Dyson has ended its contract with supplier ATA IMS Bhd, the company informed Reuters, following an examination of the Malaysian company's labor policies and allegations made by a whistleblower.
ATA, which is already under investigation by the U.S. government over allegations of forced labor, did not immediately respond to a request for comment. Previously, it has refuted such charges.
The British company is well-known for its technologically advanced vacuum cleaners. ATA manufactures replacement components for Dyson vacuum cleaners and air purifiers.
Following the news, shares of Malaysia's ATA IMS Bhd fell 30% to their lowest level in six months on Thursday. According to ATA, Dyson generates about 80% of its revenue.
The termination is also a big setback for Malaysia, a key electronics manufacturing powerhouse that has been under fire this year for allegedly exploiting foreign workers who make up a sizable portion of its factory labor.
Dyson, which is privately held by British billionaire James Dyson, stated in early October that it received the results of an audit of working conditions at ATA. It stated that it learnt of the allegations in September from a whistleblower at an ATA manufacturer and commissioned a probe by a law firm.
"Despite intensive engagement over the last six weeks, we have not seen sufficient progress and have already shut down some production lines," Dyson, based in Singapore, told Reuters in a statement.
"We have now ended our relationship with a contractual notice period of six months. We hope that this provides ATA with an incentive to reform and facilitates an orderly exit in the best interests of the workers they employ," Dyson explained.
ATA refuted charges of forced labor at its factories in May, following a statement by a prominent rights activist that the company's work policies will be scrutinized by U.S. authorities.
Andy Hall, the activist, posted a letter from the United States Customs and Border Protection (CBP) alerting him that the agency had agreed to examine an ATA section after he identified issues from workers.
The CBP has prohibited six Malaysian firms from selling their products to the U.S. in the previous two years after discovering evidence of forced labor.
The majority of Malaysia's migrant laborers come from Nepal and Bangladesh and work in plantations, industries and construction sites.
ATA reported record sales and profit for the fiscal year ended March 2021, as demand for home appliances like Dyson's stick vacuum cleaner increased because of COVID-19-induced lockdowns.