Samsung also said its audit into working conditions at an HEG Electronics facility in Huizhou in southern China found no under-aged workers. New York-based China Labor Watch said last month seven children younger than 16 were working in the factory that makes phones and DVD players for Samsung.

But Samsung said the audit identified several instances of inadequate management and potentially unsafe practices such as overtime beyond local regulations, improper safety measures and a system of fines for tardiness or absences.

"Samsung has demanded that HEG immediately improve its working conditions... If HEG fails to meet Samsung's zero tolerance policy on child labor, the contract will be immediately severed," Samsung said in a statement.

It said it would conduct inspections for all 105 supplier companies in China which produce goods solely for Samsung by the end of September, and review, via documentation, by the end of the year another 144 suppliers that makes products for it and other firms.

"If supplier companies are found to be in violation of our policies and corrective actions not taken, Samsung will terminate its contract with those supplier companies," Samsung said.

The move follows allegations earlier this year that Apple Inc's products were assembled in China amid multiple violations of labor law, including extreme hours.

Apple and its main contract manufacturer Foxconn Technology Group, whose subsidiary Hon Hai Precision Industry assembles Apple devices in China, later agreed to tackle violations of conditions among the 1.2 million workers assembling iPhones and iPads. That landmark decision could change the way Western companies do business in China.

(Reporting by Miyoung Kim; Editing by Ron Popeski)

• A Permanent Economic Emergency