012, China Labor Watch (CLW) published an investigative report on ten supplier factories for Apple. Soon afterwards, CLW begin carrying out investigations of Samsung’s network of factories.

Samsung Electronics, headquartered out of South Korea, is a world leader in electronics manufacturing and sales. In 2011, Samsung enjoyed profits of over $12 billion and was ranked as the 22^nd largest corporation in the world by CNN. Naturally, the treatment of this corporation’s manufacturing workers serves as a model for other businesses in the industry.

However, new investigations by CLW have revealed that the treatment of Samsung’s Chinese factory workers is far from model. Indeed, the list of illegal and inhumane violations is long, including but not limited to well over 100 hours of forced overtime work per month, unpaid work, standing for 11 to 12 hours while working, underage workers, severe age and gender discrimination, abuse of student and labor dispatch workers, a lack of worker safety, and verbal and physical abuse. Moreover, workers lack of any effective internal grievance channel by which to rectify these transgressions.

Samsung has a network of 12 factories that it directly owns and operates in China. In addition, it has countless contracted factories which it does not operate but which are part of Samsung's supply chain, including the HEG Electronics factory, which was exposed by CLW on August 12 for child labor abuse. From May to August 2012, CLW conducted an investigation of 8 factories, including 6 directly-operated by Samsung and 2 Samsung supplier factories.

Directly-operated factories and supplier factories differ in some important ways. Samsung has majority ownership of its directly-operated factories, these factories only work for Samsung, and all of their processing fees and expenditures are all assumed by Samsung. But supplier factories only manufacture or process products for Samsung. All expenditures are the responsibility of the factory itself, and they gain profit on the price of their produced goods.

These 8 factories include:

· Shenzhen Samsung Kejian Mobile Telecommunication Technology Co., Ltd (SSKMT), with about 500 workers, is 60% owned by Samsung and primarily produces Samsung’s CDMA cell phones;

· Huizhou Samsung Electronics Co., Ltd (SEHZ), with about 10000 workers, is 99% owned by Samsung and primarily produces MP3/MP4 players, MINI combined speakers and receivers, and DVD home theaters;

· Tianjin Samsung Electronics Co., Ltd (TSEC), with about 2000 workers, is 91% owned by Samsung and primarily produces DVD players and parts for TVs;

· Tianjin Samsung Mobile Display Co., Ltd (TSMD), with about 3500 workers, is 95% owned by Samsung and primarily produces mobile displays;

· Samsung Electronics (Shandong) Digital Printing Co., Ltd (SSDP), with about 2000 workers, is 100% owned by Samsung and primarily produces digital printers;

· Suzhou Samsung Electronics Company Co., Ltd (SSEC), with about 4000 workers, is 88% owned by Samsung and primarily produces refrigerators, washers, air conditioners, compressors, small home appliances, and related parts;

· Tianjin Intops Co., Ltd (Intops), with about 1200 workers, is a supplier factory for Samsung and primarily manufactures cell phone casings;

· Tianjin Chaarmtech Electronic Co., Ltd, with about 900 workers, is a supplier factory for Samsung and primarily produces cell phone casings and other parts.

The worker population of each factory above is an estimate based on our investigators’ work. CLW investigators entered these 8 supplier or directly-operated factories either posing as workers or interviewing workers outside of the factories.

II. 16 major sets of labor mistreatment

Our investigations have discovered an array of serious legal violations and labor abuses throughout these 8 factories. Below are some of the gravest issues:

1. Forced and excessive overtime. Every factory except SSKMT maintains overtime for at least half the year that reaches or exceeds 100 hours per month, sometimes with only one day of rest during the entire month. TSMD workers reach up to 186 hours of overtime during the peak season. Only SSKMT's factory never surpassed 100 hours of overtime, but even its 50 hours of overtime surpasses the legal limit of 36 hours. Workers of the TSEC, TSMD, Chaarmtech, and SEHZ factories are forced to work overtime. Even if not forced, workers often have no choice but to work overtime because their base wages are too low to support themselves. Because of this, most workers are quite willing to work overtime, and many workers view the inability to do overtime as a type of punishment.

2. Exhausting working conditions. Almost all factories require most workers to work standing for the entirety of their shift, including during regular overtime shifts that last 11 to 12 hours. This is despite the fact that factory technicians have expressed that from a production perspective, in many cases, standing is unnecessary. In addition, the rate of production during these long shifts is incredibly fast. For example, workers at SSEC must assemble a nearly meter-long panel and install two screws every 9 seconds. And workers on the cell phone assembly production line at Intops have to finish assembling one cell phone casing every 5 seconds.

