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DraftVersionAcerIncorporatedCompanyprofileBartSlobAmsterdam,December2005AcerIncorporated–companyprofile2SOMOStichtingOnderzoekMultinationaleOndernemingenCentreforResearchonMultinationalCorporationsKeizergracht1321015CWAmsterdamTheNetherlandsTel.
:020-6391291Fax:020-6391321info@somo.
nlwww.
somo.
nlAcerIncorporated–companyprofile3ContentsContents3Introduction.
41.
Policiesandbusinessoverview51.
1.
Generalcharacteristics51.
2.
History61.
3.
Ownershipstructure.
71.
4.
Basicfinancialinformation81.
4.
1.
Salesandprofitability.
81.
4.
2.
Shareholdingstructure.
91.
4.
3.
Keyaccountsduring2003101.
5.
Characterisationofactivities101.
6.
Mainproducts.
111.
7.
Organisationalstructure.
121.
7.
1.
Divisions.
121.
7.
2.
Management.
131.
8.
Geographicalmarkets.
141.
9.
Strategy.
141.
9.
1.
Strengths.
141.
9.
2.
Vulnerabilities.
151.
9.
3.
Outlook.
152.
Acer'ssupplychainandCorporateSocialResponsibility162.
1.
Supplychain,outsourcingandsales162.
2.
Corporatesocialresponsibilityandsustainability222.
2.
1.
Policiesregardingenvironmentalissues222.
2.
2.
Policiesregardinghumanrightsandlabourrights233.
LabourissuesinAcer'ssupplychain.
243.
1.
Acer'ssupplychaininthePhilippinesandChina243.
2.
Internationalstandardsonlabourrights.
263.
3.
Excessiveworkinghours.
273.
4.
Wagesandcompensationforovertimework.
273.
5.
Healthandsafetyissues.
283.
6.
Freedomofassociationandtherighttocollectivebargaining.
293.
7.
Women'srights304.
Summaryoffindings.
31Annex1:StructureoftheWistronsupplychaininthePhilippines.
33AcerIncorporated–companyprofile4IntroductionThiscompanyprofileonAcerispartofaresearchprojectontheICThardwaresector.
InadditiontothisstudyonAcer,SOMOconductedastudyonFujitsu-Siemens,asectorstudyandasurveyontwomajorproductioncountries.
Theaimoftheresearchprojectis:Tounderstandtheroleofmanufacturersintheglobalsupplychain,identifyissuesthatneedtobeaddressedanddevelopstrategiestoaddressidentifiedproblemsinthesupplychainingeneral;TounderstandtheorganisationofthesupplychainsoftwospecificbrandcompaniesintheICThardwaresector.
SOMOfocusesoncorporatestructuresandrelationsthroughoutthesectorandinproduction,supplyandvaluechains.
Thestudyaimstoprovideinformationandargumentsforcivilsocietyorganisationstofeedthedebateontradeandinvestmentandcorporateaccountability.
TheICThardwaresectorstudywasconductedbySOMOincollaborationwithresearchorganisationsinChinaandthePhilippines.
ThecompanyprofileonAceraimstoidentify"criticalissues"inAcer'ssupplychainfromtheperspectiveofpovertyeradicationandsustainabledevelopment.
AllreportsassociatedtotheresearchprojectontheICThardwaresectorcanbefoundonSOMO'swebsite:www.
somo.
nl.
AcerIncorporatedisaleadingOriginalEquipmentManufacturer(OEM)ofnotebooks,tablet,handheld,anddesktopcomputersfromTaiwan.
Acerhasstreamlineditsoperationsinrecentyears,spinningoffallofitsmanufacturingoperations,whichthecompanyconsiderstobeoflowvalue.
Acerhasimplementedanewchannelbusinessmodel,shiftingfrombeingamanufacturertoapurebrandcompanythatmarketsanddistributesitsproducts,whileleavingtheactualproductionprocessinthehandsofcontractmanufacturers.
Acer'schannelbusinessmodelcomprisesawidenetofsalesservices,incontrastwiththedirectsalesapproachofmarketleaderDell.
AccordingtoAcer,thecompanynowsourcesfromapproximatelyonehundredsystemsuppliersandprimarycomponentsuppliersinAsiancountries.
Labourconditionsatthesesuppliersareoftenappalling.
InordertoidentifythelabourissuesinAcer'ssupplychain,researchwasundertakenontheworkingconditionsinfourfactoriesinChinaandoneinthePhilippines.
AllofthecompaniesthatwereresearchedprovidemanufacturingservicestoAcer.
AcerIncorporated–companyprofile51.
Policiesandbusinessoverview1.
1.
GeneralcharacteristicsName:AcerIncorporatedBusinessAddress:137Sec2ChienKuoNorthRoad,Taipei,10479,TaiwanTelephone:+886226961234Fax:+886225019162Internet:http://www.
acer.
com.
twLogo:AcerIncorporated'sprincipalactivitiesaretodevelop,marketandsellcomputerworkstations,PCservers,businessdesktops,computer-relatedcomponentsandsoftware.
ItsotheractivitiesincluderepairservicesofAcerbrandproducts,investing,financing,construction,andprovisionofinternet,electronicsservicesandinformationstorage.
TheGroup'soperationsarecarriedoutinTaiwan,EuropeandintheUnitedStatesofAmerica.
TheGroupexportsitsproductstoNorthandSouthAmerica,EuropeandAfrica.
InadditiontobeinganOEMofvarioustypesofcomputers,Acerproducesservers,storagesystems,projectors,anddisplays.
ThecompanyalsoprovidesITsupportservices.
Acerhasstreamlineditsoperationsinrecentyears,spinningoffitsmanufacturingoperations(nowWistron),aswellasitsconsumerelectronicsandperipheralsbusiness(nowBenq).
Itstillholdsstakesinbothcompanies.
Acernowoutsourcesitsmanufacturing.
Itsellsthroughresellersanddistributorsworldwide.
AcerIncorporatedispartoftheAcerGroup.
TheAcerGroupcomprisesseveralcompaniesandmarketsabroadspectrumofbrandedITproducts,e-businesssolutionsandservices.
Inaddition,thegroupsuppliesmultiplebrandsofITproductsincludingcomponentsandsoftwareinGreaterChina.
TheAcerGroupemploys7,800people,whileAcerIncorporatedemploys5,600peoplesupportingdealersanddistributorsinmorethan100countries.
11Acerwebsite(8April2005).
AcerIncorporated–companyprofile61.
2.
HistoryAcerfounderandchairmanStanShihdesignedTaiwan'sfirstdesktopcalculatorintheearly1970s.
Thecompany'sprecursor,MultitechInternational,waslaunchedin1976withUS$25,000byShihandfourotherpeople.
In1980,MultitechintroducedtheDragonChinese-languageterminal,whichwonTaiwan'stopdesignaward.
In1983,thecompanyintroducedanApplecloneanditsfirstIBM-compatiblePC.
MultitechsetupAcerLand,Taiwan'sfirstandlargestfranchisedcomputerretailchain,in1985.
ThecompanychangeditsnametoAcer(theLatinwordfor"sharp,acute,ableandfacile")in1987andwentpublicontheTaiwaneseexchangethenextyear.
Acergotintothesemiconductormarket2in1989whenitenteredintoajointventurewithTexasInstruments(namedTI–Acer)todesignanddevelopmemorychipsinTaiwan.
In1990,Acer'sUSsubsidiary,AcerAmerica,paidUS$90millionforAltosComputerSystems,aUSmanufacturerofUNIXsystems.
3Duringtheprosperous1980s,Acerincreaseditsmanagementlayersandslowedthedecision-makingprocess.
Inlate1990,thecompanyrestructured,trimmingitsworkforcebyeightpercent(about400employees),includingtwo-thirdsofheadquarters.
ThefollowingyearAcerbeganitsdecentralizationplantocreateaworldwideconfederationofpubliclyownedcompanies.
Acersuffereditsfirstlossin1991onrevenuesofalmostUS$1billion,partlybecauseofincreasedmarketingbudgetsintheUSandEurope,andcontinuinginvestmentinTI–Acer.
Thecompanybouncedbackin1993,with80percentofitsprofitscomingfromthatjointventure.
TheAspirePCwasunveiledin1995.
In1996thecompanyexpandedintoconsumerelectronics,introducingahostofnew,inexpensivevideodiscplayers,videotelephones,andotherdevicesinordertoboostglobalmarketshare.
In1997,AcerpurchasedTexasInstruments'notebookcomputerbusiness.
AslowdowninmemorychipssalesandafinancialslideatAcerAmericacostthecompanyUS$141million,butAcerfinishedtheyearintheblack.
Thefounderofthecompany,StanShih,steppeddownaspresidentin1998tofocusonrestructuring.
