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November 30, 2012

Samsung Responds to Outsourcing Issues, Plans to Keep Manufacturing Mainly In-House

By Colleen Lynch, TMCnet Contributor

In regards to Samsung’s (News - Alert) recent outsourcing issues, the company has released its plans to keep the bulk of its manufacturing in- house, while working toward their repeated pledge to improve working conditions.

Samsung Electronics Co. has been accused of shady practices by their suppliers, including giving their workers excessive overtime, as well as fines for their employees in China. 

Image via Shutterstock

The complaints came initially from the China Labor Watch (CLW), which reported one of Samsung’s suppliers in China for having 16 hour workdays, and only one day off each month.

“There 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,” explained Mok Jangkyun, one of the team leaders sent to inspect Samsung’s 105 suppliers located in China.

The issue of improper fines was discovered only after an investigation was launched last September to look into the issue of extensive workdays.

Jangkyun explained further, saying, “There 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.”

Those involved in the investigation have given Samsung suggestions for rectifying the issue, as Jangkyun explains: “We’re working with them to change these practices and introduce a better work environment. We’ve 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.”

The reason Samsung has found itself in this position is due mainly to the popularity of the Galaxy S smartphone, especially around this holiday season. Because Samsung makes approximately 40 percent of its products in China, the amount of work its suppliers are given is considerable.

On Samsung’s part, the company defended itself by saying that using in-house workers, rather than outsourcing, is a good thing, and it even costs the company more money to do so.

Jangkyun even cited this as the company’s “core strength,” noting that “Samsung manufactures more than 90 percent of [its] products internally.”

It seems the problem with Samsung is the company’s refusal to allow its output fall short of demand, while competing companies such as Apple (News - Alert) Inc. are more understanding of this possibility.

The question is, do you call that dedication, or stubbornness?

“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,” argued Jangkyun.

It remains to be seen whether Samsung will alter its manufacturing practices to ensure better working conditions in China, but the company could face harsh criticism and consequences if it does not.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO Miami 2013, Jan 29- Feb. 1 in Miami, Florida.  Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.

Edited by Brooke Neuman
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