Foxconn Said to Use Forced Student Labor to Make iPhones

Foxconn has acknowledged using student “interns” on manufacturing lines, but says they are free to leave at any time. But two worker advocacy groups said Monday that they had spoken with students who said they had been forced by their teachers to assemble iPhones at a Foxconn factory in Zhengzhou, in north-central China.

Additionally, last week Chinese state-run news media reported that several vocational schools in the city of Huai’an, in eastern China, required hundreds of students to work on assembly lines at a Foxconn plant to help ease worker shortages. According to one of the articles, Huai’an students were ordered to manufacture cables for Apple’s new iPhone 5, which is expected to be introduced on Wednesday.

“They said they are forced to work by the teachers,” Li Qiang, founder of China Labor Watch, one of the advocacy organizations and a frequent critic of Foxconn’s labor policies, said in an interview on Monday. Mr. Li said his staff had spoken with multiple workers and students who, as recently as Sunday, said that 10 of 87 workers on an iPhone assembly line were students.

“They don’t want to work there — they want to learn,” said Mr. Li. “But if they don’t work, they are told they will not graduate, because it is a very busy time with the new iPhone coming, and Foxconn does not have enough workers without the students.”

Foxconn, in a statement, said that students made up just 2.7 percent of its 1.2 million-person work force in China — about 32,000 workers — and that schools “recruit the students under the supervision of the local government, and the schools also assign teachers to accompany and monitor the students throughout their internship.”

A spokesman for Apple declined to comment on the recent cases, but he said Apple’s code of conduct tells suppliers to follow local labor laws when dealing with interns and other workers.

Foxconn has come under intense scrutiny in recent months over working conditions inside factories that manufacture smartphones, tablet computers and other electronic devices for Apple, Dell, Hewlett-Packard and other technology giants. Investigations by newspapers, outside groups and companies like Apple itself have revealed illegal amounts of overtime, crowded working conditions, under-age workers, improper disposal of hazardous waste and, in some cases, industrial accidents that have killed four people and injured more than 100 at Foxconn and other Chinese factories that supply Apple.

Earlier this year, following highly publicized reports of such problems, Apple asked an outside organization to audit working conditions inside the plants where the bulk of iPhones, iPads and other Apple products are built. In the wake of that audit, Foxconn announced it would significantly raise wages for many of its employees and reduce overtime hours to come into compliance with Chinese law.

In August, the Fair Labor Association — the group hired by Apple to audit Foxconn — said Foxconn had made progress at cutting employees’ hours and improving working conditions, but that those shifts would require Foxconn to recruit “tens of thousands of extra workers.” The group also said that Foxconn and Apple had adopted policies to make sure that student interns knew they could resign from Foxconn and still graduate, and to link the jobs they performed inside Foxconn with their studies.

“I am concerned about these recent reports, and we’re following up,” said Auret van Heerden, president and chief executive of the Fair Labor Association, in an interview. “If there have been any breakdowns in policies, we expect changes to be made.”

Worker advocates say Foxconn is under intense pressure at critical moments — like leading up to the release of a new product, like the iPhone 5 — to fill huge orders quickly.

Charles Duhigg reported from New York.

This article has been revised to reflect the following correction:

Correction: September 13, 2012

An article on Tuesday about new labor issues at Foxconn, a Chinese factory that makes Apple products, misstated the number of explosions that have occurred at the company’s plants. Only one explosion has occurred at a Foxconn plant, not “several.” (There have been several explosions at other companies that make Apple products in China.)

Foxconn Said to Use Forced Student Labor to Make iPhones

Foxconn has acknowledged using student “interns” on manufacturing lines, but says they are free to leave at any time. But two worker advocacy groups said Monday that they had spoken with students who said they had been forced by their teachers to assemble iPhones at a Foxconn factory in Zhengzhou, in north-central China.

Additionally, last week Chinese state-run news media reported that several vocational schools in the city of Huai’an, in eastern China, required hundreds of students to work on assembly lines at a Foxconn plant to help ease worker shortages. According to one of the articles, Huai’an students were ordered to manufacture cables for Apple’s new iPhone 5, which is expected to be introduced on Wednesday.