ThecompanyendeditsventurewithTexasInstruments,buyingTI's33percentstakeandrenamingtheunitAcerSemiconductorManufacturing.
Thecompanyalsobeganmakinginformationappliances,introducingadeviceabletoplayCD-ROMsviaTVsetsandperformothertask-specificfunctions.
ContinuedlossesduetoahighlycompetitiveUSmarketcausedadropinprofitsfor1998.
In1999,Acersolda30percentstakeinitsstrugglingAcerSemiconductorManufacturingaffiliatetoTaiwanSemiconductorManufacturingCorp.
(TSMCcompleteditspurchaseoftheremaining70percentofthebusiness,whichwasrenamedTSMC–AcerSemiconductorManufacturingthefollowingyear.
)Thecompetitiveheatandtheriseofcheaperpersonalcomputerstookatollin1999whenAcercutjobsintheUS,"streamlined"operationsandwithdrewfromtheUSretailmarket.
Thecompanyintensifieditsfocusonprovidingonlinesoftware,hardwareandsupportforusers,launchingadigitalservicebusinessandaventurecapitaloperationtoinvestinpromisinginternetstart-ups.
2Asemiconductorisaminiaturizedelectronicdevice,typicallyacomputerchipforprocessingormemory,whichcontrolstheflowofelectricitybyvaryingtheconductancebetweentwomaterials.
3UNIXisapopularoperatingsystem,developedbyAT&Tin1969,thatwasveryimportantinthedevelopmentoftheInternet.
UNIXallowsmorethanoneusertoaccessacomputersystematthesametime.
AnearlyversionofUNIX,whichwasusedbymostcollegesanduniversities,madeInternetconnectionspossible.
AcerIncorporated–companyprofile7Thecompanysufferedafinancialblowin2000whenlargecustomerIBMcancelledanorderfordesktopcomputers.
Laterthatyear,aftercontinuedlossesinaslowingPCmarket,thecompanyannounceditwouldcutmorejobsintheUSandGermanyandcloseanunspecifiednumberofplantsworldwide.
In2001,thecompanyspunoffitscontractmanufacturingandperipheralsunits,andrenamedthemWistronandBenQ,respectively.
Acer'srestructuringactivitiescontinuedthefollowingyear,whenitmergedwithitsdistributionunit,AcerSertek.
AlthoughSertekwasinfactthesurvivingentity,thecompanyimmediatelyrevivedtheAcernametomaintainitsstrongerbrand.
In2005,J.
T.
Wangsucceededthecompany'sfounder,Shih,asCEO.
4ShihisnowamemberoftheboardofdirectorsofWistron.
AcerInc.
stillhasa32.
2percentstakeinWistron.
1.
3.
OwnershipstructureAcerSertekInc.
(ASI)wasincorporatedonAugust1,1976,asacompanylimitedbysharesunderthelawsoftheRepublicofChina(ROC).
ASIchangeditsChinesenametoitscurrentnameonJanuary7,2002.
Forthepurposeofintegratingresources,expandingbusinessscale,andbuildingupefficiencyandcompetitiveness,itwasresolvedintheshareholders'meetingsofAcerIncorporated(AI),thenthesinglemajorshareholderofASI,andASIheldonDecember17,2001,thatASImergewithAI,retainingAI'sEnglishnameforthemergedcompany.
UpontheEffectiveDayofMerger,March27,2002,ASIissuednewcommonsharestoAI'sshareholdersattheratioof2.
5sharesofAIstockinexchangeforonecommonshareofASIstock.
Afterrevokingthecross-holdingsbetweenthetwocompanies,ASIaccomplishedthemergerwithtotalissuanceof1,727,725,303newcommonsharestoAI'sshareholders.
Legally,ASIisthesurvivingcompany,withAIbeingtheliquidatingentity,whilefromtheaccountingperspective,pursuanttotheinterpretationoftheROCAccountingResearch&DevelopmentFoundationregardingthecriteriaforreverseacquisition,AIissubstantiallytheeconomicacquirerandASI,theacquired.
AIwasestablishedandregisteredaccordingtotheRepublicofChinaCompanyLawandtheROCStatutefortheEstablishmentandAdministrationofScience-basedIndustrialParksonJanuary19,1981.
OnDecember17,2001,AI'sshareholders'meetingresolvedthespin-offplanwherebyonFebruary28,2002,theCompanyspunoffitsdesign,manufacturingandservices(DMS)businessfromitsAcerbrandbusinessandtransferredrelatedoperatingassetsandliabilitiestoitssubsidiaryWistronCorporation(Wistron).
Wistronissued400millioncommonshares(parvalue10NewTaiwaneseDollars–NT$)toAIatNT$14.
5pershare.
AsthecompanyhadnotparticipatedinWistron'scapitalinjectionduringtheyearandcontinuedtosellportionsofitsownershipinWistron,theCompanyheldlessthan50percentofownershipinWistronasofDecember31,2002.
Therefore,Wistronanditssubsidiarieswereexcludedfromtheconsolidatedcompanies.
5InAugust,2005,Acerstillheld32.
2percentofWistron'sshares.
ThecompanywillcontinuetodiminishitsstakeinWistron.
AnalystsfromtheCitigroupexpectAcertosellupto10percentofWistron'stotaloutstandingsharesin2005or2006.
64Hoover'scompanyrecord,(8April2005).
5AcerIncorporated,2003annualreport(translation),(7April2005).
6K.
W.
B.
Chanetal.
,WistronCorp.
:companyreport(Investext,Citigroup:2005),p.
2.
AcerIncorporated–companyprofile81.
4.
Basicfinancialinformation1.
4.
1.
SalesandprofitabilityDuringtheyearendedDecemberof2003,salesatAcerIncorporatedwereNT$157.
66million(3.
89billion).
Thisisanincreaseof46.
9percentover2002,whenthecompany'ssaleswereNT$107.
35billion.
Salesofinformationproductssawanincreaseof52percentin2003,fromNT$89.
20billiontoNT$135.
71.
ThecompanyderivesmostofitsrevenuesinEurope:in2003,thisregion'ssaleswereNT$84.
39,whichisequivalentto53.
5percentoftotalsales.
In2003,salesinEuropewereupataratethatwasmuchhigherthanthecompanyasawhole:inthisregion,salesincreased96.
8percenttoNT$84.
39million.
Althoughthecompany'soverallsalesincreased,saleswerenotupinallregionsoftheworld:salesinothercountriesweredown7.
0percent(toNT$28.
01billion).
7Salesvalue,fiscalyears1998–2004Inbillionsof801234561998199920002001200220032004OntheNT$157.
66billioninsalesreportedbyAcerin2003,thecostofgoodssoldtotalledNT$134.
97billion,or85.
6percentofsales(i.
e.
thegrossprofitwas14.
4percentofsales).
Thisgrossprofitmarginisslightlylowerthanthecompanyachievedin2002,whencostsofgoodssoldtotalled85.
1percentofsales.
AcerIncorporatedreportsprofitsbyproductline.
During2003,theitemizedoperatingprofits9atalldivisionswereNT$1.
43billion,whichisequalto0.
9percentoftotalsales.
Ofallproductlines,7CorporateInformation.
Companyresearchreport:AcerIncorporated.
,8April2005.
8Acerwebsite(8April2005).
9Operatingprofit:Thedifferencebetweenturnover(orrevenue)andtotaloperatingexpenses,butbeforeinterestandtaxationhavebeentakenintoaccount.
AcerIncorporated–companyprofile9InformationProductshadthehighestoperatingprofitsin2003,withoperatingprofitsequalto0.
9percentofsales.
(ThisproductlineisthelargestatAcerandaccountedfor86percentofsalesin2003).
In2002,Circulationhadthehighestoperatingprofits(1.
8percentofsalesversus–1.
0percentforInformationProducts).
10Netincome,fiscalyears1999-200411Inmillionsof0501001502002501999200020012002200320041.
4.
2.
ShareholdingstructureAcerchairmanandfounderStanShihandhisfamily(viaHongRongInvestmentHoldingsCo.
)altogetherrepresentthesingle-largestshareholder,withatotalof5.
4percentofAcer.
Directorsandkeymanagersholdaboutsixpercentoftotalshares,leaving94percentasfreefloatshares.
ForeigninvestorsandQualifiedForeignInstitutionalInvestors(QFII)currentlypossess34percentofthecompany.
1210CorporateInformation.
Companyresearchreport:AcerIncorporated.
,8April2005.
11Netincome:grosssalesminustaxes,interest,depreciation,andotherexpenses.
Netincomecanalsobecallednetprofit,netearningsorbottomline.
12AcerIncorporated,2003annualreport(translation),(7April2005);severalbrokerreports.
AcerIncorporated–companyprofile10Others46,50%Governmentfunds7,20%Chairman/founder5,40%Directorsandmanagement5,00%QFIIandforeigninvestors33,90%Domesticfunds2,00%1.
