Apple has placed supplier Wistron on probation, saying on Saturday it would not award the Taiwanese contract manufacturer new business until it addressed the way workers were treated at its southern India plant.
Early findings of an Apple audit in the wake of violence at the Wistron plant in India's Karnataka state showed violations of its 'Supplier Code of Conduct', the California-based tech giant said in a statement.
Contract workers angry over unpaid wages destroyed property, gear and iPhones on December 12, causing millions of dollars in losses to Wistron and forcing it to shut the plant.
Apple said Wistron had failed to implement proper working hour management processes, which "led to payment delays for some workers in October and November".
Wistron on Saturday admitted some workers at the plant in Karnataka's Narasapura had not been paid properly or on time, and it was removing a top executive overseeing its India business.
Apple said it will continue to monitor Wistron's progress on corrective action.
"Our main objective is to make sure all the workers are treated with dignity and respect, and fully compensated promptly," Apple said, adding that it continued to investigate issues at the plant, which is located some 50km outside of the southern tech hub of Bengaluru and assembles one iPhone model.
"This is a new facility and we recognise that we made mistakes as we expanded," Wistron said in a statement. "Some of the processes we put in place to manage labor agencies and payments need to be strengthened and upgraded."
Wistron said it is restructuring its teams and setting up 24-hour hotlines for employees to make anonymous complaints.
"Apple has sent a strong message to its suppliers, telling them unequivocally that they need to adhere to its standards," Neil Shah of Hong Kong-based tech research company Counterpoint said.
"In the long run, it should make suppliers more cautious and likely create fewer such public relations headaches for Apple."
The Apple probation will delay Wistron's smartphone production and hurt its manufacturing push in India where it had committed to invest some 13 billion rupees ($177 million) over the next five years as part of New Delhi's production-linked incentive plan for smartphone manufacturing.
Wistron had plans to make another iPhone model at the Narasapura plant and was planning to hire up to 20,000 workers in a year's time, a source told Reuters previously.
But it could not cope with the rapid scaling up of manpower and breached several laws, Karnataka state officials found after an inspection of the plant following the violence.
The number of workers rose to 10,500 from the permitted 5,000 in a short span of time, the Karnataka factories department said in a report seen by Reuters.
"The HR department has not been adequately set up with personnel of sound knowledge of labour laws," the report of the inspection, which was conducted on December 13, concluded.
Other violations highlighted in the report included underpayment of wages to contract workers and housekeeping staff, and making female staff work overtime without legal authorisation.
The Wistron probation will likely also dent Apple's plans to scale up in India, a market it has bet on to expand its manufacturing base beyond China.
Apple began the assembly of its first iPhone model in India via Wistron in 2017. It has since ramped up assembly operations, with Foxconn in southern India and another supplier Pegatron also set to begin local operations.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
