Broadening the Apple supply chain can boost profit margins

Apple broadens its supply chain to maximize profit margins


Tim Cook meets with members of Apple's manufacturing team. Photo: Apple
Photo: Apple

Apple is reportedly keeping its options open when it comes to selecting manufacturing partners for the iPhone 6 and Apple Watch by broadening the number of companies it contracts work out to.

In other words, those supply-and-demand issues that have hit Apple in recent years shortly after new product releases could soon be a thing of the past.

Apple has reportedly invited Compal Electronics and Wistron to join its supply chain, and is in the process of adjusting the ratio of its orders with existing partners.

The reason for this is obvious: By widening the number of companies it works with, Apple doesn’t run the risk of leaning too heavily on one company and being severely let down if said business fails to provide the necessary components. This is exactly what happened last year with the GT Advanced Technologies debacle, which stopped from Apple using sapphire displays on the iPhone 6 and 6 Plus.

The move also means Apple can continue to maintain its gross margins, since companies that have proven they can deliver will nonetheless be pressured to undercut each other to secure larger percentages of Cupertino’s orders. Ultimately, it’s a reminder of just what manufacturers like Foxconn have always believed: That making yourself too reliant on Apple without diversifying is a bad move.

However, it’s also a positive move for those who want Apple to finally ditch the Samsung albatross. The diversification demonstrates that Tim Cook — with his background in operations — isn’t going to let Apple put all its eggs in one supply-chain basket.

As if to highlight this, a separate report from today claims that AU Optronics is set to sign an agreement with Apple to supply panels for the next-gen iPhone, while Apple is also looking for additional panel suppliers to do the same, as a way of securing shipments. This comes shortly after news that Samsung is set to create a 200-person team dedicated entirely to creating Apple display panels.

Source: Digitimes


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