4.
3.
Keyaccountsduring2003Percentageoftotalnetsales(%)13AcerThailand;2,84%AcerAustria;2,69%Other;34,14%AcerUSA;4,33%AcerFrance;4,56%AcerUK;4,76%AcerSpain;6,93%AcerGermany;16,27%AcerItaly;11,36%AcerTheNetherlands;6,35%AcerAustralia;5,77%1.
5.
CharacterisationofactivitiesAcer'smajorITproductscanbedividedintonotebooks,desktopPCs,display(CRTandLCD)andothers(servers,PDAs,etc.
).
TheseproductsbelongtothecoreITBusinessGroup(ITBG),whichaccountsfor80-85percentofAcer'stotalconsolidatedrevenues,and85-88percentofAcer'stotalcorebusiness.
13AcerIncorporated,2003annualreport(translation),(7April2005).
AcerIncorporated–companyprofile11OthercorebusinessesincludeChannelBusinessGroup(CBG,13percentoftotalconsolidatedrevenue,14percentoftotalcorerevenue),andE-serviceBusinessGroup(EBG,1percent),whichoffersend-toendbusinessITsolutions.
Non-corebusinessesinclude56percent-ownedLotteryTechand52percent-ownedApacer,amakerofflash-memorycardsandMP3players.
Inthethirdquarterof2004,notebookcomputerswereAcer'stoprevenue-contributingproduct,with47percentoftotalconsolidatedrevenue.
BothdesktopPCsanddisplay(CRTandLCD)accountfor13-14percentoftotalconsolidatedrevenueinthethirdquarterof2004.
CRTproductswillsoonbephasedoutandreplacedbythevolumerampofLCDproductsin2005.
OtherITproductsincludeserverandstorage,handheldssuchasPDAs,andprojectors.
AcerisplanningtoofferLCDtelevisionstoo,asitbelievesthatsuchproducts–coupledwithintegratedInternetconnectivity–willbecomethecentrepieceofthelivingroomundertheconceptof'digitalhome'inthenearfuture.
141.
6.
MainproductsComputersDesktop(homeandbusiness)NotebookPersonaldigitalassistants(PDAs)ServersTabletDisplaysDigitalprojectorsMonitors(cathode-raytubeandliquid-crystaldisplay)Plasmadisplays14DeutscheBank,GlobalEquityResearch:Acer.
(December2004),p.
24.
AcerIncorporated–companyprofile12Operatingrevenuebyproducts,fiscalyears2002-2003Inmillionsof1502004006008001000120014001600NotebookPCDesktopPCMonitor/TFTLCDOther200220031.
7.
Organisationalstructure1.
7.
1.
DivisionsAcerIncorporatedisdividedinthefollowingdivisions:DivisionMainfunctionsHolding&InvestmentManageAcer'sholdingand/orinvestedcompanies.
ChiefFinancialOfficerManageAcer'sfinanceandinvestments.
GeneralAuditorEvaluateandexecuteplanstoimproveAcer'sinternaloperations.
ServiceValueLab&ProductValueLabDevelopinnovative,customer-orientedproductsandserviceswithhighmarketvalue,andprofitablebusinessmodels.
KeyAccountBusinessDevelopmentDevelopnewandfeasiblebusinessmodels,andintegrateAcer'sITproductsandservicestotargetthecorporateaccountmarket.
ITProductsBusinessDevelopandmanageAcer'sbrandnameITproductsandservices.
e-EnablingServicesDevelopandmanageAcer'sMegaMicroe-Enablingservices,marketing,salesandafter-salesservices.
ChannelBusinessMarketandservicemultiplebrandsofITproductsthroughnon-Acerbrandedchannels.
GreaterChinaOperationsSalesandmarketAcer'sbrandnameITproductsandservicesinGreaterChina.
InternationalOperationsMarketAcer'sbrandnameITproductsandservicesintheinternationalmarkets.
LegalDraftandreviewcontracts;providelegalconsultingservicesandmanageAcer'sIP-relatedrights,includingwithoutlimitationthepatent,trademark,licensingandcopyrightrights.
15Ibid.
AcerIncorporated–companyprofile13DivisionMainfunctionsGeneralAffairsManagethepublicadministration,safetyandservicerelatedissues.
Finance&AccountingFinancialplanning,investmentmanagement,setandmonitorbudgets,accountingissues;cashflow,creditandcostcontrol.
HumanResourcesDevelopandmanagehumanresourcesincludingrecruitment,training,administration,careerdevelopment,compensationandwelfare,andstaffrelationship.
BrandingPromoteAcer'sbrandnameproductsthroughmarketingcommunications,publicrelationsandadvertising.
InformationTechnologyPlanandintegratesales,accounting,inventoryandassetinformation.
MaintainAcer'sinternetandintranetinfrastructure.
1.
7.
2.
ManagementJ.
T.
WangChairmanandCEOAsChairmanandCEOofAcerInc.
,J.
T.
Wang'sroleandchallengeistoensuretheglobalcompetitivenessoftheAcerbrand.
SinceDecember2000WanghasledAcertofocusoncoreandprofitablebusiness.
WanginitiatedaNewChannelBusinessModel,which,accordingtothecompany,wasessentialforthecompany'sturnaroundandgrowth.
ThemodelencouragespartnersandsupplierstojoinAcerinitsformulaofsupply-chainmanagementandallowsAcertooutsourcefromtop-tiervendorsandpartners.
Insodoing,Acerclaimstohavebuiltanefficientsupplychainthatprovidescustomerswithcompetitivelypricedandfreshtechnologies.
Acer'syear2005financialtargetswere:consolidatedrevenuesofUS$9billionfor35percentyear-on-yeargrowth;profitaftertaxofUS$229million;andoperatingincomeofUS$190millionfor67percentyear-on-yeargrowth.
In2004,Acerwastheworldnumber-fiverankingvendorfortotalPCs.
Inboththe2004fourthquarterandfullyear,Acerbecamethenumber-threePCandnumber-onenotebookbrandinEMEA(Europe,MiddleEast,Africa)andWesternEurope.
Acerhassetitsgoaltobecomeaworldtop-threePCvendorwithinthenextthreeyears.
16GianfrancoLanciPresidentofAcerInc.
AccordingtoAcer,GianfrancoLanci'spromotiontothepositionofPresidentofAcerInc.
in2004reflectsthecompany'srecognitionforhis"outstandingperformanceintheEuropeanmarket",includinghismanagementstyleandsuccessfulchannel-businessmodel,"whichmaynowextendtotheAcergroupworldwide.
"LancijoinedAcerasManagingDirectorofAcerItalyin1997,followingAcer'sacquisitionofTexasInstruments'(TI)notebookdivision,andimmediatelybeganconsolidatingthechannelandpartner-relationsatalllevels.
In2000,LancibecamePresidentofAcerEuropeandbeganbuildingupastrongEuropeanorganisation.
OnbecomingPresidentofAcerEMEAin2002,Lanciintroducedachannel-businessmodelthatturnedinhighprofitsallacrossEurope,aswellastheMiddleEasternandAfricanmarkets.
In2003,LanciwasappointedPresidentofAcer'sInternationalOperationsBusinessGroup,allowinghimtoinvolvedirectlyintheAmericasmarkets.
ThedesignationconfirmedAcer'sacknowledgement16Acerwebsite(9April2005).
AcerIncorporated–companyprofile14ofchannelmanagementandmarketingactivities,andfortherolehehadplayedforAcer'ssuccessinEMEA.
Lanci'srecordofresultsincludesgrowingAcerEMEA's2004revenuesby63percentyear-on-year,andaccountingfornearly70percentoftheITproductbusiness'totalrevenue.
Inthe2004fullyearandfourthquarter,Acerbecamethenumber-onenotebookandnumber-threePCbrandacrossbothEMEAandWesternEurope.
EMEAisnowthemostprofitablemarketforAcer.
171.
8.
GeographicalmarketsPercentageoftotalITproductrevenues,fromthe1stquarterof2003tothe3rdquarterof2004180%10%20%30%40%50%60%70%80%1Q032Q033Q034Q031Q042Q043Q04EMEA*Pan-AmericaAsia-PacificGreaterChina*EMEAstandsforEurope,MiddleEastandAfrica.
1.
9.
Strategy1.
9.
1.
StrengthsAcer'snotebookPCmarketshareinEuropeincreasedto18.
2percentinthethirdquarterof2004,vs.
11.
4percentinthethirdquarterof2003.
Thefactthatclone/regionalbrandsarelosingmoremarketsharethanglobalOEMssupportstheideathatAcerhasincreaseditscostcompetitivenessversuscompaniesthathavehigherEuro-basedcostcontents.
LocalEuropeanbrandsshouldbeatadisadvantageagainstAcerbecauseoftheirlargelyEuro-basedoperatingexpenses(about10percentofsales).
