Apple’s partnership with Foxconn, its largest manufacturing partner, is “eroding” as a result of the supposedly shady tactics that Foxconn is using in an effort to boost profits, according to a new report.
It is claimed that Foxconn has exaggerated hiring counts, used Apple equipment to produce orders for other companies, and cut corners on component and product testing.
Apple’s relationship with Foxconn spans several decades, and has proven incredibly lucrative for both. But while Apple has risen to become one of the richest companies with profit margins that sit at around 40%, Foxconn’s have remained at single digits.
This has resulted in Foxconn allegedly using all manner of tricks to squeeze more money out of Apple, reports The Information. Apple is said to have stepped up its monitoring of the Taiwanese company, officially known as Hon Hai Precision Industry, in response.
Apple’s relationship with Foxconn on the rocks
Citing Foxconn managers and former Apple employees, the report reveals that Foxconn has “tried a variety of tactics to boost its profits” while fulfilling orders for Apple. And this behavior is said to date back many years.
In 2015, Foxconn allegedly used Apple-owned equipment to assemble devices for Huawei, a competitor in the mobile industry. It is also said to have repeatedly charged Apple for workers it never hired, and taken shortcuts on quality control.
On the iPhone production line, for example, unfinished units are supposed to be scrapped if loose metal or screws are detected inside them. But instead of scrapping those units, Foxconn workers reportedly opened them up to remove the debris themselves.
While building the 12-inch MacBook before its release, Foxconn allegedly gave Google workers a tour of its production line, allowing them an early look at the new ultraportable. When Apple requested visitor logs, Foxconn reportedly refused to hand them over.
Apple steps up monitoring
Foxconn has also acquired other Apple component suppliers, and taken to manufacturing some Apple components itself so that it can replace imports and hold onto the savings.
Sources say Apple has long been wise to this behavior. Steps taken to try to prevent it include installing tracking tags on Apple-owned manufacturing equipment, and increasing its monitoring of Foxconn employees.
The ongoing battle is said to have put great strain on Apple’s relationship with Foxconn. And it comes at a time when Apple no longer relies on Foxconn as heavily as it once did, with other partners like Pegatron, Wistron, and Quanta also involved in manufacturing.
Apple still needs Foxconn for now, but experts say that Foxconn needs Apple a lot more. Without the iPhone-maker’s business — and there’s a whole lot of it — Foxconn would likely be in serious trouble.