Apple switching suppliers to cut production costs

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Apple
You don't get to $1 trillion without knowing a thing or two about saving cash.
Photo: Apple

Apple may have just passed the $1 trillion mark, but it’s still looking for ways to save money. In its efforts to keep manufacturing costs as low as possible, the company is supposedly shifting production for its various devices from Taiwanese suppliers to Chinese ones.

A report from Digitimes says that this is not necessarily new, but rather part of an ongoing strategy shift on Apple’s part in recent years:

“With their excellent manufacturing capabilities, many Taiwan suppliers used to rely on Apple orders to support their revenue increases and outperform China counterparts. But Apple has changed its marketing strategies in recent years and started to introduce more China makers into its supply chains, as the US vendor has no longer stuck to top consumer groups for sales of its devices, becoming more concerned about production costs, the sources said.”

The report gives one example of Apple’s shift in manufacturers being Catcher Technology, which has lost out on Apple’s MacBook metal chassis orders to China’s Everwin Precision Technology.

Another company that has lost Apple orders is Taiwan-based battery module maker Simplo Technology, which has been stripped of most of its orders for MacBook and iPhone battery modules in favor of China’s Desay Battery Technology and Sunwoda Electronic.

Not an easy ride

Although scoring Apple orders is a great source of revenue for suppliers, it is not by any means an indicator that you’ll find yourself on the same upwards trajectory as Apple.

A good illustration of this is Foxconn, which is one of Apple’s longest lasting manufacturers. In its recent earnings, Foxconn showed consolidated revenues rising by 17 percent year-on-year to reach a new historical high of $34.43 billion. However, net profits for the quarter fell 2.18 percent on-year to their lowest level in five years.

Earlier this year, it was reported that Apple is putting the squeeze on suppliers even more by introducing new cost-saving measures. These include negotiating its own deals for components like screws, which suppliers were previously able to buy (and mark up) themselves.

Given the current brewing trade war between the U.S. and China — which will involve tariffs on imported components from China — it will be interesting to see if Apple’s strategy changes further.