Apple reportedly 'demands' 10% price cut from key iPad suppliers as orders increase

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  • Reply 61 of 75
    hmurchisonhmurchison Posts: 12,268member
    Quote:
    Originally Posted by Joseph L View Post


    Samsung to Apple: "Go pound sand. Try to sell more iPads without our parts! Good Luck!"



    LG was the display manufacturer on the original iPad launch. Samsung was a second supplier. Samsung fabs the A4 chip as a ARM licensee. What exact other Samsung parts are so magnificent and irreplaceable?
  • Reply 62 of 75
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by hmurchison View Post


    LOL



    Microsoft is primarily a software company so exactly when were we supposed to read about them bullying vendors? Last time I checked a majority of their profits came from their own programmers. Sure the Xbox and peripherals are branded but I don't remember reading anything about IBM getting "bullied" over pricing.



    Took 15 seconds to find http://www.theregister.co.uk/2002/04...a_at_war_over/



    I've no idea what people on this site where saying about that, but I remember laughing with a friend that if MS thought that NVidia would be pushover they clearly never actually read any technology papers Mostly we just wanted popcorn and tickets to watch the bunfight.
  • Reply 63 of 75
    dunksdunks Posts: 1,240member
    Quote:
    Originally Posted by christopher126 View Post


    This is a pretty standard procedure in business. There are companies that squeeze manufacturers to the point where they aren't making any money.



    Sears, in its heyday, used to go to a small manufacturing company and say we need 500,000 widgits, what's the price? Say Ok, let the small company spend a ton of money buying new equipment, expanding the plant, hiring people, etc. and then come back the next year with a "suggested new price!" Usually, well below the original price. The small manufacturer was forced to accept it and basically was just wearing out their "new" equipment while Sears was sitting pretty.



    Walmart has a similar reputation.



    First rule of business. Get agreements in writing before investing in infrastructure.



    ...and didn't Apple buy a bunch of glass contouring machines for their suppliers so they didn't have to shell out?
  • Reply 64 of 75
    dickprinterdickprinter Posts: 1,060member
    Quote:
    Originally Posted by Wiggin View Post


    I always love it when people post stuff like this. As if the company's board of directors has no choice in the matter. "Don't blame us, it's our fiduciary responsibility." Can you please point to the law or SEC regulation that says this?



    Yes, it's the board's responsibility to make decisions in the best interest of the company. But nowhere does it say that the "best interest" = maximizing profits for shareholders. If the board decides it is, that's fine. Nothing wrong with that. But don't act as if it's anything other than greed, either on the part of the board or the shareholders.



    Don't get me wrong, making money is good. And there is nothing wrong with wanting to make lots of money. Just don't pretend is some sort of mandatory "duty" imposed by law or regulation. It's a decision made by the company, perhaps compelled by it's stockholders (on the threat of kicking out it's board members). Nothing more, nothing less. There is no outside force compelling this so-called "fiduciary responsibility".



    Who said it was a law or regulation? Not me. Outside force? Maybe, but those are your words. It's business, and good business, at that.



    Everything you just explained was another way of saying fiduciary responsibility. It's a responsibility (albeit, an unwritten rule) that a company takes on as soon as it goes public. If a company doesn't do well and strive for maximum profit, few will invest. Investors (the outside force) will look for a well managed, more profitable company to invest in. If no one invests, the company has no value. If a company has no value? Well, you figure it out.



    Shareholders want the best return on their investment and they gravitate towards the company that will allow them to achieve that goal no matter who the company is.



    You sound bitter. I'm sorry if you didn't invest in the right company at the right time. 12 years ago @ an adjusted-for-split price of ~$4.25, AAPL is one of THE best ones that I chose.
  • Reply 65 of 75
    Quote:
    Originally Posted by jawporta View Post


    How about apple takes 10% off the iPad and all their other products? Or better yet, give their employees a 10% raise to help with the Gas crime, i mean gas prices.





    You can save 20% on everything by moving from NYC to, say, Des Moines.
  • Reply 66 of 75
    Quote:
    Originally Posted by sranger View Post


    I find it amusing that most people always assume that the buyer ( Apple in this case ) has more power. In long term supply commitments, the seller often has more power then the buyer. I mean how many companies can product enough components ( with quality in tact) to keep Apple supplied? Obviously right now no one can or Apple would not have a backlog....