HPlostalargersharetoAcerlikelyduetoitshigheroperatingoverheadsinEurope.
Furthermore,HP'svolumemaybenegativelyaffectedbyIngramMicro'sstrengthenedsupportforAcerbrandproducts(bothAcerandHPuseIngramMicrotodistributetheirproductsinEurope).
17Acerwebsite(8April2005).
18DeutscheBank,GlobalEquityResearch:Acer.
(December2004).
AcerIncorporated–companyprofile15LargelydrivenbystrongnotebooksalesinEurope,Acer'sglobalPCmarketshareandrankingimprovedto3.
6percentandnumberfiveinthethirdquarterof2004,respectively,versus3.
0percentandnumberseveninthethirdquarterof2003,basedonestimatesfromtheInternationalDataGroup(IDC).
191.
9.
2.
VulnerabilitiesAcer'shighEuro-basedsalesratio(about65percentofsalesarefromEurope),andhighNT$andUS$costcontentsmakethecompanystructurallyadvantageousfromastrongEurotrend.
AstrongEurowouldinflateAcer'stoplineandenhanceitscostcompetitivenessversusotherhigherEurocost-contentcompetitors.
Asaresult,someanalystsbelievethattherecentstrongEuroappreciationmayhaveinflatedAcer'smarketsharemomentumandprofitability.
AccordingtoanalystsfromtheDeutscheBank,Acermaynothavethecostadvantageinnon-Europeanmarkets:measuredbyitssupplychain'slowertotaloperatingmarginandweakperformanceinhomemarketsTaiwanandChina.
Asaresult,thecompanymayfacechallengesinbalancingitsmarket-shareandprofitabilityobjectivesinnon-Europeanmarkets.
Acer'sexpansionintonewmarketscoulddiluteitsprofitmarginsandincreaseitsriskprofileasthecompanydoesnotappeartohavecostcompetitivenessinnon-Europeanmarkets,e.
g.
Acer'sUSbusinesscanpotentiallyremainunprofitableifthecompanypursuesabelow-costpricingstrategytogainmarketshare.
201.
9.
3.
OutlookAcer'sperformanceinitshomemarkets,TaiwanandChina,hasbeenweakin2004.
Thecompany'soverallsupplychaingeneratesloweroperatingmargin(3.
5percentin3Q04)versusthesupplychainsofcompetitorsAsustek(8.
8percent)andDell(11.
2percent),andisonparwithHP's.
TheDeutscheBankforecaststheNewTaiwaneseDollartoappreciateagainsttheUS$in2005.
AnalyststhinkthatthesefactorshavenegativeimplicationsforAcer'sexpansionintonon-Europeanmarkets.
TheDeutscheBankexpectsAcer'smarketshareexpansiontodeceleratein2005-06,afteritssuccessinEuropein2003and2004.
TheyalsoexpectthatAcer'snon-Europeanmarketexpansionwillslowdownafteraninitialramp,asthecompanymaynothavethecostadvantagetosustainanuptrend.
2119DeutscheBank,GlobalEquityResearch:Acer.
(December2004).
20Ibid.
21Ibid.
AcerIncorporated–companyprofile162.
Acer'ssupplychainandCorporateSocialResponsibility2.
1.
Supplychain,outsourcingandsalesInthelastfiveyears,Acerhastransformeditselffromamanufacturerintoacompanythatfocusesonglobalmarketingofbrand-name,PC-relatedproductsandservices.
Acer'smanagementconsidersthemanufacturingsectortobeoflittlevalue.
Thefounderofthecompany,StanShih,haspointedoutthatintheneweconomy,manufacturingmustfindwaystoprovidecustomerswithOriginalDesignManufacturing(ODM)andgloballogisticsservicessoastoincreaseaddedvalue.
22The"NewChannelBusinessModel"isnotonlycrucialtoAcer'ssuccesstoday,butwillalsobe,accordingtoAcer,thecompany'sfoundationintheglobalarenainthefuture.
AcerwillstrivetoextenditsNewChannelBusinessModelandworktogetherwithglobaldistributorsandresellerstocompetehead-to-headwithdirect-modelleaderDell.
Inpractice,theimplementationofthisbusinessmodelmeansthatAcerisshiftingfrombeingamanufacturertoapurebrandcompanythatmarketsanddistributesitsproducts,whileleavingtheactualproductionprocessinthehandsofcontractmanufacturers.
Acer'schannelbusinessmodelcomprisesawidenetofsalesservices,incontrastwiththedirectsalesapproachofmarketleaderDell.
Acersalesrepresentativesandresellersareconsidered"keylong-termbusinesspartners.
"23AnalystsandstockbrokersarguethatthischannelbusinessmodelisnotnecessarilymorecostcompetitivethanthedirectbusinessmodelDelluses.
Acer'ssupplychainmanagementstrategycanperhapsbestbecharacterizedasastrategyof"verticaldisintegration.
"24Intherecentpast,AcersoldmajoritystakesinbothWistronandBenQ.
ThesecompaniesweremainprovidersofmanufacturingservicesinAcer'ssupplychains.
Bysellingitsmajoritystakeinthesecompanies,Acerclearlydemonstratesthatitintendsto"disintegrate"itssupplychainsandfocusonbrandingandmarketing.
ThestrategyofverticaldisintegrationisquitevisibleinAcer'scorporatestructure.
Inthechartsonthenextpage,onewillnotethatAcerretainsownershipofcompaniesrelatedtothedistributionofbrand-nameITproductsandchoosestomaintaincontrolovercompaniesinvolvedinResearchandDevelopment(chartsAandB).
SharesinElectronicManufacturingServices(EMS)companies,ontheotherhand,arebeingsoldoffgradually,althoughinmostofthesecompaniesAcerisstillpowerfulenoughtoinfluencedecision-making(chartC).
ThechartshavebeensimplifiedandcanonlyreflectpartofAcer'sever-changingcorporatenetwork.
2522Acer'sStanShih:EmpoweringTechnology-MakingYourLifeEasier(newsrelease),(9April2005).
23S.
Burke,AcerLaunchesNewChannelBusinessModel,CRN,24November2003,(10April2005)24Formoreinformationonthissubject,readJeffreyT.
Macher,VerticalDisintegrationandProcessInnovationinSemiconductorManufacturing:Foundriesvs.
IntegratedProducers,(9April2005).
25AllinformationhasbeentakenfromAcer's2003annualreport.
AcerIncorporated–companyprofile17A.
Distribution,saleandmaintenanceof"Acer"brandnameinformationtechnologyproductsB.
Research,development,manufactureandsaleofintegratedcircuitsandrelatedproductsC.
ElectronicManufacturingServices(EMS)andOriginalDesignManufacturers(ODM)AcerIncorporated–companyprofile18TheverticaldisintegrationofAcer'ssupplychainbecomesevenmoreevidentwhenanalyzingthesupplychainofspecificAcerproducts.
Componentsaresourcedfrommanydifferentcomponentmanufacturers,whileassemblyiscarriedoutbyasmallgroupofselectedcontractmanufacturers.
Insomecases,Acerholdsaconsiderablestakeinthesecontractmanufacturers,althoughitalmostneverownsthesecompanies.
TheselectedcontractmanufacturersareallowedtomanufacturefinalproductsforAcer.
ItdoesnotmatterwhetheradesktopcomputerornotebookisassembledinChina,thePhilippinesorintheNetherlands.
Intheend,allAcerproductsaresoldas"madeinTaiwan".
ThefollowingchartsshowthesupplychainsfortwoAcernotebooks:theTravelmateC110andtheTravelmateC300.
SupplychainfortheTravelmateC110AcerIncorporated–companyprofile19SupplychainfortheTravelmateC300AcerIncorporated–companyprofile20ThesechartswerecomposedwithdetailedinformationfromAcer'sCBtestcertificates.
26TheCBcertificatesofAcer'snotebookcomputersrevealacomplexwebofsuppliers.
Inmostcases,oneparticularcomponentcanbeprovidedbytwoorthreedifferentcomponentmanufacturers.
Aharddiskdrive(HDD)fortheTravelmateC300,forexample,canbesuppliedbyToshibaorFujitsu.
Thisisnecessarytoguaranteecontinuoussupplyofcriticalcomponents.
Ifasupplierfailstoprovideaparticularcomponentjust-in-timeorondemand,theselectedcontractmanufacturerscanrelyonothersuppliersthatareabletoprovidethesamecomponent.
Forsomecomponents,however,thecontractmanufacturersdependonakeysupplier.
Ifthesecomponentsareoutofstock,delaysindeliveryarelikelytohappen.
ItisimportanttonotethatAceractuallydependsontheperformanceofsomeofitscompetitorsintheITmarket.
