Why Is Apple Cheating On Foxconn?
Although men and women around the world used to envy Apple Inc. (NASDAQ:AAPL) and Hon Hai Precision’s strong, enduring relationship, it appears as though there’s trouble in paradise. There was once a time that Apple was steadfastly loyal to its main manufacturing partner; however, now, no one can deny that Hon Hai Precision, better known as Foxconn, is a victim of infidelity.
The Financial Times reports that the Silicon Valley company is now giving much of its work to rival contract manufacturer, Pegatron. This company is responsible for the Apple iPhone 4s and iPad mini products, two projects they worked on while Foxconn slaved over the iPhone 5. Though Foxconn, the world’s largest electronics contract manufacturer, was once the sole assembler of the iPad and the earlier iPhone models, Apple was forced to look to Pegatron after Foxconn tried to pass on to Apple some of the production costs it was suffering. Recognizing this, Pegatron made itself more attractive to Apple by offering more competitive prices.
And its strategy worked. According to Mercury News, results from the most recent quarter show that Pegatron’s revenue grew 29 percent in the same period from a year ago, while its net profit surged 81 percent to T$2.31 billion ($78.59 million). In contrast, Foxconn suffered its biggest decline in more than a decade.
For now, Pegatron is focusing on proving its ability to Apple and increasing its workforce by 40 percent to accomodate new product launches. As Pegatron moves to increase its dependence on Apple, Foxconn works to lessen it, “mostly by acquiring parts suppliers to make high-value components such as casings and connections,” as explained by the Financial Times. This work has actually supported Foxconn’s profits.
Naturally, Apple declines to comment, but only time will tell how long the love triangle can last.
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