Profile of Apple procurement exec details iron fist supplier negotiations

Posted:
in General Discussion edited January 2020
A profile of Apple VP Tony Blevins, known as the "Blevinator," reveals an architect of punishing supply chain tactics that leverage the tech giant's dominant market position to squeeze out the most fortuitous deals from suppliers.

Glass
Apple Store glass manufacturing in Germany. | Source: Apple


An expose from The Wall Street Journal on Thursday characterizes Blevins as a particularly astute, relentless and sometimes ruthless negotiator that will stop at nothing to ensure Apple a favorable deal.

Apple has long been lauded for its supply chain acumen, a well-deserved reputation fostered under former COO and current CEO Tim Cook. Cook, considered by some as an "operational genius," provided the company greater control over its production process by outsourcing manufacturing, streamlining channel inventory and making smart long-term investments. More importantly, he assembled Apple's supplier network.

According to the report, Blevins is forwarding Cook's rubric on the supply chain and is doing so at a crucial time; a sagging smartphone market is applying pressure on Apple, whose fortunes are predominantly tied to the success of iPhone. Milking the hardware supply chain to suppress expenses is an effective strategy for keeping gross margins up as the company waits out the slump and focuses on building out other areas like services.

It was Blevins who devised and executed a plan that would ultimately deprive chipmaker Qualcomm of some $8 billion. Dubbed Project Antique, the initiative launched in 2014 and was designed to reduce Apple's remittance to Qualcomm, presumably as it pertained to IP licensing. The report fails to delve into the plan at length, but suggests Apple's move to Intel modems was part of the strategy, as was a 2017 lawsuit over patent royalties.

Blevins invited contract manufacturers responsible for producing chips relying on Qualcomm IP to the Grand Hyatt Hotel in Taipei, the report said. The Apple exec informed the collected suppliers that they no longer needed to pay licensing fees to Qualcomm, payments that Apple was reimbursing at the time. In April 2017, Qualcomm revealed Apple's contract manufacturers were withholding royalty payments. Apple itself refused to pay royalties and was $7 billion behind on payments in October 2018, court documents show. Qualcomm later said it lost out on $8 billion from unpaid licensing fees.

Apple and Qualcomm settled the sprawling legal battle in April 2019. Under terms of the arrangement, Apple would pay an unspecified amount (later estimated at $6 billion) and enter a new licensing agreement with the chipmaker.

In another example of his tenacity to strike the most favorable deal, Blevins saved the company hundreds of millions of dollars on production of Apple Park's massive glass windows in 2012. He arranged for potential suppliers to meet at the Grand Hyatt in Hong Kong, where they were separated into conference rooms and plied with common negotiation tactics like bluffed numbers. Blevins would bounce from room to room, forcing each bidder lower until he came away with an acceptable price.

The executive did the same with early iPhone contract manufacturers, playing one against the other as sales of the handset skyrocketed. STMicroelectronics lost its place to supply gyroscope parts for iPhone in 2013 after standing firm on negotiations, costing the company an estimated $150 million in annual revenue.

Blevins also played a central role in the fall of Imagination Technologies, a UK-based graphics technology firm from which Apple licensed various IP. After mulling a buyout of the company, Apple began to poach Imagination employees in 2013, signaling the iPhone maker was working on its own GPU solution. Imagination executives were wary of losing Apple as a customer, but could do little beyond negotiate existing deals.

In 2017, Blevins informed Imagination that it planned to stop licensing the firm's technology as it shifted work on a mobile graphics solution in-house. Imagination announced the development, with Blevins' consent, and watched its stock value plunge 70% in a quarter. Apple later said it stopped taking new IP from Imagination in 2015, sparking concerns over the British company's public disclosures.

Imagination was sold to a Chinese-backed equity firm in September 2017 for 550 million pounds. More recently, the company this month inked a new deal with Apple for access to unknown IP.

