Riot-hit IPhone Supplier Wistron Hired More Than It Could Handle: Report

Apple Inc.’s supplier in India quadrupled workers in about eight months, ramping up production just as the world’s most valuable company began direct online sales in the South Asia nation. The only hitch: Wistron Corp.’s systems weren’t robust enough to handle the deluge.

The number of workers at the Taiwanese company, the first Apple supplier to produce iPhones in India, surged to about 9,000 in November from some 2,000 just before the pandemic, according to people with knowledge of the matter. Wistron hired the contractual workers from six manpower companies, the people said, asking not to be identified because the matter was private. A representative for Wistron declined to comment.

The rapid expansion stretched the company’s systems and sapped the bandwidth of its management team, one of the people said. Its employee access system soon foundered, leaving it with patchy attendance records, delaying wages and overtime pay. Wistron’s human resource team -- comprising about three people -- just couldn’t cope up with the workers’ grievances. On Dec. 12 many workers -- promised roughly 15,000 rupees ($200) a month -- rioted over unpaid salaries.

The violence brings into focus the geopolitical challenge Apple faces. It’s already navigating trade tensions between the U.S. and China, while reducing its dependence on the North Asian nation for producing its iPhones, iPads and Mac laptops. Now it has to contend with a deteriorating relationship between India -- a nation Chief Executive Officer Tim Cook said is “the place to be” -- and China. The strife also dents Prime Minister Narendra Modi’s attempt to lure overseas investors for his flagship “Make in India” project, especially firms looking to leave China.

The government has offered incentives to companies such as Wistron to set up plants in the South Asian nation after border clashes earlier this year killed 20 Indian soldiers and an unknown number of Chinese troops.

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Cupertino, California-based Apple started its online store in India, the world’s fastest growing smartphone market, on Sept. 23, offering its full range of products from iPhones to Mac computers.

Earlier in the year, about 50 kilometers northeast of Bangalore, Wistron was on a hiring spree in the semi-urban area of Kolar. For the first time since the closure of India’s oldest gold mine in 2001 -- after 121 years of operation -- Kolar district had become a magnet for workers from across India.

Unpaid Wages

K Srinivasa Gowda, the politician representing the area in the local legislature, said he managed to recommend jobs for as many as 300 people with the company amid high demand for labor.

Just before the clashes, Wistron had 1,343 full-time employees and 8,483 contract workers, according to a report prepared by the Karnataka Labour Department, Kolar Circle, after the violence. The report also alleged that Wistron didn’t maintain attendance and salary records.

As the night shift crew finished on the morning of Dec. 12, workers streamed into the human resources department to ask for their salaries, according to a statement by the All India Central Council of Trade Unions. The workers were turned away. The violence started soon after, according to the AICCTU, which visited the area after the riots.

The laborers stormed Wistron’s facility, damaging property and looting thousands of iPhones and laptops, according to local media. About 150 people were arrested, the AICCTU said, adding that the company didn’t have a labor union. Wistron estimated damages at as much as NT$200 million ($7.1 million) and said it’s doing its best to resume operations at the factory.

Apple has said it is investigating the incident and whether Wistron adhered to its labor practices. It sent staff and auditors to the site, in cooperation with the local police.

“Our team is onsite, working closely with the Wistron management team to better understand and resolve the situation,” Paul Dupuis, chief executive officer of Randstad India, which provided workers to Wistron, said in an email.

Representatives for the Adecco Group and Quess Corp., staffing firms identified in the Kolar administration’s inspection report, said they were cooperating with the investigation. Bloomberg News couldn’t reach Creative Engineers Ltd., a third staffing firm named in the inspection report.

‘Important Project’

The violence has also rattled Modi’s government, which has pushed policies to build its own manufacturing base, aimed at creating well-paying jobs for workers. This year, Apple’s iPhone assemblers were among the companies on track to win approval to participate in a $6.6 billion stimulus program, Bloomberg News reported.

Wistron is a “very important project” and the local administration is working closely with the company’s management to restart the factory while addressing genuine grievances of the workers, the Government of Karnataka, the state where the facility is located, said in a statement on Wednesday. It pledged to provide security and ensure safety of the project, employees and property.

The incident holds lessons for host countries as well as companies looking to relocate facilities out of China, according to Guoli Chen, professor for strategy at INSEAD in Singapore. Over the past three decades, China has built a robust supply chain that lowers the overall cost of production, and labor is just one part of it, so companies seeking to shift need to assess whole ecosystems and not just decide based on the cost of labor, he said.

Similarly, he added that U.S. and Japanese companies have over the years understood how to set up subsidiaries in foreign cultures, while Chinese and Taiwanese firms are new to this -- so they should take more time to identify potential weak links and proactively work to mitigate risks.

“More immediately, the government and company need to sit down with the protesters, understand their issues and find common ground,” Chen said. “They need to avoid a spiral that could escalate tensions and hurt India’s reputation as a manufacturing base.”