Apple (AAPL) Supplier Accused of Using Forced Labor in China

Apple Inc. (AAPL) supplier Lens Technology Company Limited (300433.SZ), which produces glass for the iPhone, has been accused by the Tech Transparency Project of using forced labor in China, specifically thousands of Uighur workers from the majority-Muslim province of Xinjiang. Lens Technology is one of at least five Apple suppliers in China that have been accused by human rights groups of using forced labor from Xinjiang.

"Our research shows that Apple's use of forced labor in its supply chain goes far beyond what the company has acknowledged," said Katie Paul, director of the Tech Transparency Project. According to Lens Technology's annual report, Amazon.com, Inc. (AMZN) and Tesla, Inc. (TSLA) are also among Lens Technology's customers.

Apple Denies Charge

Apple denies the charge, asserting that neither Lens Technology nor any of its other suppliers are using forced Uighur labor. Apple spokesman Josh Rosenstock said: "Apple has zero tolerance for forced labor. Looking for the presence of forced labor is part of every supplier assessment we conduct, including surprise audits."

However, two congressional staffers have indicated that Apple is lobbying against strict provisions in a bill that would impose sanctions on U.S. companies that use forced Uighur labor in China, either directly or through suppliers. Apple spokesman Rosenstock denies this charge as well, saying it is "false to suggest we 'dispatched lobbyists' to Capitol Hill."

Extent of Forced Uighur Labor

The Australian Strategic Policy Institute estimates that more than 80,000 Uighurs were transferred out of Xinjiang province to work in factories across China between 2017 and 2019, some of them sent directly from detention camps. This report finds: "Under conditions that strongly suggest forced labour, Uyghurs [Uighurs] are working in factories that are in the supply chains of at least 82 well-known global brands in the technology, clothing and automotive sectors, including Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen."

Lens Technology: Tarnished Image

Lens Technology's founder and CEO, Zhou Qunfei, is estimated to be the world's richest self-made woman, with a net worth of approximately $15.2 billion. Lens Technology has a market capitalization in excess of $130 million and employs about 100,000 people within its 16-company corporate family.

Significance for Investors

The accusations leveled at Lens Technology represent another hit to the reputation of Apple regarding the labor practices of its suppliers. Recently, Apple placed a different iPhone subcontractor, Taiwan-based Wistron Corporation (3231.TW), on probation after workers in India rioted over working conditions and unpaid wages.

A previous investigation by the Tech Transparency Project found that, despite Apple's longstanding claims of "zero tolerance" for forced labor in its supply chain, "for years Apple has sourced T-shirts worn by its retail employees from a company tied to the use of forced labor in Xinjiang, China." Moreover, this supplier was sanctioned by the United States government in July 2020 for various human rights abuses, including the use of forced labor.

What impact the Lens Technology accusations ultimately will have on Apple is anyone's guess at this point. It is worth noting that Apple has been the target of criticism about labor practices in its international supply chain for many years, and yet there seems to have been no discernible negative impact on its sales.