“They said they are forced to work by the teachers,” Li Qiang, founder of China Labor Watch, one of the advocacy organizations and a frequent critic of Foxconn’s labor policies, said in an interview on Monday. Mr. Li said his staff had spoken with multiple workers and students who, as recently as Sunday, said that 10 of 87 workers on an iPhone assembly line were students.

“They don’t want to work there — they want to learn,” said Mr. Li. “But if they don’t work, they are told they will not graduate, because it is a very busy time with the new iPhone coming, and Foxconn does not have enough workers without the students.”

Foxconn, in a statement, said that students made up just 2.7 percent of its 1.2 million-person work force in China — about 32,000 workers — and that schools “recruit the students under the supervision of the local government, and the schools also assign teachers to accompany and monitor the students throughout their internship.”

A spokesman for Apple declined to comment on the recent cases, but he said Apple’s code of conduct tells suppliers to follow local labor laws when dealing with interns and other workers.

Foxconn has come under intense scrutiny in recent months over working conditions inside factories that manufacture smartphones, tablet computers and other electronic devices for Apple, Dell, Hewlett-Packard and other technology giants. Investigations by newspapers, outside groups and companies like Apple itself have revealed illegal amounts of overtime, crowded working conditions, under-age workers, improper disposal of hazardous waste and, in some cases, industrial accidents that have killed four people and injured more than 100 at Foxconn and other Chinese factories that supply Apple.

Earlier this year, following highly publicized reports of such problems, Apple asked an outside organization to audit working conditions inside the plants where the bulk of iPhones, iPads and other Apple products are built. In the wake of that audit, Foxconn announced it would significantly raise wages for many of its employees and reduce overtime hours to come into compliance with Chinese law.

In August, the Fair Labor Association — the group hired by Apple to audit Foxconn — said Foxconn had made progress at cutting employees’ hours and improving working conditions, but that those shifts would require Foxconn to recruit “tens of thousands of extra workers.” The group also said that Foxconn and Apple had adopted policies to make sure that student interns knew they could resign from Foxconn and still graduate, and to link the jobs they performed inside Foxconn with their studies.

“I am concerned about these recent reports, and we’re following up,” said Auret van Heerden, president and chief executive of the Fair Labor Association, in an interview. “If there have been any breakdowns in policies, we expect changes to be made.”

Worker advocates say Foxconn is under intense pressure at critical moments — like leading up to the release of a new product, like the iPhone 5 — to fill huge orders quickly.

Charles Duhigg reported from New York.

This article has been revised to reflect the following correction:

Correction: September 13, 2012

An article on Tuesday about new labor issues at Foxconn, a Chinese factory that makes Apple products, misstated the number of explosions that have occurred at the company’s plants. Only one explosion has occurred at a Foxconn plant, not “several.” (There have been several explosions at other companies that make Apple products in China.)

Amazon, Forced to Collect Sales Tax, Aims to Keep Its Competitive Edge

A million-square-foot warehouse stocking razor blades and books, diapers and dog food will soon rise on this spot, less than a mile from the highway that will deliver these and just about every other product imaginable to customers 85 miles away in San Francisco. It is hundreds of miles closer to those consumers than Amazon’s existing centers in Nevada and Arizona.

A similar distribution center is being built on the outskirts of Los Angeles. Others are under way in Indiana, New Jersey, South Carolina, Tennessee and Virginia.

This multibillion-dollar building frenzy comes as Amazon is about to lose perhaps its biggest competitive edge — that the vast majority of its customers do not pay sales tax. After negotiations with lawmakers, the company is beginning to collect taxes in California, Texas, Pennsylvania and other states. But Amazon hopes that the warehouses will allow it to provide better service, giving it the ability to up-end the retailing industry in an entirely new way.

Amazon will soon be able to cut as much as a day off its two-day shipping times, said Jeff Bezos, its chief executive, in an interview. This will put the much-rumored same-day delivery — the elusive aspiration of every online merchant — potentially within reach in some metropolitan areas.

