Workers at Foxconn, which makes Apple's iPod media players, may be given new housing by the end of this year, following claims of "unacceptable" living and working conditions.
Staff are currently stacked three high in bunk beds at 100 to a room, according to press reports on company dormitories and Apple's own auditors.
Taiwan-based Foxconn has paid US$54 million for land in Southern China where it is building improved staff accommodation, newspapers in Taiwan and China reported today.
The site is near to facilities where a Foxconn subsidiary makes the iPod, as well as products for other companies, such as Sony and HP.
Following press reports alleging poor working conditions on the iPod production line, Apple investigated the factories in Shenzhen, which are run by Foxconn's wholly-owned subsidiary, Hong Fu Jin Precision Industry.
"We were not satisfied with the living conditions of three of the off-site leased dorms that we visited," Apple's auditors wrote.
"These buildings were converted by the supplier during a period of rapid growth and have served as interim housing.
"Two of the dormitories, originally built as factories, now contain a large number of beds and lockers in an open space and, from our perspective, felt too impersonal.
"The third contained triple-bunks, which in our opinion did not provide reasonable personal space."
A production line manager told the Daily Mirror earlier this year: "The dorms are really overcrowded. There are too many people for comfort, but they are free. They are single-sex, with more than 100 people in a single large room."
However, the Apple auditors pointed out that, although Foxconn workers are not required to live in the company dormitories, the majority do.
The local planning bureau has authorised up to 134,000 square metres of internal floor space on the new 67,000 square metre site, according to the Shanghai Stock Daily.
This suggests that at least some of the new buildings will have more than three floors. The China Times estimated that accommodation could be divided into units 120 to 160 square metres in size, but did not explain how it arrived at this figure.
Foxconn began work on new dormitories before being visited by Apple's auditors, according to Apple's report on the affair.
The report does not say when the work was started, nor whether it pre-dated the furore over labour practices at the factories.
Foxconn spokesman Ding Qi'an made no mention of the company's Chinese labour problems when questioned by journalists from Taiwan's China Times yesterday.
Instead, he told the newspaper, the impetus for the new accommodation had come from company chairman Terry Guo's decision to promote a "happy and prosperous life" for Chinese staff by providing free private accommodation.
Guo also denied suggestions that the company bought the land as part of an attempt to profit from rapidly rising land prices in China, according to the China Times.
However, he conceded that the rising prices had been a factor in the early purchase of the land.
Foxconn is the trading name of Taiwan-headquartered Hon Hai Precision Industry. The contract electronics manufacturer builds notebook PCs and other consumer electronics products for many well-known brand name vendors, including Apple.
Foxconn also makes Sony's PlayStation 2 console, some HP PCs as well as some products in Apple's iPod series. The company reported revenues of US$28 billion last year.
The firm and its subsidiaries employ some 200,000 staff in China, the vast majority on factory production lines. Some 15 per cent of these staff work on Apple products, according to Apple.
Last month, Hong Fu Jin Precision Industry sued two Chinese journalists who reported on its employees working conditions.
The company sought US$3.8 million in damages from the journalists, a sum equivalent to approximately 800 years' salary for each of them, before dropping the case after negative publicity.
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