3. Extensive labor contract violations. Almost every factory failed to uphold workers’ legal rights to a labor contract. These violations range from a blank contract, to not giving workers a copy of the contract, to no contract at all. For instance, many or most workers at TSEC, TSMD, Intops, and Chaarmtech sign absolutely no legitimate contract with the factory.

4. Forced work without pay. TSEC, SSDP, and Intops require workers to come into work up to 20 minutes early every day for meetings without any remuneration for the time. A fourth factory, SSEC, also doesn’t pay workers during some months in the year for overtime past 36 hours, instead giving them extra vacation time.

5. Inhumane treatment of workers. In at least two factories, TSMD and Intops, investigators discovered regular crude treatment of workers, including verbal and physical abuse.

6. Abuse of underage workers. At least 3 factories—TSMD, SEHZ, and SSKMT—have been discovered hiring workers under 18 years of age, requiring them to do the same work as adults without providing extra protection for these children. The SEHZ factory was even reported as having management hire underage workers by changing the name on the young person’s ID card to the name of a past worker in order to create a facade of age legality. Additionally, workers at SEHZ, Chaarmtech, and SSKMT have reported that underage workers will enter the factories with fake IDs, indicating a major problem with the hiring and supervision system in these factories.

7. Severe discrimination based on age, gender, and individual characteristics unrelated to the job. Every factory but SSDP and SSEC was reported to be restricting the age of new workers to only young workers, the most egregious of which being 16-20 years of age at the SEHZ factory. The factories hire young workers because they are both more cooperative and less able to defend their own rights. Every factory but SSDP and SSKMT refuses to hire either males or females. When females are favored, it is usually because they are considered more cooperative. Only SSEC favors males because the rate of work is so demanding that the factory fears that female workers could not adapt. SEHZ was also reported as refusing to hire any person less than 1.55 meters tall or that has tattoos, dyed hair, or physical disabilities.

8. Abuse of labor dispatch workers. TSEC, TSMD, INTOPS, Chaarmtech, and SSEC hire a large part or all of their workers via labor dispatch companies, generally offering the workers an illegitimate contract or no contract at all. Instead, dispatch workers will sign a contract with the dispatch companies, allowing the factory to shirk much responsibility for these workers' benefits and safety.

9. Abuse of student workers. TSEC, TSMD, SSDP, SEHZ, and SSKMT extensively hire students directly from vocational schools. Many of these students are underage and they often don't receive a legitimate labor contract; instead, the factory signs a contract with the school of which the students never receive a copy. Many, if not most, students are forced to accept this work as part of graduation requirements. Moreover, schools themselves are more than happy to continue providing students as they receive kickbacks from the factory.

10. Charging workers inordinately high fees to be hired. Workers hired via dispatch and employment agencies must pay up to 800 RMB ($125) per person, where the average monthly base wage for workers is less than 1700 RMB ($267). For example, at the TSEC factory, dispatch workers had to shell out 300-700 RMB ($47-110) to be hired, which occupied up to one half of their base monthly salary of 1450 RMB ($228). In addition, Intops, Chaarmtech, and SSEC charge workers up to 100 RMB ($15) for a health check required during the hiring process.

11. Lack of worker safety. Intops and Chaarmtech don’t provide any safety training for workers. In addition, investigators reported safety concerns in the hazardous environments on the factory floors of SSDP, Intops, and SSEC. For instance, those at Intops who come into contact with printing fumes don't receive or wear protective masks.

12. Dependence on overtime. Workers at Intops and Chaarmtech, both supplier factories, receive a monthly base salary of only 1310 RMB ($206), which is the minimum wage in Tianjin. The average monthly wage at these factories is 3200 RMB ($503) and 3300 RMB ($519), respectively, meaning that their monthly base salary is only about one half of their monthly overtimes wages, making these workers dependent on overtime in order to make a living wage. Dependence on overtime work is characteristic of workers at almost every investigated factory.

13. No pay stubs. At SSDP, Chaarmtech, and SSEC, workers are not given pay stubs when wages are issued. At SSDP and SSEC, workers must access company computers to check their wages.

14. Discrimination in benefits based on personal identity. The TSMD factory provides more insurance benefits for workers that are Tianjin residents than non-residents.