ManycriticalcomponentsinAcer'ssupplychainfornotebookcomputersareprovidedbyitskeycompetitors.
Fujitsu,acompanythatalsoengagesintheproductionofnotebooks,suppliestheharddisksfortheTravelmateC300andtheTravelmateC110.
Forthesamenotebooks,SonyprovidestheDVD-ROM.
SonyalsoproducesnotebooksasanOriginalEquipmentManufacturer.
OtherkeycompetitorsforAcerIncorporatedintheconsumerelectronicsmarketareToshiba,Hitachi,IBMandMatsushita.
27AllthesecompaniesprovidecomponentsforAcernotebooks.
Thissituationmaybedescribedasasortof"entrepreneurialendogamy,"ascompanieshavenoalternativebuttoengageincommercialrelationshipswiththeirindustrialpeers(competitors),ratherthantointegrateessentialpartsoftheirsupplychains.
LargemultinationalssuchasSonyandToshibacannotbelabelledaspureoriginalequipmentmanufacturers(OEMs),becausetheyalsoprovideservicesthataretypicalofcomponentmanufacturersorelectronicsmanufacturingservices(EMS)companies.
AcerisadifferenttypeofcompanybecauseitneithermanufacturestechnologyproductsitselfnorproducescomponentsforotherOEMs.
Attheotherendofthesupplychain,insales,Acerengagesinpartnershipswithkeycompetitorsaswell.
InNewZealand,forexample,AcerappointedFujitsuasa"GoldChannelPartner"in2004.
28Asawhole,Acer'ssupplychainandsalesstrategiescanbecharacterisedasindirectandverylean.
Sellingisdonethroughdistributiononlyandevenlargeretailersareapproachedthroughthebusinesschannel,thusindirectly.
Decision-makinginthecompanycanbeveryfastbecausetherearefewhierarchicallevels.
AccordingtoanalystsfromtheDeutscheBank,Acer'scombinedsupply-chainmargin(Acer-brand,Wistron-ODMandIngramMigram-distributor)of3.
5percentislowervs.
8.
8percentforAsustek'ssupplychain(Asustek-OEM,Synnex-distributor)butclosetothe3.
8percentforHP'sPCsupplychain26TheIECEECBSchemeisaninternationalsystemforacceptanceoftestreportsdealingwiththesafetyofelectricalandelectronicproducts.
Itisamultilateralagreementamongparticipatingcountriesandcertificationorganisations.
AmanufacturerutilizingaCBtestreportissuedbyoneoftheseorganisationscanobtainnationalcertificationinallothermembercountriesoftheCBScheme.
TheSchemeisbasedontheuseofinternational(IEC)Standards.
Ifsomemembers'nationalstandardsarenotyetcompletelyharmonizedwithIECStandards,nationaldifferencesarepermittedifclearlydeclaredtoallothermembers.
TheCBSchemeutilizesCBTestCertificatestoattestthatproductsampleshavesuccessfullypassedtheappropriatetestsandareincompliancewiththerequirementsoftherelevantIECStandardandwiththedeclarednationaldifferencesofvariousmembercountries.
27(10April2005).
28AcerexpandsitscorporatereachwithFujitsu,newsrelease,31May2004,(10April2005).
AcerIncorporated–companyprofile21(HP-brand,Quanta-ODM,IngramMicro-distributor).
Dell'soverallsupplychain(Dellbrand+distributor,Quanta-ODM)generatesan11.
2percentoperatingmarginduetoitsdirectbusinessmodel.
Assumingthatasupplychain'stotaloperatingmargingenerallyreflectsitscostcompetitiveness,Acer'sweakerpositionversusAsustek'sandDell'ssupplychainsanditsequalpositionvs.
HP'ssupplychainsuggeststhatAcerwouldbeinastrongpositiontocompetewithotherbrandsinpricing.
29TheDeutscheBankbelieves,however,thatwithoutaclearpricingadvantage,Acercouldfacedifficultiescapturingmarketshareinnon-Europeanmarkets.
3029Operatingmarginisacompany'sprofitabilityafteralloperatingcostshavebeenpaid.
Itiscalculatedbydividingcashflowbyrevenueandthenmultiplyingby100.
Theresultisexpressedasapercentage.
Operatingmarginshowshowprofitableacompanyisbeforeinterestexpensesondebtanddepreciationcostshavebeendeducted.
Sinceaccountantsoftenmanipulatedepreciationandamortizationcostsonincomestatements,manyanalystsfeeloperatingprofitpaintsatruerpictureofacompany'sprofitability.
30DeutscheBank,GlobalEquityResearch:Acer.
(December2004).
AcerIncorporated–companyprofile222.
2.
Corporatesocialresponsibilityandsustainability2.
2.
1.
PoliciesregardingenvironmentalissuesAccordingtothecompany,Acer'sglobaloperation,spanningacrossEurope,MiddleEast,Africa,theAmericas,GreaterChinaandtheAsiaPacific,isdevotedto:Ensuringthatitsproductsandoperationsmeetallapplicableenvironmentalregulatoryrequirements.
Selectingtechnologiesthatminimizeharmful,non-environmentallysensitivematerials;conserveenergy;andarerecyclable.
Savingenergies,preventingpollution,minimizingandrecyclingdiscardsinitsdailyoperations.
Promotingawarenessofitsenvironmentalpolicyamongemployeesandpartnersinoursupplychain.
BuildinganEnvironmentalManagementSystem(EMS)tocontinuallymonitorandimproveactivities.
31In2005,Acerpublisheditsfirstenvironmentalreport,forwhichthecompanyusedtheGRIguidelines.
32Intheforewordtothisreport,AcerpresidentGianfrancoLancistates,"Aceriscommittedtoreduceandpreventnegativeenvironmentalimpacts,aswellaspromoteahealthyworkplaceandlivingenvironment.
"33AllofAcer'stier-onesuppliershaveacquiredISO14001certification.
34AcerstatesthatitadherestotheEUDirectiveontherestrictionofhazardoussubstances(RoHS)byprohibitingtheuseoflead,cadmium,mercury,hexavalentchromiumandbrominatedflameretardantsPBBandPBDE.
AsofJanuary1,2006,allAcerproductswillcomplywiththeRoHSDirective.
AsofAugust,2005,accordingtothecompany,allAceroperationsandproductscomplywiththeEUDirectiveonWasteElectrical&ElectronicEquipment(WEEE).
3531Acercompanywebsite,GlobalEnvironmentalPolicy,nodate,(28July2005).
32TheGlobalReportingInitiative(GRI)isamulti-stakeholderprocessandindependentinstitutionwhosemissionistodevelopanddisseminategloballyapplicableSustainabilityReportingGuidelines.
TheseGuidelinesareforvoluntaryusebyorganisationsforreportingontheeconomic,environmental,andsocialdimensionsoftheiractivities,products,andservices.
TheGRIincorporatesparticipationofrepresentativesfrombusiness,accountancy,investment,environmental,humanrights,researchandlabourorganisationsfromaroundtheworld.
Startedin1997,GRIbecameindependentin2002,andisanofficialcollaboratingcentreoftheUnitedNationsEnvironmentProgramme(UNEP)andworksincooperationwithUNSecretary-GeneralKofiAnnan'sGlobalCompact.
Cf.
GRIwebsite,GRIataglance,nodate,(20October2005).
33AcerInc.
,AcerCorporateEnvironmentalReport2005(2005),p.
3.
34ISO14001wasreleasedin1996withtheintentthatcompaniesmanagealloftheactivities,productsandservicesthatcansignificantlyimpacttheenvironment.
TheStandardhasthreebasicobjectivesofcontinuousimprovement,regulatorycomplianceandpollutionprevention.
Thestandardisbrokeninto5mainsections:EnvironmentalPolicy,Planning,Implementation&Operation,CheckingandCorrectiveAction,andManagementReview.
ToimplementanISO14001conformingEnvironmentalManagementSystem(EMS),acompanyhastowriteandimplementapproximately6newproceduresandmodifyapproximately9existingprocedures(AssumingthecompanyiscurrentlyISO9000orQS-9000compliant).
35AcerInc.
,AcerCorporateEnvironmentalReport2005(2005),p.
6.
AcerIncorporated–companyprofile23AllofAcer'ssuppliersmustadheretoAcergreenproductspecifications.
Suppliersarerequiredtocomplywiththesespecificationswithregardtorulesonenergyconservation,easeofrecycling,lowtoxicity,batteryusageandpackaging.
AcerisapartneroftheEPAEnergyStarprogram,throughwhichcompaniesandorganisationsaimtocompletesuccessfulwhole-buildingenergyefficiencyupgrades.
2.
2.
2.
PoliciesregardinghumanrightsandlabourrightsAcerdoesnothavespecificpoliciesonCSRintheareaofhumanandlabourrights,nordoesithaveacodeofconductthatmentionsthesethemes.