Blevins is also in charge of enforcing Apple's nondisclosure agreements, which can incur punishments of over $50 million. In 2017, he reportedly blasted a Japan Display executive for supposedly breaching Apple's rules by publicly disclosing a number of companies had placed orders for LCD screens. "Are you stupid?" Blevins asked the executive, according to the report. Apple supposedly demanded $5 million for violating contract terms, but didn't collect. Instead, Japan Display agreed to submit future press releases to Apple prior to public events.

Comments

  • Reply 1 of 16
    No surprise here. Apple is notorious for it's 'bare knuckle' tactics with suppliers. I worked with some ex-Apple Supply Chain folks and I can tell you that with one exception these were NOT pleasant people to deal with...
    dedgeckowatto_cobra
  • Reply 2 of 16
    DAalsethDAalseth Posts: 1,712member
    Walmart does the same. Amazon does the same. Business is not a place for nice guys. 
    baconstangdedgeckowatto_cobrajony0
  • Reply 3 of 16
    apple ][apple ][ Posts: 9,233member
    Sounds good to me.

    That's how a smart business should be run.

    When I'm purchasing something, either for business or personal use, I always try to get the best deal that I can.

    If somebody's business is powerful and they are able to use that to their advantage, then they would be stupid and negligent not to.
    dedgeckocommonsense2020watto_cobrajony0
  • Reply 4 of 16
    "they were separated into conference rooms and plied with common negotiation tactics like bluffed numbers"

    Competitive negotiating is one thing, yet is fraudulent misrepresentation an entirely different matter? And so many on this forum preach to 'trust' iCloud with their data - hmmm...

    edited January 2020 welshdogOferFileMakerFeller
  • Reply 5 of 16
    I feel sorry for Imagination. It would have been better if Apple had bought them, rather than the Chinese investment firm. Then no licensing fees and keep good employees. 
    watto_cobrajony0
  • Reply 6 of 16
    Oh boy, ha-ha, a-hole big time. I admit, people with possible sociopathic characteristics make the best negotiators. There’s no way I would want someone like him as a friend, he couldn’t turn off these tendencies in his personal life. Interesting piece, liked the article. I don’t think there’s anything illegal exposed in the article, but I can see the European Commission taking note of him, and investigating his activities when the time comes.
    OferFileMakerFeller
  • Reply 7 of 16
    cg27cg27 Posts: 127member
    Shareholders should expect nothing less.  If a supplier can’t compete or doesn’t want to abide by Apple’s terms so be it.  Apple has earned this privilege.
    dedgeckocommonsense2020watto_cobrajony0
  • Reply 8 of 16
    tundraboytundraboy Posts: 1,768member
    "they were separated into conference rooms and plied with common negotiation tactics like bluffed numbers"

    Competitive negotiating is one thing, yet is fraudulent misrepresentation an entirely different matter? And so many on this forum preach to 'trust' iCloud with their data - hmmm...

    You can say pretty much anything in a negotiation as long as you don't sign a contract afterwards asserting as true something that is not.   A negotiation is not a deposition under oath.  If the other party falls for your fib, then their fault for not doing their homework and going in ill-informed.
    edited January 2020 watto_cobrajony0FileMakerFeller
  • Reply 9 of 16
    The author is using the word “fortuitous” incorrectly.
    neilmdedgeckowatto_cobrajony0
  • Reply 10 of 16
    It works both ways - people see Apple and immediately try to cash in. This applies to trademark acquisition, real estate, intellectual property...
    watto_cobrajony0
  • Reply 11 of 16
    GeorgeBMacGeorgeBMac Posts: 10,260member
    DAalseth said:
    Walmart does the same. Amazon does the same. Business is not a place for nice guys. 

    Neither did America's great original entrepreneurs like Morgan, Carnegie, Rockefeller, etc...   Totally amoral -- like a stereotypical mob boss:  "Nothing personal, just business" as they knock somebody off.

    One of my first jobs out of college was with RCA who used similar tactics:  They intentionally signed up with smaller vendors so that they could then later leverage the fact that RCA could put them out of business if they chose....

