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Apple reportedly looking to Pegatron in supply chain diversification away from Foxconn

post #1 of 33
Thread Starter 
Apple is reported to be bolstering ties with partner supplier Pegatron, while at the same time lessening its reliance on manufacturing monolith Foxconn, which up to now has been responsible for producing a bulk of the Cupertino company's devices.

iphone
Purported shell of low-cost iPhone, which will reportedly be manufactured by Pegatron.


According to people familiar with the shift, Apple is looking to grow its supply chain in light of increasing competition from rival handset makers, and to diversify risk after Foxconn fumbled the iPhone 5 rollout by shipping out units with nicks and scratches, reports The Wall Street Journal.

In addition, Pegatron is likely to offer more attractive production deals as it tries to garner a bigger slice of Apple's substantial consumer electronics business. The publication notes Foxconn's previous advantage of scale has "waned" due to steps taken to fix the factory working conditions, a result of increased scrutiny from labor watchdog groups.

Apple CEO Tim Cook is also said to be a catalyst in the move away from Foxconn. Sources said late Apple cofounder Steve Jobs and Foxconn Chairman Terry Gou had a special relationship as "two leader with a hero complex." Cook still has strong ties to Gou, however, and has known the manufacturing mogul before taking coming to Apple in 1998.

Foxconn, in its growing heft as the world's largest electronics contract company, was also getting more difficult for Apple to control, with incidents such as changing component sourcing without notifying Apple, people familiar with the matter said. At the same time, Foxconn became frustrated with the growing complexity of Apple products, such as the iPhone 5, which is difficult to make in the volumes Apple needed.

The WSJ said Pegatron will be the primary manufacturer of Apple's much rumored low-cost iPhone, though other reports have claimed that Foxconn will be handling a bulk of the initial orders. KGI analyst Ming-Chi Kuo noted in March that Pegatron and Foxconn would almost split production of the low-cost iPhone, while the former would take a bigger share of legacy models like the iPhone 4 and 4S.

Most recently, Pegatron was reported to be readying a massive 40,000-worker hire for the second half of 2013, rekindling rumors that a less expensive iPhone is in the offing.
post #2 of 33

I know Apple's move away from component manufacture has been credited to Tim Cook and this in turn has been credited as one of the key elements to Apples return to profitability, but it seems Apple is now big enough to create a new company dedicated to providing some key components for its devices. No need to be wholly owned, just controlled by Apple. The effort it must take to change supplier must be enormous and very costly.

 

Just thinking aloud here.

post #3 of 33
"Foxconn's previous advantage of scale has "waned" due to steps taken to fix the factory working conditions, a result of increased scrutiny from labor watchdog groups."

I think this statement is just loaded with political and social import.... It is almost implying that Apple is punishing Foxconn for the improved working conditions by taking their business elsewhere. Doesn't sound very Apple-like.

"Foxconn, in its growing heft as the world's largest electronics contract company, was also getting more difficult for Apple to control.... Foxconn became frustrated with the growing complexity of Apple products, such as the iPhone 5"

This I believe! Well Foxconn, there is a phrase along the lines of "Adapt or perish" that's worth keeping in mind.
post #4 of 33

I find it bizarre that Apple hasn't committed to advanced robotic assembly plants yet. Seems to me that would be something that would be clearly in line with their expectations of absolute secrecy and top quality. And the last time they actually operated their own assembly lines? Was it the original (black and white screen) Macintosh? Please make it happen, folks.

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post #5 of 33
A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.
post #6 of 33
Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

The iPhone's ability to do is very limited. 

post #7 of 33
Anyone else wondering if the source for this is Pegatron. What better way to make yourself look better than to be gaining/gaining more of Apple,'s business

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A non tech's thoughts on Apple stuff 

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post #8 of 33
Originally Posted by AppleInsider View Post

Apple is reported to be bolstering ties with partner supplier Pegatron, while at the same time lessening its reliance on manufacturing monolith Foxconn ...

 

Apple: "Hey Foxconn.  We're going to do a deal with Pegatron.  Care to make a counter offer?"

 

Foxconn: "Nope.  You need us too much."

 

Apple: "OK.  We'll talk later.  Guaranteed."

