Dyson has terminated its relationship with supplier ATA IMS Bhd following an audit of the Malaysian company's labour practices and whistleblower allegations, the firm, known for its high-tech hoovers, told Reuters.
ATA, which the United States is already investigating allegations of forced labour, did not immediately comment. It had previously denied such allegations.
Shares in ATA, which makes parts for Dyson hoovers and air cleaners, fell 30% to its lowest level since April 2020 following a Reuters report. According to ATA, Dyson accounts for almost 80% of its revenue.
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The company's termination is also a major blow to Malaysia, a key electronics manufacturing hub, which has come under criticism this year for exploiting foreigners who make up a large part of its factory workforce.
Dyson, the private company of British billionaire James Dyson, said it had received the results of an audit of working conditions at ATA in early October. It said it learned of the whistleblower's allegations at the ATA factory in September and instructed a law firm to investigate the allegations.
"Despite intensive engagement over the past six weeks, we have not seen sufficient progress and have already removed some production lines," Dyson, who is headquartered in Singapore, said in a statement to Reuters. "We ended our relationship with six months' notice of contract. We hope this will give ATA an incentive to improve and leave in an orderly manner for the benefit of the workers they employ." In May, ATA denied allegations of forced labour at its factories after a prominent human rights activist said US authorities were going to scrutinise the company's practices.
Activist Andy Hall shared a letter sent to him by the US Customs and Border Protection (CBP) stating that it had agreed to investigate ATA's unit after noting complaints it had received from workers.
The CBP did not comment on the investigation.
CBP has banned six Malaysian firms over the past two years from selling their products in the US after finding evidence of forced labour.
In July, the US State Department listed Malaysia among more than a dozen countries, including China and North Korea, saying it had made no progress in eradicating worker trafficking.
Most migrant workers in Malaysia come from Bangladesh and Nepal and work in factories, plantations and construction sites.
ATA reported record revenues and profits for the financial year ending March 2021, as restrictions caused by COVID-19 boosted demand for appliances such as the Dyson hoover.