    Yes, it is normal.  It is legal.  But it is not ethical.
    seanismorrisOferFileMakerFeller
  • Reply 12 of 16
    And this is why a “failed negotiator” in his business life should never be POTUS!  

    He’s literally negotiating the future of the country, not just his imaginary empire.
    GeorgeBMacOferjony0FileMakerFeller
  • Reply 13 of 16
    maestro64maestro64 Posts: 5,005member
    Not sure I totally believe all of this story. Since my understand about the glass for the spaceship came from a German company which is the only company who had technology to make plate glass that large which also had a curve to it. I highly doubt that he put the German company in a room and pit them against a Asian company.

    I work in enough tech companies and the supply chain people like the believe they control the relationship with the suppliers, when in reality it is the design teams who design in a part. Many times if the design need to meet a spec and only one company has technology to make that happen then the supply chain people can yell and scream all they want at suppliers but very little changes.

    The how Qualcomm thing is more complicated than holding royalty payments. There was no way Apple was selling a phone to Verizon with a Qualcomm modem CDMA is owned by Qualcomm. Keep in mind this all started because Apple reveal to the Korean government how Qualcomm royalties works and Qualcomm retaliated which then lead Apple to hold back all the royalty payments since they learn from the Korean case that Qualcomm was double dipping.

    Lastly putting everyone in different rooms and running around and until someone gives in only works for items which are truly a commodity. So they can do this with resistors and batteries but that not doing that with chips which only one supplier has the solution. I suspect this happen more with the like of Foxconn and its competitors. By the way this is consider an old school tactic, today it better to negotiate by knowing all the cost drivers and figuring out if the company if operating at the high efficiency.  Because you do not want to do business with a company who does not understand their costs because they could disappear one day and your product is shut down.
    thtFileMakerFeller
  • Reply 14 of 16
    As both an Apple product user and shareholder, I’m thankful that Apple management has been working hard to deliver great products and ROI on my money. They are willing to go through the tough diligence to fulfill their fiduciary duties. They take their jobs seriously. I am buying more Apple stocks! 
    apple ][ said:
    Sounds good to me.

    That's how a smart business should be run.

    When I'm purchasing something, either for business or personal use, I always try to get the best deal that I can.

    If somebody's business is powerful and they are able to use that to their advantage, then they would be stupid and negligent not to.

    edited January 2020 watto_cobra
  • Reply 15 of 16
    thttht Posts: 4,029member
    maestro64 said:
    Not sure I totally believe all of this story. Since my understand about the glass for the spaceship came from a German company which is the only company who had technology to make plate glass that large which also had a curve to it. I highly doubt that he put the German company in a room and pit them against a Asian company.
    It’s your typical innuendo being presented as news, or facts. I’m not sure how far removed the vast majority of mass market news media from celebrity tabloids. Are they really just tabloids, but we don’t call them tabloids because they covers “news”, not celebrities? And they are given more trust in their reporting because it is news?

    Like the Bloomberg Businessweek Chinese chip implant story, the reporters and editors often get in the trap of writing about the “story” rather than reporting actual facts. I can easily see them taking what little bits of information from the suppliers that they can get, and creating an entertaining story, but the story doesn’t represents the facts or the sourcing that they have. 

    After decades of being exposed to these big media, your trust gradually dwindles to nothing. They can’t even get simple things straight, and would rather live in the rhetoric and drama, rather just report facts.

  • Reply 16 of 16
    wowsawowsa Posts: 1member
    the monk said:
    Oh boy, ha-ha, a-hole big time. I admit, people with possible sociopathic characteristics make the best negotiators. There’s no way I would want someone like him as a friend, he couldn’t turn off these tendencies in his personal life. Interesting piece, liked the article. I don’t think there’s anything illegal exposed in the article, but I can see the European Commission taking note of him, and investigating his activities when the time comes.
    I actually know Tony socially and believe me, he can and does turn off whatever tendencies were described in the article when he isn't working. Lot of fun to hang out with.
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