New iPhone production spurs huge growth for Pegatron even as PC decline continues

Photo: vr-zone.net

Photo: vr-zone.net

Apple supplier Pegatron is forecasting up to a 50 percent growth in its Q3 revenues despite its PC business continuing to decline, with the bulk of this growth likely to come from the iPhone, reports ReutersPegatron made the announcement after failing to hit analyst expectations in Q2.

“We expect revenue in the non-computing segment to grow by 40 to 50 percent in Q3 due to new consumer products. Q4 will also be higher,” said company CEO and President Jason Cheng in an investor conference.

Pegatron has been pretty much confirmed as making the iPhone 5C – the plastic iPhone – with some Digitimes-based rumors suggesting it may also be a secondary supplier for the 5S, whose production is being led by Foxconn. Both handsets are expected to be announced by Apple on 10th September …  Read more

Working conditions at Apple manufacturing partner Pegatron come under fire

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According to an upcoming report from the China Labor Watch, outlined by the Wall Street Journal, Apple’s China-based manufacturing partner Pegatron has come under fire for worker conditions. The report outlines several claims which shed a negative light on Pegatron:

  • Pegatron is claimed to be withholding worker IDs. This means that Pegatron employees are unable to work elsewhere because they lack proper identification.
  • The company is also claimed to be providing “poor living conditions” with “30-minute waits to enter their production facility, tight living quarters, and packed cafeterias.” Cold showers and packed dorms are also noted.
  • Workers are claimed to be working over 60 hours a week (Apple’s limit), while Apple’s June Supplier Responsibility paper points to a 46-hour work-week average for Pegatron employees.
  • At a Pegatron subsidiary, employees are said to be provided gloves that do not sufficiently protect from the materials used to create metal backplates for the iPad.

As for pay, the report claims that some workers are seeing their payment withheld. Within this issue, recruiting companies for Pegatron have come under fire for not paying the workers enough. These recruiting companies, in some situations, are even fining employees:

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Pegatron CEO says Bloomberg reporter made up report of ‘falling iPad mini demand’

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Yesterday we decided not to run with a story published by Bloomberg that Pegatron’s forecasted 25 percent to 30 percent drop for second-quarter revenue was due to “falling iPad mini demand.” It seemed a little far fetched that an Apple supplier would be giving up specific information on product demand, something we know suppliers in Apple’s circle typically remain tight-lipped on. Today CEO of Pegatron Jason Cheng has confirmed our suspicions in an email to Fortune claiming that Bloomberg reporter Tim Culpan made the iPad mini angle up.

While quoting an analyst’s expectations for iPad mini demand in Q2, Bloomberg’s Tim Culpan offered the following quote from Pegatron Chief Executive Officer Jason Cheng as proof:

A decline in revenue from the iPad Mini “is more on demand, while price has been stable. Not just tablets, also e-books and games consoles, almost every item is moving in a negative direction.”

Pegatron chief Jason Cheng says he wasn’t referring to iPad mini specifically, but rather all of its products including all tablets and game consoles, while noting that “clearly refused” to answer Culpan’s questions related to specific products. Here’s what he had to say about the Bloomberg piece: Read more

Digitimes’ latest rumor: new iPhone coming September, 7-inch iPad in August, and new 10-inch iPad in Q4

The ever-sketchy DigiTimes does not have the best reputation when it comes to predicting Apple product launches, but today the publication is reporting Apple OEM Pegatron began receiving orders for a new iPhone and a next-generation 10-inch iPad. It also reported Apple plans to release a 7-inch iPad in August:

Pegatron Technology reportedly has landed orders for a new-generation iPhone to be launched in September and a 10-inch iPad to be launched in the fourth quarter, according to Taiwan-based supply chain makers. Pegatron is currently an OEM for the iPhone 4S and new iPad… A 7-inch iPad, which reportedly will be released in August, will be manufactured by Foxconn Electronics (Hon Hai Precision Industry).

With the release of Apple’s new iPad last March, we find it hard to imagine Apple plans to break its yearly release window with a new 10-inch iPad, in addition to a 7-inch variant in August. We heard many rumors lately about a 7-inch or 7.85-inch tablet, indicating Apple could be experimenting with smaller screen sizes. In April, a translated report from a Chinese publication claimed Apple was prepping 7.85-inch iPad minis to launch in Q3 for $250 to $300, but we have not heard anything concrete on Apple’s plans to release a 7-inch tablet. As for iPhone, we are still expecting an October launch at this point.
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FLA president says Apple/Foxconn agreement raises bar, but will it raise prices?

The results of the Fair Labor Association’s investigation into Apple’s suppliers beginning with three Foxconn facilities officially published yesterday. While finding excessive working hours and many violations of Chinese labor law, Foxconn and Apple agreed to reduce workweek and overtime hours within Chinese law to 49 hours per week and 36 overtime hours per month based on the FLA’s recommendations. Foxconn will also hire tens of thousands of new employees and implement a compensation package to make sure workers’ salaries remain the same amid reduced working hours.

In the interview above with Reuters, head of the FLA Auret van Heerden talked about the investigation and noted the agreement could set a new standard for working conditions throughout China. One unanswered question is whether the agreement will lead to higher prices for consumers (which is not necessarily a bad thing)…

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NPR reports on aftermath of Pegatron explosions

With Apple currently allowing the Fair Labor Association to inspect the working conditions of its supply chains abroad, a new report from NPR profiled 25 of the 59 workers injured in an explosion at the Pegatron iPad factory in Shanghai, China last December (audio here – MP3). The explosion was attributed to a build-up of aluminum particles. According to Pegatron, it started in the machinery meant to collect the dust. Today’s report from NPR gives us a look into the conditions of the Shanghai plant before, during, and after the explosion from the eyes of workers.

A similar explosion months before in May at a Foxconn factory in Chengdu was the focus of The New York Times’ recent story sparking controversy over Apple’s suppliers. Zhang Qing explained to NPR that Apple inspected the Shanghai factory just hours before the explosion:

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