Protests at Indian iPhone plant offer a lesson for investors

Protests by workers at an Apple supplier’s plant in India that turned violent this month are a reminder that companies need to treat their workers correctly, analysts said on Tuesday, but added that the incident is unlikely to deter foreign firms from investing in the country.

In early December, thousands of contract workers, allegedly enraged over unpaid salaries and overtime payments of several weeks, ransacked Taiwanese manufacturing firm Wistron’s factory in the southern Indian state of Karnataka where it assembles iPhones for Apple, causing damage estimated at up to $7m.

Wistron, which did not respond to an email from Al Jazeera seeking comment, said in a filing to the Taiwan Stock Exchange on December 13 that it was “deeply shocked” by the events. It  added that it “follow[s] the law and [is] supporting the authorities with their investigation” and will “collaborate with related parties to provide any help needed for the employees”.

The incident comes as Indian Prime Minister Narendra Modi is trying to encourage global companies to shift some of their supply chains to India, partly in response to the heightened risks to their operations from continuing trade tensions between Washington and Beijing.

His government has offered subsidies, or so-called production-linked incentives (PLI), tied to manufacturing and investment targets, across 10 sectors. Wistron, as well as other Taiwanese iPhone manufacturers Foxconn and Pegatron, has applied to assemble the products in India under this programme.

Short-term dent

Analysts and industry representatives say the incident, rather than turning potential long-term investors away, is likely to focus their attention on improving systems and processes that involve blue-collar workers, something that is likely to be crucial to the government’s plans to create jobs for the millions joining the workforce every year.

“[The incident was] good in a sense because the PLI scheme has just started, a lot of investors are looking at India … and workers getting paid, and paid on time, are crucial issues to make sure that the business is built on a solid foundation,” said Tarun Pathak, associate director at Counterpoint Research, a technology market research firm. “These are big investments and this is only a short-term dent to their image.”

Sougata Roy Choudhury, executive director at industry body the Confederation of Indian Industry, said that while the employees “had no right” to damage the factory, Wistron was “very much in the wrong” for not paying or underpaying the workers. He said he was not concerned that this would deter foreign investors.

In a statement on December 14, the All India Central Council of Trade Unions said that the real question was how “such brutal exploitation of workers in sweatshop-like conditions was allowed by the manufacturers of the world’s most expensive mobile phones”.

It also questioned how government officials could “claim ignorance of this exploitation”. The union urged the state government to investigate the “unfair labour practices” Wistron had engaged in and to take action against the company.

Growing pains?

The world’s two largest developing economies, India and China, are no strangers to labour problems.

In India, one of the biggest bust-ups between workers and management in recent years took place at carmaker Maruti Suzuki India Ltd’s plant at Manesar in Haryana state in the summer of 2012. It started with a fight on the shop floor between a supervisor and an employee which ultimately led to the death of a manager. In China, several workers at Foxconn facilities committed suicide in 2010 over low pay and stressful work conditions.

“This is part of the process of growing big, and maybe growing too fast, and then companies course-correct,” says Rahul Bajoria, chief India economist at Barclays India. “Unless it leads to any major policy changes, this won’t have a long-lasting impact.”

For now, Apple has said it has put Wistron on probation and will hold off on giving it new orders while the Taiwanese company has removed its employee overseeing operations in the country.

With the government betting on increasing investments under its PLI scheme, “there will be a lot of work done to ensure this doesn’t derail the investment agreements they’ve inked,” added Bajoria.