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Taiwanese Suppliers Push Back on Apple’s Demands for Lower Component Pricing

Taiwanese Suppliers Push Back on Apple’s Demands for Lower Component Pricing

Apple’s Taiwanese component suppliers are reportedly pushing back against Apple’s demands for lower quotes for iPhone 7 components. DigiTimes says the move aims to force the American company to drop its policy of constantly attempting to squeezing profits from Taiwan suppliers.

Taiwanese Suppliers Push Back on Apple's Demands for Lower Component Pricing

Apple is said to have asked downstream part and component suppliers, excluding Taiwan Semiconductor Manufacturing Company (TSMC) and Largan Precision, to reduce their quotes for iPhone 7 devices by as much as 20% even though order volumes for new phones are reportedly 30% lower than those placed a year earlier.

Major downstream suppliers, notably Advanced Semiconductor Engineering (ASE) and associated companies under the Foxconn Group, have replied Apple that they could not be able to accept orders without reasonable profits at this time.

Apple is said to be leveraging the rising handset supply chain in China to force Taiwan-based companies to reduce their quotes to make them more comparable to those offered by the Cupertino firm’s China-based suppliers. However, DigiTimes points out that the company’s policy of squeezing out profits from Taiwan suppliers “makes no sense” due to the fact that “the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels”.

The iPhone maker is said to have not made similar demands to suppliers TSMC and Largan, due to the difficulty to find alternative sources for TSMC’s chip fabrication services and Largan’s high-end camera modules.

ASE was able to push back on Apple’s demands due to ASE’s steadily growing business, via a merger agreement with Siliconware Precision Industries. Meanwhile, Foxconn recently acquired Sharp, which will reportedly keep its production facilities running at a good capacity, so there is no reason for the firm to sacrifice its margins to keep Apple’s business.

Apple has long ran its iPhone business at a high profit level. While the iPhone accounted for a 17.2% share of the global smartphone market in terms of shipment volume, its took as high as 91% of the industry’s profits in 2015, according to data compiled by Canaccord Genuity.