    In this specific case, the iPad 2, it may well be that the balance of power is tilting towards Apple: those are components that mostly are designed exclusively for the specific product, with a dedicated industrial equipment (some of which Apple helped finance). The suppliers have no alternate market to use that production capacity (no competitive tablet against iPad 2).
  • Reply 67 of 75
    macrulezmacrulez Posts: 2,455member
    deleted
  • Reply 68 of 75
    Quote:
    Originally Posted by MacRulez View Post


    Apple isn't in Redmond either.



    Let me help you out:

    http://dictionary.reference.com/browse/metaphor





    I never said every criticism from Mac fans against Microsoft was justified, just enjoying another day here in Doublestandardland.



    Quote:
    Originally Posted by Jacksons View Post


    uh!?



    Sorry. Integrating. Even OS/2 bundled, but who can deny that the point of integrating IE was to kill Netscape.
  • Reply 69 of 75
    joseph ljoseph l Posts: 197member
    Quote:
    Originally Posted by MacRulez View Post




    Wouldn't be the first time AI posted an unnecessarily inflammatory headline in their ongoing drive to get eyeballs at any cost.







    Apple Insider Sucks!



    Not.
  • Reply 70 of 75
    wigginwiggin Posts: 2,265member
    Quote:
    Originally Posted by Alonso Perez View Post


    Well, it sort of does, actually.



    The key is the timescale. When people pull out the "fiduciary responsibility" card, they are often justifying short-term gains.



    It's easy to maximize short-term profits. Cut corners, squeeze suppliers, cheat customers with poor service, and so on. But all of these will destroy a brand in the long run. Blindly cutting costs is not management, and it is not responsibility, fiduciary or otherwise.



    It's hard to say if this particular instance qualifies as blind cost-cutting. I hope not. I just think people should not be so quick to applaud it. Let's see what it results in a couple of years down the road.



    Agreed. I avoided the whole short-term vs long-term in my original post. There is far more to responsibly running a company than maximizing profits.



    Quote:
    Originally Posted by Dickprinter View Post


    Who said it was a law or regulation? Not me. Outside force? Maybe, but those are your words. It's business, and good business, at that.



    Everything you just explained was another way of saying fiduciary responsibility. It's a responsibility (albeit, an unwritten rule) that a company takes on as soon as it goes public. If a company doesn't do well and strive for maximum profit, few will invest. Investors (the outside force) will look for a well managed, more profitable company to invest in. If no one invests, the company has no value. If a company has no value? Well, you figure it out.



    Shareholders want the best return on their investment and they gravitate towards the company that will allow them to achieve that goal no matter who the company is.



    You sound bitter. I'm sorry if you didn't invest in the right company at the right time. 12 years ago @ an adjusted-for-split price of ~$4.25, AAPL is one of THE best ones that I chose.



    Not bitter at all. Just think too many companies put too much emphasis on shareholder profits and not enough on running running the company with the long term in mind. The way some companies are run, you'd think the shareholders were the customers of the company. I've even seen one company's mission statement that talked about maximizing shareholder value and not once mention either their products or their customers. This kind of short-term greed is what helped led to the dot.com bust, the housing collapse, and many of the current economic woes.



    Steve Jobs himself said as much in an interview in Fortune magazine (I think it was Fortune, might have been another biz mag) in the late 90s. That too many companies were overly focused on short-term profits and not enough on building a business. Apple is one of the few companies that do both very well. They have zero debt and huge cash reserves. If only more companies (and individuals) could have the same. And if you don't need to borrow cash, share price becomes a less critical issue in the running of your business...so you can spend more time focusing on running your company than the whims of shareholders. When stock prices plunged a few years back, how many companies were screwed because they could no longer borrow money to run their business?



