Apple Push Into India Dealt Setback as Protest Turns Violent
Apple’s effort to expand the manufacturing of its products in India ran into trouble after workers at a supplier’s plant rioted.
(Bloomberg) -- Apple Inc.’s effort to expand the manufacturing of its products in India ran into trouble after workers at a supplier’s plant rioted over unpaid wages, with many arrested for violence and vandalism.
Hundreds of workers stormed Wistron Corp.’s facility in the southern city of Kolar over the weekend, damaging the property and looting thousands of iPhones and laptops, according to local media. More than 150 people were arrested, the Times of India reported.
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. The Taiwan-based company has said the protesters are not its own workers, suggesting they may have been hired by employment agencies, though it’s not clear who is responsible for paying them. Shares fell as much as 3.4%.
“There should be limited fundamental impact in 2020,” analysts Howard Kao and Sharon Shih at Morgan Stanley wrote in a research note. “However, we plan to monitor the situation closely – key factors will be the length of the production halt, possible changes in Wistron’s relationship with Apple after this incident, and the progress of Wistron’s Phase II capacity expansion.”
The clash is part of a broader geopolitical challenge for Apple, the most valuable company in the world with a market capitalization of $2 trillion. The Cupertino, Calif.-based company has long had its iPhones and iPads made in China by contractors such as Wistron and Hon Hai Precision Industry Co., but the political tensions between China and the U.S. have raised the risks of dependence on a single production base.
In addition, India, under Prime Minister Narendra Modi, has pushed policies to build its own manufacturing base, aimed at creating good-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.
“Apple needs India,” said Navkendar Singh, a research director at IDC. “India needs Apple to showcase to the world that if Apple can make things here so can others.”
Meanwhile, another Apple supplier, Pegatron Corp., said it will start its India plant on schedule in 2021.
The protests at Wistron were sparked Dec. 12 as workers stormed the facility because they hadn’t been paid, according to the media reports. So many people were arrested that they overwhelmed Kolar’s jail and some were sent elsewhere, the local superintendent of police said.
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.
Wistron said in its own statement that it’s committed to following and implementing all local labor regulations, and will resume production as soon as possible to protect employees’ right to work.
“The government and Wistron management are working in coordination” to investigate the incident, Ravi Shankar Prasad, India’s minister for electronics, information technology and communications said in a statement. “Aberrations like this are unfortunate.”
The Morgan Stanley analysts wrote the immediate impact for Apple is likely to be negligible because the Kolar complex had started up only in past months with a capacity for just 5 to 10 million iPhones yearly. It is Wistron’s second production site in the country and handles older phones, rather than the latest iPhone 12, they wrote. But the incident could affect the Taiwanese assembler’s relationship with Apple, which has shown greater willingness to clamp down on labor violations at its hundreds of suppliers.
In China -- where Apple suppliers are among the country’s largest private employers with upwards of a million people assembling gear from iPhones to Macs -- state media wasted no time in highlighting the troubles in India.
“This is a potential risk when manufacturers consider moving their production lines out of #China where they have most stable labor market supporting the nation to become the largest manufacturing hub,” one reporter at the country’s Global Times said on Twitter.
©2020 Bloomberg L.P.