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Apple has met resistance from makers in Taiwan’s supply chain to lower their quotes for parts and components for iPhone 7 devices, a move which aims to force Apple to discontinue its established policy of constantly squeezing profits from Taiwan suppliers.
Apple is said to have asked downstream part and component suppliers, excluding Taiwan Semiconductor Manufacturing Company (TSMC) and Largan Precision, to reduce their quotes for iPhone 7 devices by as much as 20% even though order volumes for new phones are reportedly 30% lower than those placed a year earlier.
Major downstream suppliers, notably Advanced Semiconductor Engineering (ASE) and associated companies under the Foxconn Group, have replied Apple that they could not be able to accept orders without reasonable profits at this time.
Apple is leveraging the rising handset supply chain in China to force Taiwan-based companies to reduce their quotes comparable to those offered by China-based suppliers. But it makes no sense for such a requirment since the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels.
Apple appeared to have chosen to by-pass TSMC and Largan and did not require the two companies to reduce their quotes simply because it is difficult for Apple to find alternative sources to replace TSMC or Largan to offer foundry services or high-end camera modules, respectively.
ASE, which has reached a merger agreement with fellow company Siliconware Precision Industries (SPIL), has seen its business growing steadily in recent years optimizing its advanced packaging technology. The planned merger with SPIL will help ASE further expand its client base for sustainable growth.
Foxconn has acquired Japan-based Sharp recently, and orders from Sharp will enable production facilities under the group to hum at high gear for a period of time, and there is no need for the giant EMS to sacrifice its margins to work for Apple.
Apple accounted for a 17.2% share of the global smartphone market in terms of shipment volume, but took as high as 91% of the industry’s profits in 2015, according to data compiled by Canaccord Genuity. It is about time for Apple to amend its purchasing policy.
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