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

Samsung Electronics Co said in statement on Monday that it would inspect 250 Chinese companies which make products for the South Korean firm to ensure no labour laws are broken after a US-based group accused one of its suppliers of using child labour.

Samsung said its probe uncovered what it alleged to be "inadequate management and potentially unsafe practices" at HEG. China Labour Watch and Samsung's auditors claimed plant employees were fined if they were late or sick. The South Korean team added that, in its opinion, the factory's workers were doing illegal amounts of overtime.

"Samsung has demanded that HEG immediately improve its working conditions," the chaebol said. "We have formally notified the company that it must comply with all applicable labor laws and Samsung’s labor and employment right policies."

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

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.