Onitswebsite,theonlyinformationavailablereferstoenvironmentalpolicies.
However,someoftheassertionsintheenvironmentalreportAcerpublishedrecentlyindicatethatAcercanalsobeheldaccountableforissuesrelatedtohumanandlabourrightsinitssupplychain.
Thecompanystates,"AtAcer,welikentherelationshipswithinthesupplychaintothoseofacommunity[…].
Acerhasnearly100suppliers,mostofwhicharesystemsuppliersandprimarycomponentsuppliers.
Intermsofsupplychainmanagement,Acermakesnodistinctionbetweenitselfanditssuppliers.
Fosteringacorporateculturethatemphasizescreativity,Acersetsgoalsandletssuppliersproposethemethodofexecution"(emphasisadded).
36Acerdoeshaveacodeofconductforstaffmembers.
Thiscodedoesnotmakeanyreferencetohumanrightsorlabourrightsissues.
3736AcerInc.
,AcerCorporateEnvironmentalReport2005(2005),p.
30.
37Ibid.
,p.
40.
AcerIncorporated–companyprofile243.
LabourissuesinAcer'ssupplychain3.
1.
Acer'ssupplychaininthePhilippinesandChinaInordertoidentifyissueswithregardtoAcer'scorporatesocialresponsibility(CSR)inrelationtoitssupplychain,SOMOcommissionedfieldresearchstudiesinthePhilippinesandinChina.
ThesestudiesfocusonimportantcontractmanufacturersinAcer'ssupplychainandwereundertakenbyresearchersfromthePhilippineResourceCentre-Manila(PRC-Manila)andMoninaWongfromLabourActionChina(LAC).
InthePhilippines,researchwascarriedoutonWistronInfocommPhilippinesCorporation.
WistronInfocommisasubsidiaryofWistronCorp.
,aTaiwaneseoriginaldesignmanufacturer.
AcerInc.
isakeystockholderofWistronCorporation.
Before2002,morethan50percentofWistron'sshareswereownedbyAcer.
Currently,AcerInc.
anditsinvestmentcompaniesstillhold32.
2percentofWistron'sshares.
38Acer'sfounder,StanShih,isamemberoftheBoardofDirectorsofbothWistronandAcer.
Therelationbetweenthetwocompaniesisobviousandisconstantlyemphasizedinthemedia.
InanarticlepublishedinApril,2004,bytheChinaEconomicNewsService,StanShihprovidedagrowthprojectionforthe"combined"salesofthe"Pan-AcerGroup,includingthreesubgroupsofAcer,Wistron,andBenQ.
"39ThisdemonstratesthateventhoughAcerisnolongeramajorityshareholderinWistronandBenQ,theresultsofthesecompaniesarestillincludedinthecombinedsalesfiguresofthePan-AcerGroup.
Acer'sinfluenceinWistron'sisapparent.
RelationbetweenAcerInc.
andWistronInfocommPhilippinesCorporation40WistronproducesdesktopcomputersandnotebookPCsfor,amongothers,Acer,HewlettPackard,DellComputers,Gateway,MedionandIBM.
ItalsomanufacturesgameconsolesforMicrosoft.
41Wistron'sbranchinthePhilippines,WistronInfocomm(formerlyAcerInformationProductsPhilippines),isoneofthecountry'slargestITcompanies.
Thecompanyproducesdesktops,notebooks,CPUandothercomponentsforAcer,HP,DellandGateway.
InChina,fieldresearchcoveredfourfactoriesthatsupplyAcerintheZhongshanCityScienceandHigh-TechParkandintheFoxconnScientificParkinShenzhenCity.
BothcitiesareintheGuangdongprovince.
TwoofthefactoriesresearchedarelocatedintheAcerScienceParkinZhongshan:WistronandAopen.
Wistronproducescomputerandelectronicgamedevicesfora38K.
W.
B.
Chanetal.
,WistronCorp.
:companyreport(Investext,Citigroup,2005).
39CENS,Pan-AcerGroupaimstograbNT$745B.
inoverallrevenuethisyear,TheTaiwanEconomicNews,12April2004(28October2005).
40K.
W.
B.
Chanetal.
,WistronCorp.
:companyreport(Investext,Citigroup,2005).
41CENSTaipei,February4,2004.
AcerIncorporated–companyprofile25numberofbuyers,includingAcer.
AopenisasubsidiaryofAcerandsuppliescentralprocessingunits(CPUs)exclusivelytoAcer.
Thethirdcompanylocatedwithinthesameindustrialpark,LianYiPrecisionCompanyLtd.
,providesplasticsemi-finishedproductstoAcerandWistron.
Thefourthcompany,Foxconn,islocatedintheFoxconnScientificParkinShenzhenCityintheGuangdongprovince.
FoxconnisalargeTaiwanesemultinationalODMcompanythatsuppliesmotherboards,enclosures,coolers,barebonesystems,cardreadersandwirelesscardstovariousbuyers,includingAcer,Philips42,Lenovo,Dell,HP,Apple,SonyandNokia.
Foxconn'sfactoryinShenzhenhasabout70,000employees,ofwhom85percent(about60,000)aremigrantsand50,000arewomen.
43RelationsbetweenAcerInc.
andresearchedfactoriesinChina4442PhilipsdecidedtoenditsrelationshipwithFoxconninShenzenCityinthesecondquarterof2005,becauseFoxconn"doesnotfulfilPhilips'requirements".
PhilipshasstartedtheprocessofphasingFoxconninShenzenoutofitssupplychain.
Source:H.
deBruin,SeniorVice-President,HeadofCorporateSustainabilityOffice,Philips,e-mail8December2005;P.
vanHeck,SeniorSustainabilityOfficer,CorporateSustainabilityOffice,Philips,e-mail9December2005.
43L.
KaimingandD.
Xin,Dayandnightatthefactory:workingconditionsoftemporaryworkersinthefactoriesofNokiaanditssuppliersinsouthernChina(Shenzhen,China:InstituteofContemporaryObservation,2005),p.
15.
44ReedElsevierInc.
,Directoryofcorporateaffiliations,internationalcompany,AopenInc.
(12October2005);Aopenwebsite,"Corporate",nodate,(31October2005);ThomsonFinancial,ThomsonExtelCardDatabase,AopenInc.
(3September2005);AcerkicksoffsaleofitsfirstFoxconn-madedesktops,saysreport,EMSnow,13March2003,(31October2005).
AcerIncorporated–companyprofile263.
2.
InternationalstandardsonlabourrightsResearchteamsinboththePhilippinesandinChinausednationallawsandinternationalCSRstandardsasareferencetoidentifysocialandlabourissuesinAcer'ssupplychain.
Thefollowingstandards,guidelinesandframeworksareconsideredtobeparticularlyrelevantinthecontextoftheresearchproject:TheUniversalDeclarationofHumanRights45TheUNNormsontheResponsibilitiesofTransnationalCorporationsandOtherBusinessEnterpriseswithRegardtoHumanRights46TheConventionsoftheInternationalLabourOrganisation(ILO)47TheOECDGuidelinesforMultinationalEnterprises48TheCSRFrameofReferencefromtheDutchCSRPlatform49TheConventionsoftheInternationalLabourOrganisation(ILO)aremostspecificindefiningcorporatebehaviourregardingemployment.
TheILOhasissuedalmost200conventionsonworkingconditions.
EightoftheseILOconventionsspecifythefourfundamentallabourrights.
Thesefourlabourstandardsare:Freedomofassociationandcollectivebargaining(ILOconventions87,98and135)Noforcedlabour(ILOconventions29and105)Nochildlabour(ILOconventions138and182)Nodiscrimination,forexamplewithreferencetothesexes(ILOconventions100and111)TheTripartiteDeclarationofPrinciplesConcerningMultinationalEnterprisesandSocialPolicyextendstheILOconventions,listingcorporateresponsibilitieswithregardtolabourissuesandalsoincludinganumberofadditionallabourstandardsfallingunderthespecificresponsibilityofcorporations:Therighttosecurityofemployment(TripartiteDeclaration,Art.
24-28)Alivingwagethatcoversbasicneeds(ILOconventions26and131)Healthyandsafeworkingconditions(ILOconvention115)Compliancewiththemaximumnumberofworkinghours(48+12)(ILOconvention1)ThefindingsofthefieldresearchstudiesinthePhilippinesandinChina,takingintoaccounttheabovementionedinternationalstandards,aredescribedinthefollowingparagraphs.
45Cf.
UNwebsite,UniversalDeclarationofHumanRights,nodate,(31October2005).
46Cf.
UNwebsite,Normsontheresponsibilitiesoftransnationalcorporationsandotherbusinessenterpriseswithregardtohumanrights,26August2003,(31October2005).
47Cf.
ILOwebsite,ILOLEX,nodate,(31October2005).
48Cf.
