Foreign media: Foxconn is starting to be abandoned

Tech 2023-05-17 13:54:05 Source: Network

Dream Chaser - Samuel Tai. mp34:03From a tech powerhouseRecently, the performance of giants such as Intel and Qualcomm has severely declined, while Apple has exceeded expectations, especially with iPhone revenue increasing by 2% against the trend

Dream Chaser - Samuel Tai. mp34:03

From a tech powerhouse

Recently, the performance of giants such as Intel and Qualcomm has severely declined, while Apple has exceeded expectations, especially with iPhone revenue increasing by 2% against the trend. The reason is that profits are very high, and sales are not the top in the world, but they take away the majority of profits.

According to statistics, Apple accounted for 84% of the global smartphone market's profits in the first quarter of this year. And Foxconn continues to grow and grow as it is Apple's largest OEM factory. But as it developed, there was a lack of trust, and Foxconn began to be abandoned!

The reason why Apple is able to make such money is mainly because it adopts a light asset model, focusing on chip design and product design. Chip OEM is handed over to TSMC, and product assembly is handed over to OEM manufacturers such as Foxconn, Asus, Wistron, and Lexus Precision.

Choose the appropriate supplier for the required accessories, forming the so-called "fruit chain", and Apple is mainly responsible for supply chain management and deployment. Therefore, Apple can achieve maximum output through a light asset model with lower human capital investment.

Of course, the focus is on brand building, and Apple has successfully become a high-end symbol, resulting in higher profits.

Among them, assembly outsourcing is a very important part of Apple's supply chain. It is necessary to produce sufficient products on time to ensure normal sales in the market. Imagine if the product is released and production cannot keep up, it will naturally affect performance.

So, Apple first chose to place its product processing in China, because "Made in China" has already gained global favor with its excellent craftsmanship and efficient work efficiency, coupled with a sufficient number of high-quality and low-cost workers.

Then I chose mainland Foxconn because it can provide high-quality and efficient manufacturing services and solutions.

In 2007, Apple and Foxconn established a partnership, and Foxconn began manufacturing the first generation iPhone for Apple. Since then, Foxconn has gained a strong reputation in the industry by providing Apple with a complete and efficient production process chain.

Foxconn has gradually become Apple's largest iPhone manufacturer, producing 90% of the world's iPhones for Apple, ensuring a stable supply of Apple products. Taking the iPhone 14 as an example, Zhengzhou Foxconn alone has taken on 80% of orders.

However, although the cooperation process between the two companies is very tacit, there are inevitably some gaps, and both sides have other ideas.

Because not only is Foxconn extremely dependent on Apple, Apple's dependence on Foxconn is also increasing. Foxconn relies on Apple for the majority of its profits, and once Apple reduces orders or lowers prices, this will have a significant impact on Foxconn.

This has also happened. In 2016, when Apple requested a 20% reduction in its quotation, it was opposed by a group led by Foxconn.

Therefore, Apple understood that it should not overly rely on Foxconn, so it redistributed the proportion of iPhone OEM orders and handed over a portion of the OEM to Heshuo, and later Weichuang. However, Foxconn remains the largest OEM manufacturer in terms of market share.

Apple has always attached great importance to supply chain management and adheres to a dual supplier strategy, especially in OEM. So in recent years, Apple has also actively cultivated Lucent Precision and started introducing more suppliers to diversify the risk of the supply chain.

The reason should be due to the impact of last year's Foxconn incident in Zhengzhou, which resulted in iPhone production not keeping up during the peak sales season, affecting Apple's performance. Cook mentioned the issue of Foxconn after the decline in performance in the first quarter of this year.

This incident posed a huge challenge to Apple's supply chain, and at that time, some mobile phone orders were given to Asus and Lexus Precision.

Now, Apple will launch a new iPhone series, and of course, it will pay more attention to OEM issues. So according to the news, Apple has made a decision to jointly assemble the iPhone series for the first time by Foxconn, Asus, and Lexus Precision.

Apple is also very cautious, and the high-end 15ProMax or 15Ultra are still exclusively assembled by Foxconn to ensure quality.

However, Lexus Precision has become the main OEM for the iPhone 15Plus and has also secured some orders for the 15 and 15Pro. Lixun Precision only outsourced some 14 and 14Plus products last year, which will further expand this year and may further expand in the future.

Although Foxconn vigorously cooperated with Apple's relocation to India and actively built factories in places such as India and Vietnam, the results were not very satisfactory to Apple, and there were also many problems that led to orders being transferred back to mainland China before being completed, causing more dissatisfaction from Cook.

Therefore, Apple has gradually begun to dilute Foxconn's OEM orders, and the OEM share of Lixun Precision continues to increase. Foxconn has gradually awakened to this and started seeking other businesses. Foreign media have stated that Foxconn is starting to be abandoned!

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