Samsung Suspends Business With Chinese Supplier After Finding Evidence Of Child Labor

Samsung Electronics Co Ltd (KRX:005930) said on Monday that it had temporarily suspended business with Dongguan Shinyang Electronics, one of its suppliers in China, after it found evidence of child labor at the factory.

Samsung’s decision comes less than a week after New York-based watchdog China Labor Watch, or CLW, accused the Chinese firm, based in Guangdong province in the country's southeast, of employing underage workers. Samsung said at the time that it was “urgently looking” into the child labor allegations and would adhere to its “zero-tolerance” policy.

"It is unfortunate that the allegation surfaced despite Samsung’s efforts to prevent child labor at its suppliers," Samsung said, in a statement Monday. "As part of its pledge against child labor, Samsung routinely conducts inspections to monitor its suppliers in China to ensure they follow the commitment, and has provided necessary support."

According to Samsung, it had conducted an investigation into Dongguan Shinyang, which is reportedly a subsidiary of Shinyang Engineering Co., Ltd. (KOSDAQ:086830), a South Korean firm that manufactures cases for mobile phones, following CLW's allegations, and found evidence of an “illegal hiring process” that took place on June 29 at the factory.

While Chinese authorities are also looking into the allegations, Samsung said it would permanently sever ties with the supplier if the investigations conclude that Dongguan Shinyang was indeed hiring children to be part of its workforce. Samsung also said that it had previously found no evidence of child labor at the Chinese supplier’s factory in three audits since 2013, with the latest one ending on June 25.

CLW said in its report last week that its investigation of Dongguan Shinyang revealed “at least five child workers” without contracts at the supplier.

“During the busy season and in urgent need of labor, Shinyang hires child labor and underage student workers. These minors will usually only work for a period of three to six months, toiling for 11 hours every day without overtime pay, and the factory does not purchase social insurance for them as required by law,” CLW said, in a statement.

Although Samsung instructs its suppliers to hire people after face-to-face interviews and to use scanners to detect fake IDs, CLW said the South Korean conglomerate’s monitoring system has so far been ineffective. However, Samsung claimed in the statement that it has strengthened the hiring process not only at its production facilities, but also at its suppliers to prevent illegal recruitments.