Date
17 August 2017
Apple is looking beyond Foxconn to make its products. That is good news for other Taiwanese OEM firms. Photo: AFP, Getty
Apple is looking beyond Foxconn to make its products. That is good news for other Taiwanese OEM firms. Photo: AFP, Getty

Why Apple is looking beyond Foxconn

To some extent, Foxconn saved Apple Inc. during some of its darkest days.

In 1997, when Steve Jobs returned as interim chief executive, Apple was muddling through unmarketable products and an inefficient supply chain. He once complained that its suppliers were clustered in Asia but most of its products were made in an Irish factory half a world away.

When Jobs began to reinvent Apple, he brought Foxconn into its supply chain. We know the rest of the story — or at least most of us do.

An example of Apple’s early challenge for Foxconn came when it decided to change the screen design of the iPhone 4 two weeks before its 2010 debut.

The last-minute change would have been a nightmare for any manufacturer, but Foxconn somehow managed to marshal 10,000 workers to pull an all-nighter when the new displays arrived at its Shenzhen plant. Within 96 hours, 100,000 iPhone 4s were ready to ship.

Today, most Apple products are made by Foxconn which reportedly derives more than half of its net profit from the Cupertino, California, company. The relationship has become so entwined both companies know how much they depend on each other.

When the iPhone 5 was launched in 2012, the highly sophisticated manufacturing process meant Foxconn plants were constantly running to full capacity. Apple was forced to limit the number of new phones to each buyer.

It was only a matter of time before Apple would look for other contract manufacturers.

Apple picked Pegatron Corp., the OEM (original equipment manufacturing) subsidiary of Taiwan tech firm ASUS, to assemble the iPhone 5c and some of the new iPad minis which were both launched last year.

Pegatron was reportedly willing to sacrifice profit for bigger orders. Apple, on the other hand, was happy to oblige.

Besides, a lesser known company would not be as big a lightning rod for accusations of sweatshop conditions as a major player like Foxconn.

Analysts say by choosing a smaller partner like Pegatron, Apple can force compliance with labor laws and worker demands and have better oversight of the manufacturing process. Foxconn is said to have replaced some iPhone parts without Apple’s approval.

So tight is the process facial recognition software has been installed in Pegatron’s premises to prevent leaks of sensitive technology, according to the Sina Technology website. This security feature was first used during the production of the iPhone 5c.

Pegatron’s plant in Kunshan, a county near Shanghai, has been making the iPhone 5c and iPad mini since last year. Apple has ordered more iPhones from the company this year, including the highly anticipated iPhone 6, NetEase reports.

Given that Pegatron was set up to make ASUS laptops, could a MacBook order be far behind?

– Contact the writer at [email protected]

RA

Apple has been forced to deal with criticism against Foxconn’s working conditions. Photo: Students and Scholars Against Corporate Misbehavior


EJ Insight writer

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