Taiwan Component Makers Refuse to Lower Quotes For iPhone 7 Parts

[MacRumors]

Apple's demand that overseas suppliers lower their quotes for iPhone 7 parts and components has been met with resistance from makers, according to Taiwanese website DigiTimes.

Apple is said to have asked downstream part and component suppliers, excluding TSMC and Largan Precision, to reduce their quotes for iPhone 7 devices by as much as 20 percent, even though order volumes for new phones are reportedly 30 percent lower than those placed a year earlier.

Apple is reportedly using the rising handset supply chain in China to force Taiwan-based companies to make their quotes more competitive. However, DigiTimes suggests Apple's policy of squeezing out profits from Taiwan suppliers "makes no sense" because "the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels".

Whether or not quality is an issue, major downstream suppliers including Advanced Semiconductor Engineering (ASE) and associated companies under the Foxconn Group have told Apple that they cannot accept orders without reasonable profits.

Apple reportedly chose to exclude TSMC and Largan from its demands because the company is finding it hard to find alternatives that offer foundry services or high-end camera modules, respectively.

Meanwhile, ASE has seen its business grow steadily in recent years and optimized its advanced packaging technology by expanding its client base through a merger agreement with fellow company Siliconware Precision Industries (SPIL).

Foxconn Group, for its part, has acquired Japan-based Sharp, which will reportedly keep its production facilities busy, meaning there's no inclination for the electronic manufacturing subcontractor to sacrifice its margins to work for Apple.

Apple accounted for a 17.2 percent share of the global smartphone market in terms of shipment volume, but took as high as 91 percent of the industry's profits in 2015, according to data compiled by Canaccord Genuity.

Apple is expected to reveal the iPhone 7 at an event on September 7, and open up pre-orders on September 9. The specific launch date remains ambiguous, with both September 16 and September 23 mooted as potential options.

Article Link: Taiwan Component Makers Refuse to Lower Quotes For iPhone 7 Parts

 

[S.B.G]

Apple is said to have asked downstream part and component suppliers, excluding TSMC and Largan Precision, to reduce their quotes for iPhone 7 devices by as much as 20 percent...

...major downstream suppliers including Advanced Semiconductor Engineering (ASE) and associated companies under the Foxconn Group have told Apple that they cannot accept orders without reasonable profits.

Probably because Apple wants to increase their profit margins for their next quarterly earnings call so it won't appear that their numbers will be down as much again.

 

[Stella]

Good on them.

Apple want lower cost components in order to increase / retain their profit margin.

The consumer certainly won't benefit in the way of a lower priced phone.

 

[Avieshek]

Apple's policy of squeezing out profits from Taiwan suppliers "makes no sense" because "the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels".

Huh, Apple.. "the definition of quality and details".
to
Apple: "The Tortoise and the Hare" (Search)

 

[Nozuka]

Don't Cook it till it's too dry.

 

[Rogifan]

Well if Digitimes says it...

 

[Rocketman]

I think suppliers have a responsibility to their own employees and shareholders. Apple might have a lower market share as a result of their premium quality, premium margins, and premium services. So long as they maintain a recurring renewal of their customer base and increase their customer base, it's okay if they do not own the entire market. Some folks are perfectly willing to settle for less to gain access at all.

A fraction of those folks will come to the premium side over time. It's okay.

 

[Fin745]

You seem to be under the illusion that lower priced components would mean cheaper phones for consumers. Apple will not pass on the cost savings. But either way people buy Apple because they like the products not because of price.

And you seem to be under the illusion that higher priced components would mean an unchanged price for consumers and you're correct most people buy Apple for Apple, but I would argue up to a point.


If the costs of phones were to go up substantially because Apple on shored their productions most people even if explained why wouldn't put their money where their principals are and refuse to pay the higher price and since you brought it up if Apples price of components were to go down the last thing I would want them to do is "Pass that saves on to you" most good and long lasting companies bank roll that extra profit so if the price does go back up they aren't caught offguard.

 

[fermat-au]

volumes for new phones are reportedly 30 percent lower than those placed a year earlier.

So Apple expects the iPhone 7 to sell 30% less than the 6s

 

[blackcrayon]

Probably because Apple wants to increase their profit margins for their next quarterly earnings call so it won't appear that their numbers will be down as much again.

I'm sure they want to increase their profit margins so they get more profit. You make it sound like they couldn't care less except for the number they have to read during the earnings call

 

[Dave245]

If this is true, I'm guessing Apple will increase the price of the iPhone 7 in order to make up the difference, adding to the fact that they plan to remove the 16GB version from the line up and add a 256GB storage option, I'm guessing the iPhone 7 will start at a higher price, £50 maybe? and around £100 for the iPhone 7 Plus?

 

[maflynn]

robably because Apple wants to increase their profit margins for their next quarterly earnings call so it won't appear that their numbers will be down as much again.

I'd say maybe maintain profit margins in light of the falling sales that has been occurring.

The risk of going elsewhere for components that are less expensive, is that you get what you pay for, i.e., inferior components that in turn make an inferior product

 

[Porco]

Apple are rumoured to have said "You want HOW MUCH for 3.5mm headphone jack sockets?!"

 

[blackcrayon]

If this is true, I'm guessing Apple will increase the price of the iPhone 7 in order to make up the difference, adding to the fact that they plan to remove the 16GB version from the line up and add a 256GB storage option, I'm guessing the iPhone 7 will start at a higher price, £50 maybe? and around £100 for the iPhone 7 Plus?

