John Sculley: Apple’s System Needs Fixing

facetime_hero iphoneA cheaper iPhone may have become a necessity, but Apple (NASDAQ:AAPL) will need to overhaul its supply chain to keep the device’s manufacturing cost low and make it profitable, the company’s former chief executive John Sculley has said. While a high-profile iPhone may have seen great success in the United States and Europe over the last couple of years, the future called for a focus on growth in emerging markets. And there, a premium priced smartphone will just not work in the face of cheaper, similarly functional devices from Google (NASDAQ:GOOG) Android rivals, Sculley added.

“Apple needs to adapt to a very different world,” Sculley told Bloomberg Television. “As we go from $500 smartphones to even as low, for some companies, as $100 for a smartphone, you’ve got to dramatically rethink the supply chain and how you can make these products and do it profitably.”

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Apple’s stock fell to the lowest price in 11 months on Monday after news reports that it had cut back on production of the iPhone 5 after seeing weaker-than-expected demand. Several of Apple Asian suppliers, including Sharp, also declined after the reports. Slower iPhone demand “will inevitably have a negative impact on component suppliers,” Tong Yang Securities analyst Park Hyun told Bloomberg. “The center of growth in the market is moving toward the mid-end segment.”

Sculley specifically mentioned the increasing levels of threat from devices such as Samsung’s (SSNLF.PK) Galaxy S series. “Samsung is an extraordinarily good competitor,” he said. “The differentiation between a Samsung Galaxy and an iPhone 5 is not as great as we used to see.”

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The former chief did express confidence in current CEO Tim Cook, who was speeding up the company’s product cycle to twice a year. Cook is “exactly the right leader” because of his supply-chain expertise, Sculley said.

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