 

[Foxconn's revenues drop due to their other OEM businesses declining: HP and Dell PCs, Sony and Microsoft gaming consoles, and Amazon Kindle devices.  All built by Foxconn.]

 

Foxconn: "OK, OK, Apple.  We'll deal.  We need you after all."

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post #9 of 33
Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

 

Sooooo... why are you reading and commenting on an article that's about a company that's primary line of business is something that is pointless to you?

post #10 of 33

Pattern of American companies overseas:

 

(1) Offshore work to save money

(2) Foreign company observes all your know-how and stabs you in the back

(3) Change to different offshore company

(4) Rinse and repeat

post #11 of 33

Who would have guessed that this is the reason for Foxconn's "worries", and not lack of demand for the best products in the world by a huge margin?

 

Yes, there's sarcasm there.

post #12 of 33
Quote:
Originally Posted by paxman View Post

I know Apple's move away from component manufacture has been credited to Tim Cook and this in turn has been credited as one of the key elements to Apples return to profitability, but it seems Apple is now big enough to create a new company dedicated to providing some key components for its devices. No need to be wholly owned, just controlled by Apple. The effort it must take to change supplier must be enormous and very costly.

 

Just thinking aloud here.

I know from experience that having two suppliers competing for your business keeps them both hungry and their pencils sharp. Also, it's smart to not have all your production in one geographic area and subject to local weather/seismic and political condition.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #13 of 33
Quote:
Originally Posted by SpamSandwich View Post

I find it bizarre that Apple hasn't committed to advanced robotic assembly plants yet. Seems to me that would be something that would be clearly in line with their expectations of absolute secrecy and top quality. And the last time they actually operated their own assembly lines? Was it the original (black and white screen) Macintosh? Please make it happen, folks.

 

I totally agree.  It would seem like a smart move to invest in a couple of production facilities at key points in the supply chain.  I don't think Apple should try to get back too deep into the component game, but especially given the leaks that come out of foxconn it seems to make sense that final product assembly and key design elements could be kept in house.  Robotics plants can be retooled fairly quickly for different/new products, so it would seem like a perfect fit now.  C'mon apple, use some of that $140B to insource some of your production.

 

As an aside Samsung, their biggest competitor, is also a HUGE and profitable component supplier.  These two companies are competing in more and more markets, yet Samsung is Apple's largest supplier.  Insourcing some of those critical components would give them greater control while also helping starve their competitor.

post #14 of 33
Quote:
Originally Posted by SpamSandwich View Post

I find it bizarre that Apple hasn't committed to advanced robotic assembly plants yet. Seems to me that would be something that would be clearly in line with their expectations of absolute secrecy and top quality. And the last time they actually operated their own assembly lines? Was it the original (black and white screen) Macintosh? Please make it happen, folks.

They would be constantly upgrading an retooling the robots at least yearly due to changes, upgrades, new models. Not sure robotics would be economical with the short product lives.

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post #15 of 33
Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

Search engines are your friend. There are multiple sources for such a thing. I got mine from Verizon, but anyone with half a brain can find them most places.

 

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #16 of 33
Quote:
Originally Posted by SpamSandwich View Post

I find it bizarre that Apple hasn't committed to advanced robotic assembly plants yet. Seems to me that would be something that would be clearly in line with their expectations of absolute secrecy and top quality. And the last time they actually operated their own assembly lines? Was it the original (black and white screen) Macintosh? Please make it happen, folks.

That is because manufacturing in China it is job program for its billions of people. In China a manufacturer can not automate something a human can otherwise do. If a human can do it then a machine can not. However, you can still automate if they still allow humans to press the buttons to make it work or load material into the machines.

 

It will be interesting to see for the products they plan to make in the US how much is actually fully automated over people doing the work.


Edited by Maestro64 - 5/30/13 at 10:28am
post #17 of 33
Quote:
Originally Posted by ascii View Post

Pattern of American companies overseas:

 

(1) Offshore work to save money

(2) Foreign company observes all your know-how and stabs you in the back

(3) Change to different offshore company

(4) Rinse and repeat

 

Somebody gets it. Apple invested 100 million in Samsung back in the 90s. Dell 200 million. Now look at it. 

post #18 of 33
Quote:
Originally Posted by tsunami78 View Post

 

I totally agree.  It would seem like a smart move to invest in a couple of production facilities at key points in the supply chain.  I don't think Apple should try to get back too deep into the component game, but especially given the leaks that come out of foxconn it seems to make sense that final product assembly and key design elements could be kept in house.  Robotics plants can be retooled fairly quickly for different/new products, so it would seem like a perfect fit now.  C'mon apple, use some of that $140B to insource some of your production.