Why would you assume that? Unless the parts of the iPhone 7 are costing Apple significantly more than the 6s, I don't see the price changing. Hell, this "rumor" could be an indicator (however unlikely) that Apple wants to lower the price slightly, or as you said, lose a little (compared to before) on Flash storage. If demands is already going to be lower, I don't see them raising the price over the 6s.

 

[radiology]

If suppliers lowered their margins, the only people loosing would be the factory workers who already make very little money. Apple knows this. This to me is as close as it gets to slavery. Apple = hypocrite.

 

[Dave245]

Why would you assume that? Unless the parts of the iPhone 7 are costing Apple significantly more than the 6s, I don't see the price changing. Hell, this "rumor" could be an indicator (however unlikely) that Apple wants to lower the price slightly, or as you said, lose a little (compared to before) on Flash storage. If demands is already going to be lower, I don't see them raising the price over the 6s.

Apple usually increase the price on numbered model's, i could be wrong and i hope i am. Also wouldn't the dual lens camera for the 7 Plus cost more? hence another reason for a price hike. Apple have always charged more for storage so i can't see them dropping the price, they like their profits to much.

 

[blackcrayon]

Apple usually increase the price on numbered model's, i could be wrong and i hope i am. Also wouldn't the dual lens camera for the 7 Plus cost more? hence another reason for a price hike. Apple have always charged more for storage so i can't see them dropping the price, they like their profits to much.

I'm pretty sure they haven't increased the price often, and definitely not every time they upped the model #, though at times they've introduced more expensive models (with more storage), or new models like the plus which are more expensive (and also have introduced cheaper models like the 5c and SE).

If suppliers lowered their margins, the only people loosing would be the factory workers who already make very little money. Apple knows this. This to me is as close as it gets to slavery. Apple = hypocrite.

Ahh right, if true it would be Apple's fault, and not the execs running the supplier.

 

[mbh]

Probably because Apple wants to increase their profit margins for their next quarterly earnings call so it won't appear that their numbers will be down as much again.

It's almost as if Apple is functioning as a business or something. How crazy is that?

 

[radiology]

It's almost as if Apple is functioning as a business or something. How crazy is that?

Don't forget that businesses have social responsibility (at least that's what Apple's CEO claims).

 

[S.B.G]

I'm sure they want to increase their profit margins so they get more profit. You make it sound like they couldn't care less except for the number they have to read during the earnings call

I didn't intend on making it sound that way, however, I am sure that Apple is concerned about the bottom line as it relates to their shareholders and this is just one avenue for them to look at generating higher margins.

I'd say maybe maintain profit margins in light of the falling sales that has been occurring.

The risk of going elsewhere for components that are less expensive, is that you get what you pay for, i.e., inferior components that in turn make an inferior product

That's always something to consider and I should hope Apple is ensuring the quality of production parts don't suffer as they attempt to get more or equal for less money.

 

[FelixDerKater]

The game is clearly going to the Android side, so it's time to play the margins game even harder.

 

[samcraig]

So Apple goes to these manufacturers and says - we're ordering less, so we want a greater volume discount. On what planet does that work? Apple's profit margins are of no concern to these companies. They are businesses just like Apple. If one is to take Apple's side because they are a stockholder, I get it. It never hurts to ask or try to negotiate. But you can't fault these companies for looking out for their best interests too.

 

[MacSince1985]

Probably because Apple wants to increase their profit margins for their next quarterly earnings call so it won't appear that their numbers will be down as much again.

Typical business motto "buy low, sell high". It applies to Apple as well as the suppliers. Not much new there except that the suppliers seem less likely to bend to Apple's will.

 

[2457282]

Apple are rumoured to have said "You want HOW MUCH for 3.5mm headphone jack sockets?!"

So now we know why Apple has removed the jack. LOL

If these suppliers to cooperate soon, we may be back to dumb phones.

oh yes here it is ==> /s

 

[Val-kyrie]

Apple is reportedly using the rising handset supply chain in China to force Taiwan-based companies to make their quotes more competitive. However, DigiTimes suggests Apple's policy of squeezing out profits from Taiwan suppliers "makes no sense" because "the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels".

This seems to confirm the criticism that Apple really does care less about quality than profit margins. Unfortunately, I think this will be Cook's legacy on Apple and perhaps the beginning of a Gilded Age at Apple.

If the costs of phones were to go up substantially because Apple on shored their productions most people even if explained why wouldn't put their money where their principals are and refuse to pay the higher price and since you brought it up if Apples price of components were to go down the last thing I would want them to do is "Pass that saves on to you" most good and long lasting companies bank roll that extra profit so if the price does go back up they aren't caught offguard.

Actually, IIRC, when it was announced that the new Mac Pro was being built in the USA, Cook gave an interview in which he stated that making Apple products in the US only increased costs marginally (~$50 per product). Cook claimed the real hindrance to manufacturing Apple products in the US was a shortage of workers in the labor force, the unwillingness of workers to work 7 days a week (How shocking!), and the fact that the US lacked the infrastructure needed to transport the materials and components in quantity to a US manufacturing facility.

While I believe this is all true, I also believe the bean counters did not like the fact that Apple might lose $50 in profit per device.

Personally, I think that the US government should create the necessary infrastructure for large scale manufacturing and that Apple should bring back manufacturing (and jobs) to the US even if it costs them some profit in the short term. Of course, this requires both the US government and Apple to act unselfishly.

Boosting the US economy through job creation might even result in boosted sales for Apple and it would prevent Chinese companies from receiving the blueprints for Apple's products.