Samsung Electronics Co plans to keep the bulk of its manufacturing
inhouse but reiterated a pledge to improve working conditions at its
suppliers after admitting excessive overtime and fines for employees in
China, a senior executive said on Friday.
New York-based China Labor
Watch (CLW) said employees at one of Samsung's suppliers sometimes
worked up to 16 hours a day, with only one day's rest a month.
That prompted an investigation in September by Samsung of its suppliers in China.
was common use of a system of penalties (at our suppliers in China) for
being late or producing faulty products, which is improper practice
under global standards but somewhat general practice under local
regulations," said Mok Jangkyun, who led the team of over 100 auditors
to inspect Samsung's 105 suppliers in China.
"We're working with
them to change these practices and introduce a better work environment,"
Mok, vice president of human resources, told Reuters in an interview.
were indeed some cases of excessive overtime work. When workers have to
work weekends, for example, due to a temporary spike in orders,
overtime work reached 32 hours a week or 100 hours a month," he said.
recommended they hire more workers, introduce automation and improve
production processes to fix this. We are also working on guidelines to
gradually reduce overtime work hours."
Samsung produces more than
40 percent of its goods in China including its popular Galaxy S
smartphones, home appliances and chips. But most of that is in its own
plants, with outsourcing accounting for less than 10 percent of total
A number of foreign companies have been accused in
recent years of improper work practices in China, seen as a cheap source
Many multinational brands have contracts with firms
using Chinese labour, including Apple Inc, Dell Inc, Hewlett-Packard,
Amazon.com Inc, Google's Motorola Mobility, Nokia Oyj, and Sony Corp.
defended its in-house manufacturing strategy even though it tends to be
more expensive than outsourcing, calling it a main strength of the
"Multinationals are increasingly opting for outsourcing
for various reasons. But at Samsung, out of over 200,000 staff
worldwide, more than half are manufacturing jobs, which indicates we are
very much a manufacturing-driven company and it is where our core
strength is," Mok said.
"Samsung manufactures more than 90 percent
of our products internally and only relies on contractors for
peripheral products such as components, feature phones and handset
He said it allows the company to adapt quickly to changing market conditions.
an example, Mok cited Samsung's smartphone plants in South Korea, China
and Vietnam as giving it the flexibility to adjust output of its Galaxy
S, depending on demand or production problems at one factory. By
contrast, main rival Apple depends heavily on contractors.
warned last month that its industry-leading margins would shrink this
quarter as new products have become more expensive to build and as it is
having trouble meeting robust demand for the iPhone 5.
Terry Gou of Taiwan's Foxconn Technology Group, Apple's main contract
manufacturer, said earlier this month the company was falling short of
meeting demand for the phone.
"Manufacturing is the backbone of
Samsung's growth and we put very much emphasis on improving
manufacturing competitiveness, as this is how we've become the leader in
chips and displays," Mok said.
© Thomson Reuters 2012