 

As an aside Samsung, their biggest competitor, is also a HUGE and profitable component supplier.  These two companies are competing in more and more markets, yet Samsung is Apple's largest supplier.  Insourcing some of those critical components would give them greater control while also helping starve their competitor.

Apple does insource some components such as their batteries. They are also doing some advanced work on NAND memory in in's factories in Israel. Apple also owns it's own CPU/GPU design company. In all cases Apple bought a specific company that had on staff all the important technical engineers and production equipment. You really can't just set up a new company from scratch to even make something a basic as a resistor. 

 

One element of owning a component company is one of matching production to your need. Especially if you don't intend to supply other customers with components, like Apple. Apple has found that it is most profitable to buy up hugh amounts of future production of limited components, such as they did several years ago with NAND memory. They also have found that if they make a component themselves, they also secure a secondary partner that can supply their overage needs on the spot market. Apple is very shrewd about their buying, even more so then what I've explained.

 

Finally, it will be interesting to find out who the new nine companies Apple bought so far in 2013.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #19 of 33
Quote:
Originally Posted by Realistic View Post

They would be constantly upgrading an retooling the robots at least yearly due to changes, upgrades, new models. Not sure robotics would be economical with the short product lives.

 

If tooling is involved (which there wouldn't be in the case of pure assembly) then it would be required in either case (human or robot workers).

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post #20 of 33
Quote:
Originally Posted by Macky the Macky View Post

Finally, it will be interesting to find out who the new nine companies Apple bought so far in 2013.

 

Some of them we many never know the details. As Cook mentioned, they only announce it when they need to announce it.

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post #21 of 33
Foxconn, Samsung, Pegatron, ASIA-con... I wouldn't trust them with my worst friends half dead dog. They are thieves and will sell anyone they do business with down the river in the end! Anyone who continues the meme "it's too late to bring manufacturing back to the U.S." is only making it more difficult for that to happen. The only solution is to become independent of any company outside of our borders. Heaven knows we need the jobs. There's a lot of mending to be done in this country if we are to continue to be a great nation.

Sorry if this sounds paranoiac, but anyone who stays on top of world news and conditions knows this to be true. Sadly, this is only the beginning of mending America. We must reform government, learn to use technology for the betterment of mankind, and learn to get along with one another. Become the role model for the rest of the world that we used to be.

I'm certainly not advocating isolationism - but the world feels so messed up right now, we have to do some very drastic rethinking of the world we want our kids to grow up in. And then ACT!
post #22 of 33

Apple and the rest of SV complain about the lack of advanced manufacturing talent when they created this gap.

post #23 of 33
Quote:
Originally Posted by SpamSandwich View Post

I find it bizarre that Apple hasn't committed to advanced robotic assembly plants yet. Seems to me that would be something that would be clearly in line with their expectations of absolute secrecy and top quality. And the last time they actually operated their own assembly lines? Was it the original (black and white screen) Macintosh? Please make it happen, folks.

100% agreed.
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post #24 of 33
Quote:
Originally Posted by jobsisgod View Post

We can't move the jobs here to the US because it would cost MUCH more to produce the products here.  Our minimum wage is significantly higher along with tighter regulations on things such as chemical disposal which all add to the per unit cost.  Apple is a publicly traded company so they have a duty to its shareholders to maximize shareholder value.  Increasing production costs is not a move that will maximize profits and shareholder value.  We live in a global marketplace and Apple is right to utilize that fact to its fullest potential.

Shareholder value is only loosely associated with corporate profit. Shareholders do NOT own part of the company. They own paper. AAPL stock dropped like a rock while profits soared. No correlation whatsoever. People buy the stock hoping to sell to someone else who has the same misconceptions you have at a higher price than what they paid for it. All paper no actual tangible assets. Entirely different than investing in real estate of which they can't just print more of.


