During the last several years, your iPhone’s and iPad’s have been assembled and manufactured by Foxconn, a company that has been afflicted by reports of poor labor conditions. Apple and Foxconn have had a strong relationship in the past; with Steve Jobs and Terry Gou, Foxconn’s CEO, being close and Tim Cook also knowing him before starting at Apple. Due to this developed relationship, and being a firm that is constantly in the spot light, Apple has experienced back lash from activists trying to bring the labor rights issue into the public eye.
However, the Wall Street Journal recently published an article highlighting Apple’s change of heart. Pegatron Corporation will take the reins from Foxconn and become the primary assembler of the iPhone that is expected to launch later this year. If this is in fact because of the negative publicity that Apple has been a target of, one can only speculate. In January 2012 though, it is worth noting that “Apple became the first technology company admitted to the Fair Labor Association.” Apple will still contract with both firms to assemble products, but it is a move that could help mitigate the flack that Apple has received regarding labor rights.
Conversely, it could be a move to simply improve their supply chain. Although it is true the fewer assemblers lead to better, stronger relationships, relying on several would increase the competition between assemblers and possibly reduce Apple’s costs. Additionally, greater diversification at this stage in the supply chain would reduce the risk that comes with relying on one or a few companies. For example, Foxconn experienced manufacturing issues last year that resulted in scratches on the casings of the iPhone5. Depending on several firms to assemble your products reduces the number of those with defects; thus, containing the issue to a small number of products.
Regardless of the reasoning behind Apple’s switch to Pegatron, it is obvious that it will have positive effects on the company. Shrinking their business with Foxconn will help separate them from the negative publicity regarding labor conditions, while diversifying their supply chain will help reduce risk and costs. But, could this hurt Apple? Could separating from Foxconn, a global leader in its business, to a smaller company hurt their supply chain in the long term?
4 thoughts on “Betrayal: Apple’s Ditching Long-Term iPhone Assembler”
This is an interesting blog post after yesterday’s lecture in regards to supply chain and this example in specific. I definitely dont think that this will hurt Apple. In the video shown in class they mentioned how one of the reasons for also working with Pegratron is due to the expansion of the company as more and more different product are being manufactured. I also think in a way Apple is doing this to maybe in the long run work with Pegraton only but due to it’s relationship with Foxconn it would not be to their benefit to cut them off completely right away.
Great article this rally go along with we are talking about in class. This is a good article. i love Apple but i would have to agree with the the comment above, Apple should keep doing business with Foxconn. Foxconn has done good for Apple so far why change that. Apply just need to come out with there phone soon. Hopefully apple will be come up on top.
Getting away from Foxconn is a good move by Apple. They’re losing marketshare to companies like Samsung, and need to do everything they can to bounce back. While I’m not sure that changing their supplier will make a huge impact on this, I think it’s a step in the right direction. The fact of the matter is, if Apple wants to keep their customers from jumping ship to Android, they’re going to have to make some serious innovations in the next device that its competitors don’t already have…
What I find interesting about this is less the “why” behind Apple’s move – either for the publicity and/or the change to their supply chain, but rather, that this is what we are talking about. It seems as though the conversations about Apple have shifted from the “new product” to more traditional business questions since Steve Jobs passed away. Whether this is a coincidence, or because of the change in leadership, I’m not sure. But, it does imply a different future for Apple, one where they may not be as industry-leading.