Apple is reportedly teaming up with new suppliers to boost production of the iPhone 5c and the iPad mini to meet strong consumer demand, The Wall Street Journal reports.
Wistron Corp., a manufacturer based in Taiwan that already produces smartphones for BlackBerry and Nokia, will be tasked with assembling the iPhone 5c; while Compal Communications, which currently works with Acer, Dell, Lenovo, and others, will manufacturer the iPad mini.
Foxconn, Apple’s biggest partner, will focus on production of the iPhone 5s, which is still is short supply more than a month after making its public debut. But supply chain sources claim that Apple may be looking to loosen its ties with Foxconn for various reasons.
Firstly, there are the allegations surrounding its poor labor practices and worker suicides, which is “creating a headache for Apple,” they say; while high return rates of defective iPhone 5 units have caused tension between the two companies over which should be liable for repair costs.
Foxconn has also refused to reduce its prices for Apple, despite the fact that the Cupertino company provides around 40 percent of its revenues.
“Hon Hai [which owns Foxconn] Chairman Terry Gou is not willing to cut contract prices substantially to get more orders from Apple,” an unnamed executive told The Journal. “Hon Hai is also aware of the risk of building gigantic production capacity for a single customer so it is adopting a more cautious stance on expanding production.”
But Foxconn knows that Apple can’t call of the relationship too quickly.
“Apple has raised this quarter’s iPhone 5s orders from Hon Hai as demand has been stronger than expected,” the Foxconn executive added. “But it takes time to boost production capacity and Apple can’t find other assemblers to increase production to meet demand immediately.”
Apple may want to take its business to other suppliers, then, but with such demand for its latest products, switching completely isn’t that easy. Experts say that its production processes are so complex, that it currently makes sense for it to add new suppliers and broaden its supply chain instead.
Source: The Wall Street Journal