    Apple has managed this success on the long term. And you've benefitted from it. That's great. But sorry to break the news to you, you didn't benefit because Apple focused on your return on investment. You benefited because Apple focused on running their business. Yes, it's a fine line to draw, but an important one. Too many companies place too much emphasis on the "maximizing shareholder return on investment" to the detriment of the company as a whole. When Apple's stock price plunged with the rest of the market, it had nearly zero impact on Apple's operations. Why? Becuase Apple is not beholden to a fiduciary responsibility to maximize their shareholder's return on investment. They could have spent their cash to prop up the share price, but they didn't. They continued to focus on running the company responsibly, and that is their fiduciary responsibility.
  • Reply 71 of 75
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by Wiggin View Post


    They continued to focus on running the company responsibly, and that is their fiduciary responsibility.



    Their fiduciary duty is to the shareholders and to shareholder value. That's distinct from share price or near term profits, but it is also very different from 'running the company responsibly' - because that phrase is so vague as to have no meaning at all.
  • Reply 72 of 75
    wizard69wizard69 Posts: 12,791member
    Quote:
    Originally Posted by Joseph L View Post


    That is an amazing claim. Never heard that one before.



    Got any evidence that Apple paid a premium for iPad parts? As in, more than normal market price?



    Hard to believe.



    It is my understanding that in some cases Apple paid for entire production lines to make sure capacity was brought on line quickly. My facts are thin here but this would not be surprising at all as it gives Apple exclusive access to product lines.



    Now how much Apple has paid for directly can be debated but the fact is customers often own part of the tooling involved in the production of their product. Having worked in a job shop I know this is not uncommon, for example molds and secondary operations tooling is owned buy the company contracting to you. However it is not uncommon to see deal wrought that might have your customer taking an interesting in the tooling to run those molds.



    As to this idea of more than normal market price, some of the stuff that we are talking about is brand new to market. There isn't a normal market price. The flip side of that is that even though it goes against common belief Apple isn't always getting parts at the absolute lowest price. There are other things that go into making a Mac that can justify a premium such as testing, specifying more robust parts or customization specific to Apple. Just look at any of the tear down sight where you can see the parts on the latest Apple device listed. There are often many custom numbered, that can mean there are alterations that are specific to Apple. it can also mean other things but the end result is that Apple may end up paying more for a part that is based off of something more generic.
  • Reply 73 of 75
    Quote:
    Originally Posted by Bagman View Post


    Last time I checked my econ book, it said that when demand outstrips supply, the cost of the items go up accordingly. Only someone as strong as Apple can attempt to upend that truism, and have enough clout to back it up. Only Apple, having alternative suppliers, will keep this supply-side price creep in check (hopefully).



    You shouldn't speak about things you know naught about.



    This is not supply and demand at work. It is economics of scale.
  • Reply 74 of 75
    wizard69wizard69 Posts: 12,791member
    Quote:
    Originally Posted by Alonso Perez View Post


    Manufacturers aren't simply going to take this from their bottom line. Quality will suffer, or worker compensation or safety, or environmental responsibility, or all of the above. A 10% cut just "because I demand it" is huge. Productivity does not go up that fast.



    Apple is moving more components than expected so demand is higher. Higher volume automatically means lower cost per unit.



    Second; electronics manufactures cover their development costs very early in the production cycle. So if you use bleeding edge hardware you pay a rather huge premium over what would be the case if you used two year old technology. It is the nature of the beast, if you don't cover your development costs when the item is new and shinny you are basically screwed because in two years your hardware is relegated to bargain basement hardware.



    Actually after a year productivity should increase substantially. If it doesn't you either have problems with a design or your production crew sucks. Contrary to popular belief it takes a while to remove the bugs from a production line. You almost never start up a line and have it running at 100% of rated speed. Take this from somebody involved in the start up of several high speed production lines. In the second year if you are starting up additional lines the benefit of experience and the spread of talent across those lines can result in significant reduction in expenses.
  • Reply 75 of 75
    cwingravcwingrav Posts: 78member
    Um. This is normal people. Apple isn't evil. People aren't starving.



    Companies expect manufacturers to increase yield and find other cost savings over the life of a parts contract so they build in reductions to part costs into their contracts. Despite this not being as true these days, as manufacturing processes are pretty efficient from the start, this has not changed the contractual process. Because of this, parts companies make money at the beginning and tend to barely make a profit at the end of a contract.



    Hope people learned something. <honestly, i'm not trying to be snooty>
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