Foxconn and Apple’s Relationship Faces Trouble Over Massive Profit Margin Differences

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A 90's kid with a huge love for films, pop culture and everything related to them. I am also a cliché engineer turned writer and a filmmaking aspirant. I love writing and reading stories, watching and discovering films from all around the world. Basically, always in the search for stories.

Apple and Foxconn are currently in the middle of a turbulent relationship. This is due to a staggering difference between their profit margins. According to The Information, there is a huge battle between the two companies, and while Apple who have soared high with their product sales, Foxconn has been struggling at their end.

Apple’s gross profit margins are close to 40 percent while Foxconn’s profits come at the single-digit margin. The Taiwanese giant is the world’s largest provider of electronics manufacturing services. They are responsible for assembling Apple products for two decades now. However, Foxconn has struggled with their profits and have employed some questionable methods to increase those margins.

As a standard procedure, Foxconn has to provide a headcount of the employees they will require to manufacture a product. Reports suggest that they exaggerated the number a couple of times. The report also mentions that they have used Apple-owned idle factory equipment to work with different clients. It also said that they used radio testing equipment owned by Apple to test Huawei smartphones.

Foxconn has reportedly not followed the Apple guidelines

Foxconn
Source: 9to5Mac

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Reports also suggest that Foxconn has been stringent when it comes to testing of Apple products. This doesn’t sit well with the Cupertino giant who is known for meticulousness in their products. This has led the iPhone giant take certain actions and keep a close eye on Foxconn employees and the Apple products in their facilities.

Reports say that Apple has accused Foxconn of giving Google employees a tour of their factory in China that produced the 12-inch MacBooks, ahead of its release. They also refused to comply with Apple when they asked for security footage and visitation logs.

There are also comments by many former Foxconn and Apple employees who said that the relationship between the two companies is changing gradually. This has to do with Apple’s diversification of the supply chain as they continue to expand its manufacture out of China. Foxconn manufactures around 60-70 percent of iPhones sold every year so supply chain diversification is a huge deal to them.

For the AirPods Pro, Apple initially contacted Foxconn to manufacture them. The Taiwanese giant expected to win the contract and was ready with a facility to start production. To their disappointment, they saw the contract go to their competitors.

Over the years, Apple has expanded manufacturing outside of China into India. iPhones manufactured in India are exported to European markets and not just sold domestically. Regardless, Apple is still working closely with Foxconn, even in India.

Source: The Information

 

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