“We want fast delivery,” Mr. Bezos said. At a minimum, “we can work on making it the next day.”

It is a monumental bet, even for a company that consistently defied skeptics on Wall Street and Main Street as it rose to become one of the country’s largest retailers. Amazon’s delivery of everyday objects needs to be fast enough and cheap enough to wean customers from their local stores. Yet it also must be economically feasible for the retailer, which is investing so heavily in the warehouses that it is barely profitable.

If Amazon can truly deliver on its ambitions, said Sucharita Mulpuru, an analyst at the research firm Forrester, “it will be the dominant retailer in the decade to come.”

Amazon will begin collecting sales tax in California on Saturday. Local merchants have been waiting for this day for more than a decade. Now that it has arrived, though, they are tempering their joy at the company’s apparent surrender.

“Amazon is so aggressive on so many fronts,” said Amy Thomas, the owner of three Pegasus stores in the East Bay of San Francisco that sell new and used books as well as magazines. “It’s hard to keep putting out fires everywhere. They sell e-books. They’re becoming publishers. And now they want to do same-day shipping. They’re an octopus.”

Despite the attention that Amazon’s technology receives — its latest e-readers were introduced last week to the usual fanfare — the majority of its sales are old-fashioned three-dimensional objects. The company’s retail sales in the United States are on track this year to be roughly comparable to those of enterprises like McDonald’s, Sears and Safeway. And while its sales are only about 12 percent that of Walmart, the reigning retail kingpin, they are increasing much faster.

“Amazon is the giant sucking sound in retail,” said Colin Gillis, an analyst at BGC Partners. But the company, he added, is switching to an untested game plan: “They have to hope that same-day delivery will offset the price advantage they no longer have.”

Since the company’s founding, Mr. Bezos held on tightly to a 1992 Supreme Court decision that said mail-order merchants did not have to collect tax in states where they did not have physical operations. (Consumers were supposed to pay a use tax directly to the state, but few did.)

“The original justification for this de facto tax exemption was that the Internet ought to get some growing space,” said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities. “Amazon collecting the tax in California, the birthplace of the commercial Internet, says that the Net can compete on a level playing field with traditional retail.”

Amazon executives maintained that the sales tax exemption was not much of an advantage. Its regulatory filings told a different story, noting that collecting taxes could “decrease our ability to compete.”

California retailers, particularly a handful of remaining independent booksellers, would love to see a dent in Amazon’s business. “Oliver Wendell Holmes said taxes are the price of civilization, but Amazon did not want to pay,” said Michael Barnard, president of the Northern California Independent Booksellers Association.

Booksellers concede that Amazon, which offers a flat annual rate for fast shipping to encourage frequent orders, is still likely to be cheaper even when it collects taxes. The most Mr. Barnard can hope is that Amazon’s notoriously low margins — it makes little more than a penny for every dollar in sales — will eventually catch up with it. “Same-day delivery is very, very expensive,” he said.

States began aggressively asserting that Amazon should collect taxes in 2008, when New York passed a law compelling the company to do so. Amazon is challenging the law in court but is collecting the tax for now.

The biggest battle was fought last summer in California after Gov. Jerry Brown signed a measure that widened the definition of physical operations to include marketing affiliates. The company initially tried to put the law on the ballot but ended up striking a deal with the state to put two warehouses in California, including the one here, in exchange for a year’s exemption from tax collection.

Amazon started collecting taxes in Texas this summer, and in Pennsylvania on Sept. 1. New Jersey’s turn will come next summer, and several other states over the next two years. The company seems to be surrendering on the tax issue mostly in those states where it sees strategic value in new warehouses. Company officials say they hoped to see a national sales tax law in place that will supersede state laws.

The Patterson warehouse, which might employ as many as a thousand people, is supposed to open by mid-2013. Local officials were eager to land the project; the county has 15 percent unemployment.

Some residents want more. “They want to be able to order something and then drive down the street to the warehouse and pick it up,” said Rod Butler, the city manager. Here, just like everywhere else, shoppers dream of same-day delivery.

Nick Bilton contributed reporting from Santa Monica, Calif.