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Samsung Reveals Chinese Labor Breaches

Samsung Electronics has admitted breaches of labor regulations at its plants in China, as well as at those of outside suppliers.

Jung Yeon-Je | AFP | Getty Images

A four-week survey of 105 Chinese suppliers to the South Korean electronics manufacturer showed breaches including excessive working hours and the failure to supply labor contracts, Samsung said on Monday.

"Samsung takes concerns about working conditions in China seriously and, whenever an issue is identified, we take immediate and appropriate steps to correct it," the company said.

The internal study followed research compiled by undercover investigators and published in August and September by China Labor Watch, a New York-based group, which alleged labor law breaches at eight factories supplying Samsung, of which six are owned by the South Korean group. CLW also alleged repeated use of child labor at HEG, another supplier, but Samsung says it has found no evidence of this.

(Read More: Samsung to Review China Suppliers for Labor Violations)

"We are now designing, researching, and/or implementing corrective actions to address every violation that was identified," Samsung said on Monday. "Corrective actions include new hiring policies and work hours and overtime practices, among other steps, to protect the health and welfare of employees."

Shares in Samsung fell 2.3 percent to Won1,404,000.

Samsung is reviewing practices at a further 144 supplier factories, and will complete the process by the end of the year. However, it has not released a detailed response to CLW's report in September. The report condemned alleged practices at factories owned by Samsung, including forced work without pay, labor contract violations and dangerous working conditions.

Following an internal probe of those plants, Samsung has admitted failures to comply with guidelines on working time, saying that it will aim to address this by the end of 2014. It denies all the other allegations, and claims that its extensive "in-house" manufacturing network allows it to monitor working conditions at plants more closely than rivals that rely on outsourcing, allowing it to achieve "world-class working conditions".

The rivals alluded to include Apple, which has faced extensive negative publicity over working conditions in Chinese factories operated by Foxconn, a major supplier. Earlier this year Apple admitted that nearly two-thirds of its supplier factories in China did not meet its code of conduct in 2011.

Criticism of its supply chain practices is an unwelcome distraction as Samsung seeks to cement its position as the world's leading smartphone producer by volume. Early this month the group announced that its flagship Galaxy S3 handset had sold more than 30 million units in the five months since its launch.

A technology analyst in Seoul, who asked not to be named, said that while Samsung would respond swiftly to the threat of damage to its brand, there was "no incentive" for it to go beyond ensuring a minimum level of compliance with labor law. Wage pressure in China was making Vietnam an increasingly attractive option for new manufacturing investment by the company, he added.

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