OECDwebsite,TextoftheOECDGuidelinesforMultinationalEnterprises,nodate,(31October2005).
49Cf.
CoalitionofDutchCSOs&TradeUnionsactivelypromotingCSR,CSRFrameofReference,July2003,(31October2005).
AcerIncorporated–companyprofile273.
3.
ExcessiveworkinghoursTheresearchteamfromthePhilippineResourceCentrefoundthatmorethan30percentoftheworkersatWistronInfocommhavetowork72hoursweekly.
Sixdaysaweek,theywork12hoursperday.
Theyareregularlyforcedtodoovertimeduringtheirdays-offduetofluctuationsofrawmaterialsupply.
Workerswholivefarawayfromthefactoryoftenareunabletogohomebetweenshifts.
Theyareforcedtostaywithrelativesorfriendswholivenearby.
50AccordingtothePhilippineLabourCode,thenormalhoursofanyemployeeshallnotexceedeighthoursaday.
Exceptionscanbemadein"emergencycases,"inwhichemployersmayrequireanyemployeetodoovertimework.
AtWistronInfocomm,therearenoemergencycases:overtimeseemstobestructural.
WistronInfocomminthePhilippinesclearlydoesnotactincompliancewithILOconvention1,whichstatesthatworkinghoursshallnotexceed48perweekplus12hoursofovertime.
InChina,workersatAopenandWistroninZhongshanCityworkintwoshiftsofeighthoursadayinthelowseasonandthehoursadayinthepeakseason.
WorkersatFoxconninShenzenCitywork12hoursadayintwoshifts.
TheamountofworkinghoursatLianYiinZhongshanvariesbetweendepartments.
Workersinthecolourcoatingdepartmentworkontwoshiftsoftenhoursaday,whileassemblylineworkersworkeightto12hoursadayandsometimesovernightinthepeakseason.
Workersherehavetoworkroughly60to100overtimehoursamonth.
AopenandWinstronworkersareentitledtomorerestdays.
Theyhaveatleasttwotothreedays-offamonthinthepeakseason,whileinthelowseasontheyhaveoneday-offperweek.
FoxconnandLianYiworkersseldomhaveaday-offinthepeakseason.
ThisisworseatFoxconn.
Workerscomplainthattheyhavenoday-offatallformonthsandthattheyhavetoworkevenduringstatutoryholidaysinthepeakseason.
Theyareoffonlywhenthereisanelectricityshortageorwhentheyarewaitingforrawmaterialsandpartssupply.
Intermsofthenumberofworkinghoursandrestdays,onlyAopenandWinstroncomplywiththenationallabourlawwhichrequireatleastoneday-offperweekforworkers.
51Still,noneoftheresearchedfactoriesinChinaseemtoabidebyILOconvention1duringthepeakseason.
3.
4.
WagesandcompensationforovertimeworkThePhilippineResourceCentrefoundthatWistronInfocommdoesnotpaythelegallymandatedcompensationforovertime.
Instead,overtimepayiscomputedbasedontheregularhourlyrate.
ThisisnotinaccordancewiththePhilippineLabourCode,whichstatesthat"everyemployeeshallbepaidanightshiftdifferentialofnotlessthantenpercentofhis/herregularwage"andthat"workmaybeperformedbeyondeighthoursaday,providedthattheemployeeispaidfortheovertimeworkanadditionalcompensationequivalenttohis/herregularwageplusatleast25percentthereof.
"5250PhilippineResourceCentre–Manila&SOMO,CorporateSocialResponsibilityBehaviourofmultinationalcorporationsintheglobalinformationandcommunicationtechnologysupplychaininthePhilippines(Manila:April2005),p.
43.
51M.
Wong,TheICThardwaresectorinChinaandcorporatesocialresponsibilityissues:withcasestudiesonthesupplychainofFujitsu-SiemensComputersandAcerInc.
(HongKong:LabourActionChina,2005),p.
14-15.
52PhilippineResourceCentre–Manila&SOMO,CorporateSocialResponsibilityBehaviourofmultinationalcorporationsintheglobalinformationandcommunicationtechnologysupplychaininthePhilippines(Manila:April2005),p.
44.
AcerIncorporated–companyprofile28InChina,AopenandWistroninZhongshanpayproductionworkersRMB480amonth(about50),whichisincompliancewiththelegalminimumofthecity.
Attimeswhenthereisnowork,themonthlyincomeoftheworkersisdeductedonanhourlyanddailybasis.
WorkersatFoxconninShenzenCityreceiveamonthlybasiswageofRMB450–480(47-50)afteraprobationperiodofthreemonths.
AtLianYiinZhongshan,thebasisdailywagerangesfromRMB13(1.
36)to15(1,57)foraneight-hourworkingday,whichisnotinaccordancewiththelegalminimumwageofRMB21(2.
19)aday.
AllfouroftheChinesecompaniesresearchedpayovertimecompensationsof150,200and300percentrespectivelyonweekdays,duringtheweekendandonstatutoryholidays.
ConsideringthefactthatLianYidoesnotpaythelegalminimumwage,theovertimecompensationatthiscompanyisalsolowerthanrequired.
Instead,LianYiprovidesitsworkerswithaseriesofsubsidies,suchasRMB6(0.
63)perdayforfoodandbonusesofRMB40–100permonthforworkerswithspecificskills.
53AopenandWistroninZhongshanandFoxconninShenzenCityofferminimumwageprotectionforproductionlineworkersduringthelowseason.
AopenandWistronprovideafoodsubsidyofRMB225(23.
50)amonthtobeusedbyworkerstosustaintheirsurvival.
Inspiteofthiscontribution,workerscomplainthatitisnotenoughwhenworkisscarceinthelowseason.
WorkersatLianYicomplainthattheyreceiveanunsustainablewageofonlyRMB200–300(20.
90-31.
30)amonthinthelowseason.
54Inallcases,bothinthePhilippinesandinChina,wagesarehardlyenoughtoprovideanadequatestandardofliving,"withaviewtoprogressiveimprovement",asstatedintheUNNormsontheresponsibilitiesoftransnationalcorporationsandotherbusinessenterpriseswithregardtohumanrights.
55ILOConventions26and131alsorefertotherightofworkerstoalivingwage.
3.
5.
HealthandsafetyissuesAconsiderablenumberoftheworkersatWistronInfocomminthePhilippineshastowork12hoursaday.
Thisdeprivesthemofnecessaryrest.
WistronInfocommkeepsathree-bedroomclinicinsidethepremises.
Intheclinic,full-timedoctorsandnursesandadentistoncall24hoursadaylookafterthehealthneedsofthecompany'sworkforce.
Incompliancewithnationallaw,WistronInfocommgrantsworkersamonthofpaidsickleaveeveryyear.
Forseriouscases,thecompanygrantspaidextendedmedicalleaves.
56InChina,exposuretochemicaldustandweldingsmokeisacommonproblemforassemblyworkersinallfactoriesresearched.
WorkersattheSurfaceMountTechnology(SMT)57sectionatAopenin53M.
Wong,TheICThardwaresectorinChinaandcorporatesocialresponsibilityissues:withcasestudiesonthesupplychainofFujitsu-SiemensComputersandAcerInc.
(HongKong:LabourActionChina,2005),p.
14.
54Ibid.
55Cf.
UNwebsite,Normsontheresponsibilitiesoftransnationalcorporationsandotherbusinessenterpriseswithregardtohumanrights,26August2003,(31October2005),chapterD.
RightsofWorkers,§8.
56PhilippineResourceCentre–Manila&SOMO,CorporateSocialResponsibilityBehaviourofmultinationalcorporationsintheglobalinformationandcommunicationtechnologysupplychaininthePhilippines(Manila:April2005),p.
45.
57Surfacemounttechnology(SMT)isamethodforconstructingelectroniccircuitsinwhichthecomponentsaremounteddirectlyontothesurfaceofprintedcircuitboards(PCBs).
ElectronicdevicessomadearecalledAcerIncorporated–companyprofile29ZhongshanCityhavetoputachemicalcoatingonCPUboardsbeforeautomaticassembly.
Duetopoorventilation,theysufferfromskinallergyandrespirationproblems.
58Inaddition,theysufferfromthenoiseproducedbytheautomaticassemblymachines.
TheproblemofexposuretochemicalsisalsofoundatthecolourcoatingdepartmentatLianYiinZhongshan.
Workerstherehavetoworkinair-conditionedroomswithpoorventilationandcomplainaboutdizziness,feelingweakandlossofappetite.
Aftertenhoursofwork,theyfrequentlyfeeltheurgetovomit.
WorkersatthetrimmingdepartmentofLianYiarealsoexposedtochemicals.
Theirworkistoflattenplasticboardswithaheatpress.
Theyreportsimilarproblems,suchasfeelingdizzyandhavingskinallergies.