Edited by mstone - 5/29/13 at 9:38pm

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post #25 of 33
Quote:
Originally Posted by paxman View Post

Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.
The iPhone's ability to do is very limited. 

Only on the 4&5 too. Earlier models couldn't. No smartphone from Samsung or HTC can. This is likely one of the weirdest complaints ever posted here. That is saying a lot.
post #26 of 33
Quote:
Originally Posted by tsunami78 View Post

Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

Sooooo... why are you reading and commenting on an article that's about a company that's primary line of business is something that is pointless to you?

I know I responded to him too, but it is pretty clear he was just trolling. Know one can believe something that weird. As others have pointed out , essentially no phone meets his criteria and there are countless cases for every phone that meet his criteria. He will come back soon and claim sarcasm. No one will understand how it could have been (most likely because it actually wasn't), then we will all ignore it and move on.
post #27 of 33
Quote:
Originally Posted by jobsisgod View Post

Quote:
Originally Posted by mstone View Post

Shareholders do NOT own part of the company.  They own paper.

 

So if I were to own 51% of a company's shares you think that I don't own any part of that company?

Nope. You would have the majority of the stock. That is it. See, it is different for a small company you and a partner might have founded verses a publicly traded one. If you owned stock in AAPL the only way you would own part of the company is if it went bankrupt and all its assets were liquidated. After all the other creditors are paid off then whatever is left is divided among the shareholders which is almost always zero. Other than that you own paper that was based on the value of the company at the IPO or after they issued additional shares and adjusted to a market value estimated by some bankers according to investor demand and expected future earnings, all of which is just make believe. You are a millionaire on paper.

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post #28 of 33
Quote:
Originally Posted by isaidso View Post

A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

WTF ???

 

Again:  WTF???

post #29 of 33
Originally Posted by isaidso View Post
A phone with a video screen and a camera, that I cannot stand-up on it's side or on it's end, is almost (not quite), but almost pointless to me.

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post #30 of 33

And, once again we see the stupidity of analysts. Despite the fact that Tim Cook warned them not to base conclusions on single data points, they went ahead and forecast doom for Apple because Foxconn said they would have less works. 

post #31 of 33
Quote:
Originally Posted by jobsisgod View Post

 

We can't move the jobs here to the US because it would cost MUCH more to produce the products here.  Our minimum wage is significantly higher along with tighter regulations on things such as chemical disposal which all add to the per unit cost.  Apple is a publicly traded company so they have a duty to its shareholders to maximize shareholder value.  Increasing production costs is not a move that will maximize profits and shareholder value.  We live in a global marketplace and Apple is right to utilize that fact to its fullest potential.

 

Employees would not be an issue if the facilities were almost 100% robot assembly workers. In fact, on a going forward basis, I believe a good number people who are manual laborers in factories will face obsolescence within 10 years, due to liability and other legal issues.


Edited by SpamSandwich - 5/30/13 at 1:43pm

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post #32 of 33
Quote:
Originally Posted by jobsisgod View Post

We can't move the jobs here to the US because it would cost MUCH more to produce the products here. 

 

 

I dunno. At Foxconn, each iPhone goes through about 50 workers.  In the US, most of those would probably be robots instead.  No dormitories or canteens or psychologists or bathrooms or parking lots or even heating needed.

 

Surveys say about 1/3 of the biggest American companies are looking into moving production back to the US, partly because Chinese labor costs are climbing.  So is shipping.

 

They've seen how other companies have done it, and sometimes been able to cut their costs.  I was just reading about a major appliance maker who brought back some manufacturing.   Along the way, they discovered that Americans were more likely to speak up and say, hey this is being done wrong, and revamp the design and/or production methods to save time and money.  They were actually able to lower their price on one major item, and thus be more competitive.

post #33 of 33
Quote:
Originally Posted by SpamSandwich View Post

 

Employees would not be an issue if the facilities were almost 100% robot assembly workers. In fact, on a going forward basis, I believe a good number people who are manual laborers in factories will face obsolescence within 10 years, due to liability and other legal issues.

Yes. If your current job is a simple, repetitive task you better try something harder because robots are getting better and better.

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