Wistron Corp.

apologized for mishandling wages at its plant in India that makes iPhones, saying it will correct the problems that led a group of angry workers to damage its facilities a week ago.

On Dec. 12, workers broke windows and overturned cars at a Wistron facility near India’s technology hub of Bangalore. They threw stones, tossed office furniture and set fire to a sign at Wistron’s operations, according to videos shown on Indian television.

Labor leaders said workers at the Taiwanese-owned company that is a contract manufacturer for

Apple Inc.

were upset about late wage payments and confusion over expected working hours and overtime payments.

Wistron has investigated and discovered the workers had legitimate complaints, Wistron spokeswoman

Joyce Chou

said. To try to fix the problems it has removed the vice president who oversees its business in India and started an anonymous hotline for complaints and created other avenues for employees to disclose their concerns.

“We deeply regret this and apologize to all of our workers,” Ms. Chou said.  “This is a new facility, and we recognize that we made mistakes as we expanded. Some of the processes we put in place to manage labor agencies and payments need to be strengthened and upgraded.”

Apple said it had also done its own investigation and found problems. It is putting Wistron on probation until the problems are fixed and structures are put in place to ensure they couldn’t happen again.

“Our preliminary findings indicate violations of our supplier code of conduct by failing to implement proper working-hour management processes,” Apple said. “We have placed Wistron on probation, and they will not receive any new business from Apple before they complete corrective actions.”

Wistron’s operations in Bangalore were often pointed to by policy makers and economists as an example of India’s ability to attract investment by luring companies looking to diversify away from China.

India’s prime minister has been trying to make it easier to invest and expand in India for years.

Narendra Modi’s

“Make in India” campaign gained more firepower this year as foreign investment is seen as a crucial component for India to dig its way out of its current Covid-19 recession. He has promised a more predictable and open regulatory regime, a simpler corporate tax structure and incentives for targeted industries.

This year, India made it easier for some types of companies to fire workers as part of its efforts to deregulate the economy and boost growth. It has also made it harder for workers to unionize and strike. At the same time, it expanded social security programs to include many contract workers.

Labor leaders in Bangalore said the outburst of violence wasn’t a result of any new government rules but instead was triggered by a lack of communication and confusion. New employees didn’t understand why they weren’t getting paid on time and getting paychecks smaller than they expected. They weren’t being heard so they snapped, said

Satyanand Mukund,

secretary of the Bangalore wing of the All India Trade Union Congress, a union that has spoken with workers but isn’t active in the Wistron facility.

“They felt they were being exploited since there’s a large proportion of contract employees without any scope of being made permanent,” he said.

Apple and its suppliers aren’t just grappling with labor problems in India. In China, where most of Apple’s products are assembled, the companies continue to face labor headaches after years of dealing with similar problems.

Apple last month suspended new business with

Pegatron Corp.

after finding the supplier broke Apple’s rules by having allowed student interns to work at night time or overtime.

Some worker protests have also taken place in recent weeks, though they weren’t violent like the Wistron plant attack in India and were brought under control relatively quickly. Dispatch workers staged protests over payments at factories of Foxconn Technology Group and Pegatron, according to New York-based workers rights group China Labor Watch and people familiar with the matter.

Apple didn’t immediately comment on the China issues.

As labor costs grew in China and as the U.S.-China trade war intensified, companies such as Apple have been considering diversifying their production bases beyond China in recent years.

India is one of the largest phone markets in the world, so manufacturers have an incentive to be closer to their customers to avoid the cost of importing handsets and parts as well as tariffs. It is trying to position itself as a smartphone-production hub amid a U.S.-China trade war that has disrupted global supply chains and left tech companies looking for alternatives to China.

Samsung Electronics Inc.

is building one of its biggest plants in the world near New Delhi. Foxconn Technology Group has gone from a few hundred employees in southern India to more than 30,000 in recent years. More than 300 companies that supply parts for Foxconn have also set up production.

Wistron’s assembling and building of iPhones in India was one of the first high-profile victories of the Modi government’s efforts and was often pointed to as proof that India could make even some of the most sophisticated phones.

Corrections & Amplifications
Workers damaged a new Wistron facility near Bangalore earlier this month. An earlier version of this article suggested a different facility which has been in Bangalore for years was the target of angry workers. (Corrected on Dec. 20, 2020)

Write to Eric Bellman at [email protected] and Vibhuti Agarwal at [email protected]

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