59EyeirritationanddeteriorationofeyesightisanothercommonhealthproblemintheCPUassemblyandtestingprocess.
WorkerswitheyeproblemsatAopenaretransferredtoanotherdepartmentafterhavingworkedataparticulardepartmentforoneyear.
Innoneofthefourfactoriesresearchedareregularandspecificbodychecksforoccupationaldiseasesprovided.
60AsattestedbythefindingsoftheHKCIC,companiesinAcer'ssupplychaininChinafailtoguaranteehealthyandsafeworkingconditionstotheirworkers,inaccordancewithILOconvention115.
3.
6.
FreedomofassociationandtherighttocollectivebargainingUnionorganizersinthePhilippinesandallworkersinterviewedatWistronInfocommassertthatthereisnounioninthecompany.
Companyofficialsstatethattheyrespecttherightofworkerstoformtheirunion.
Unionorganizers,however,claimthattheirattemptstoorganizeaunioninthecompanywereopposedbyofficials.
Intheirinitialcontactswiththecompany,companyofficialsaskedthemtodesistfromfurtherorganizingactivities.
61ThisindicatesthatthereisnofreedomofassociationatWistronInfocomm,whichconstitutesaviolationofILOconventions87,98and135.
InChina,thereisonlyone,state-controlledunion.
TheAllChinaFederationofTradeUnions(ACFTU)istheonlytradeunionrecognisedinthecountry.
Itexercisesalegalandheavily-protectedmonopolyoverallsubsidiaryunionorganisationsandtradeunionactivities.
ItremainsunderthecontroloftheCommunistParty,whichappointsitsofficials.
Thismeansthat,bylaw,thereisnopossibilityofformingtrulyindependentunionsinChina,whichcompromisesworkers'freedomofassociation.
62Therefore,workerscannotasserttheirrightsthrougharepresentativeorganisation.
surface-mountdevicesorSMDs.
Intheindustryithaslargelyreplacedthepreviousconstructionmethodoffittingcomponentswithwireleadsintoholesinthecircuitboard(alsocalledthrough-holetechnology).
58M.
Wong,TheICThardwaresectorinChinaandcorporatesocialresponsibilityissues:withcasestudiesonthesupplychainofFujitsu-SiemensComputersandAcerInc.
(HongKong:LabourActionChina,2005),p.
15.
59Ibid.
60Ibid.
,p.
16.
61PhilippineResourceCentre–Manila&SOMO,CorporateSocialResponsibilityBehaviourofmultinationalcorporationsintheglobalinformationandcommunicationtechnologysupplychaininthePhilippines(Manila:April2005),p.
42.
62FairLabourAssociation,AnnualPublicReport,"FreedomofAssociationinChina",2004(5December2005).
AcerIncorporated–companyprofile303.
7.
Women'srightsAbout75to80percentoftheworkersatWistronInfocomminthePhilippinesarewomen.
Theyhavetoworkovernight,eventhoughthisisnotallowedbynationallaw.
ThePhilippineLabourCodestates:"Nowoman,regardlessofage,shallbeemployedorpermittedorsufferedtowork,withorwithoutcompensation:paragraph(a)–Inanyindustrialundertakingorbranchthereofbetweenteno'clockatnightandsixo'clockinthemorningofthefollowingday.
"63Exemptionscanbemadeifthenatureoftheworkrequires"themanualskillanddexterity"ofwomenworkersandthesamecannotbeperformedwithequalefficiencybymaleworkers.
64ItisunlikelythattheworkatWistronInfocommcannotbecarriedoutwithequalefficiencybymaleworkers.
63LabourCodeofthePhilippines,BookThree,conditionsofemployment,TitleIII,workingconditionsforspecialgroupsofemployees,chapterI,employmentofwomen,art.
130,nodate,(15November2005).
64Ibid.
,paragraph(e).
AcerIncorporated–companyprofile314.
SummaryoffindingsWithregardtoAcer'spoliciesonCorporateSocialResponsibility(CSR),oneeasilynotesthatthereisanenormousasymmetrybetweenAcer'spoliciesconcerningtheenvironmentandthoseconcerningsocialconditions.
Acerhasnocorporatecodeofconduct,nordoesthecompanyspecifyprinciplesregardingtherightsoftheworkersinitssupplychain.
Initscorporateenvironmentalreport2005,AcerstatesthatitlikenstherelationshipswithinthesupplychaintothoseofacommunityandthatAcermakesnodistinctionbetweenitselfanditssuppliers.
65Ifthisistrue,Acershouldtakeresponsibilityforthelabourissues(mentionedinchapter3)initssupplychainandendeavourtoimprovetheharshworkingconditionsinsupplyingfactoriesinChinaandthePhilippines.
ThefindingsoffieldresearchprojectsundertakeninthePhilippinesandChinarevealseverallabourissuesinthesupplychainofAcerInc.
inthePhilippinesandChina.
ResearchwascarriedoutatonesupplierinthePhilippinesandfoursuppliersinChina.
Seriousproblemswereidentifiedatallfivesuppliers.
ExcessiveworkinghoursDuetodemandsforhighproductionlevelsduringthepeakseasonandflexibility,workersatcompaniesinAcer'ssupplychainoftenworkexcessively.
AtWistronInfocomm,inthePhilippines,aconsiderablenumberoftheworkershastowork72hoursaweek.
ThecompanyfailstocomplywiththePhilippineLabourCode,whichstatesthatthenormalhoursofanyemployeeshallnotexceedeighthoursaday.
InChina,thesituationseemstobeevenworse.
AtFoxconninShenzhenCity,workerscomplainthattheyhavenothadasingleday-offformonths.
Astonishingly,FoxconndoesnotevenabidebythelooseChineselabourlaw,whichrequiresthatworkersshouldhaveatleastoneday-offperweek.
FoxconninShenzhenCityalsoproducesforotherOEMssuchasDell,HP,Apple,Lenovo,Sony,Philips(seefootnote42inthisreport)andNokia.
66WagesandcompensationforovertimeworkSincemostworkersatthecompaniesresearcheddoovertime,compensationshouldbepaid.
AtWistronInfocomminthePhilippines,remunerationsforovertimearenotpaidinaccordancewiththePhilippineLabourCode,asworkersdonotreceiveadditionalcompensationforovertime.
InChina,LianYi,asupplierofAcerInc.
inZhongshanCity,paysdailywagesunderthelegalminimumwageofRMB21(2,19)aday.
Theovertimecompensationatthiscompanyisalsolowerthanrequiredbylaw.
Althoughwagesintheelectronicssectorarerelativelyhighcomparedtoothersectors,itshouldbestressedthatthewagesofmostworkersatthecompaniesresearchedareinsufficienttocoverexpensesfortofood,letalonerent,transport,clothingandeducation.
NeitherinthePhilippinesnorinChinaarewageshighenoughtoprovideanadequatestandardofliving.
HealthandsafetyWorkersintheelectronicssectoroftenhavetoworkwithhazardousandtoxicmaterialsandsubstanceswithoutproperprotectionorhealthandsafetymeasures.
WorkersatthecompaniesresearchedinChinaareexposedtochemicaldustandweldingsmoke.
Otherreportedhealthproblemsareskinallergies,respirationproblems,noisehazards,dizziness,lossofappetiteandnausea.
Theseproblemsaremainlyprovokedbythelackofprotectionforworkersanddefectiveventilationinworkplaces.
Eyeirritationanddeteriorationofeyesightisanothercommonhealth65AcerInc.
,AcerCorporateEnvironmentalReport2005(2005),p.
30.
66M.
Wong,TheICThardwaresectorinChinaandcorporatesocialresponsibilityissues:withcasestudiesonthesupplychainofFujitsu-SiemensComputersandAcerInc.
(HongKong:LabourActionChina,2005).
AcerIncorporated–companyprofile32problemattheChinesecompanies.
InnoneofthefourfactoriesresearchedinChinaarespecificbodychecksforoccupationaldiseasesprovidedonaregularbasis.
FreedomofassociationandtherighttocollectivebargainingAtWistronInfocomminthePhilippines,officialsthwartattemptstoorganiseaunioninthecompanybyintimidatingworkers.
InChina,bylawthereisnopossibilityofformingtrulyindependentunions,whichcompromisesworkers'freedomofassociation.
Forthatreason,therearenoindependentunionsinthecompaniesresearchedinChina.
OtherissuesFemaleworkersatWistronInfocomminthePhilippineshavetoworkovernight,whichisnotallowedaccordingtothePhilippineLabourCode.
AcerIncorporated–companyprofile33Annex1:StructureoftheWistronsupplychaininthePhilippinesSource:WistronInfocomm(Phils.
)FinancialStatement;AcerComputersPhils.
Inc.
FinancialStatement;ComputerWeekly,April12,2004,andinterviewwithWistron'smanagement.