15. Unfair and unreasonable rules. Almost every factory had other regulations that were unfair or simply cruel. A few examples: at TSMD and Intops, sick days are recorded as “work absences”, affecting the workers performance grades and wages; at SEHZ and SSKMT, workers are only allowed to leave the probation period and become formal employees during the month of July, arbitrarily punishing workers who are hired in any other month; and at SEHZ and Intops, workers pay hundreds of renminbi in insurance costs without ever receiving insurance cards that would allow them to enjoy the benefits for which they paid.

16. Lack of any effective complaint mechanisms. Even when they suffered unfair treatment, workers at almost factory lacked any effective channel by which to express grievances to management. TSEC and SSEC had a type of suggestion box, but workers didn’t believe that management would seriously consider these complaints. Furthermore, most workers at every factory had heard nothing about a union, and even if there was a union, it did not act as a voice for the workers’ interests.

(The individual reports for each factory can be found below.)

III. Supplier factories are the worst violators

All factories in this investigation mistreat labor in one way or another, but generally speaking, those factories directly owned and operated by Samsung are, in some aspects, less egregious violators than the supplier factories that Samsung pays to produce its products. As an example, the chart below compares a factory completely owned by Samsung, SSDP, and a supplier factory, Intops, based on information and estimates collected during our investigations.

The above chart clearly demonstrates that although the SSDP factory is still plagued with issues—e.g., excessive overtime, harsh work conditions, a lack of effective grievance channels—the Intops factory can be considered in another league of labor abuse, with over 100 hours of overtime per month throughout the year, gender and age discrimination, illegitimate labor contracts, and a lack of concern for worker safety. Through the network of Samsung’s Chinese factories, those majority owned or directly operated by Samsung occupy a very small percentage of the factories. The majority of those in Samsung’s network are supplier factories, and the conditions at these supplier factories are, on average, worse than those at Samsung’s own factories.

IV. Samsung can and must improve labor conditions

The labor abuse detailed above mustn’t be allowed to persist. As discussed in the beginning of this report, Samsung is among the largest corporations in the world, with over $12 billion dollars in profits in 2011. It clearly has the wherewithal to systematically improve labor conditions for its network of factories and supplier factories in China. Below are some of the steps Samsung can take in both its majority-owned and supplier factories:

· Establish worker hotlines in each factory. By establishing this channel of communication between the factory and workers, worker grievances can be clearly expressed and potentially rectified. Of course, workers should be free from factory reprisals and be able to maintain their anonymity if so desired. The factory also benefits from a hotline because the expectations of more workers can be met and employee turnover will reduce.

· Establish third-party hotlines. Third party actors, such as NGOs, can act as mediators of labor disputes by giving workers a direct channel by which to contact these NGOs and express their grievances. In turn, these NGOs can then communicate the grievances to the factory and discuss potential solutions.

· Reduce internal audits and increase third party audits. Redundant internal corporate social responsibility (CSR) audits lack independence and are mired in corruption. Samsung should reduce these audits and replace them with regular independent third party audits. NGOs, which have no conflict of interest in working with Samsung, should be able to freely conduct CSR audits in factories, strengthening oversight and improving labor conditions.

· Educate managers. Management—particularly low-level management on the factory floor—should be provided with communication and human resource management training. Without these essential skills, the verbal and physical abuse in factory workshops will persist.

· Round-table discussions. Samsung can organize discussion events which bring in
representatives for the workers at a given factory, for that factory, for Samsung itself, and for any other corporation that does business with that factory. Round-table events should allow all sides to hold open discussions on factory rules, labor treatment, and other issues relevant to workers. These events should emphasize equality among the various parties, ensuring that there are an equal (or greater) number of worker representatives as corporate and factory representatives. Worker representatives should be directly chosen by the workers themselves.

· Production transparency. Samsung should publish a list of all supplier factories as well as put the names of these factories on its products. This way, Samsung's manufacturing operations will be fully transparent.

· Collective bargaining and unions. Not one factory in this investigation had a legitimate union. Samsung should allow the right to worker-organized, worker-operated, and worker-led unions in all of its directly-owned and supplier factories. Of course, all union leadership and representatives should be chosen by the workers that union represents. And all unions should have to right to collective bargaining.

The long list of abuses discussed in this report demands an immediate effort by Samsung to rectify current illegal and unfair treatment. But in order to prevent transgressions in the future, Samsung should also improve the entire system, as is detailed above. By nature of its size and extensive utilization of Chinese labor, Samsung can change the way that the electronics industry treats manufacturing workers. CLW calls on Samsung to begin at once.