Apple’s cost-cutting strategy draws ire of Chinese supply chain

By

Larry Kudlow
Tim Cook meeting an iPhone manufacturer in China.
Photo: Apple

With iPhone demand slowing down, one of the ways in which Apple is hoping to increase earnings is by pushing its suppliers to work for less money — but it doesn’t seem to be going entirely to plan.

According to a new report, Apple is meeting resistance from manufacturers in its Taiwan-based supply chain as it requests that they lower quotes for iPhone 7 components by as much as 20 percent.

Apple’s cost-cutting tactic — aimed at slicing as much as 20 percent off components for the iPhone 7, according to Digitimes — most likely wouldn’t be well-received at any time. But it’s reportedly going down even worse at the moment, since Apple is said to be placing order volumes that are around 30 percent lower than last year’s.

Cupertino’s ability to drive down prices is the result of a shift in strategy over the past few years, in which it expanded the number of companies it does business with to mitigate against manufacturing problems and gain leverage in terms of its orders.

Interestingly, Apple appears to not have asked TSMC and camera module maker Largan Precision to reduce their quotes, since it’s tough for Apple to find alternative companies able to deliver these components.

Foxconn has previously warned other manufacturers about the dangers of becoming too reliant on Apple without diversifying.

Source: Digitimes