Apple shifts supply chain manufacturers from Foxconn to Pegatron

Pegatron to be the new assembly line producer of the low cost iPhone to be released later this year. The move comes as ploy to achieve a better supply chain stability.

By Abhinav Mishra Published Date
30 - May - 2013
| Last Updated
30 - May - 2013
Apple shifts supply chain manufacturers from Foxconn to Pegatron

For decades, all iPhones and iPads were manufactured by a single company called Foxconn. Apple now intends to enlarge its supply chain for the next gen iPhone to include manufacturers other than their longtime partner in order to achieve a better supply chain balance.

Pegatron Corp, will from now on will be the primary assembler of a low cost iPhone expected to be unveiled later this year. They began manufacturing a small number of iPhones in 2011and also picked up a contract to assemble iPad Mini's last year.

The move marks a paradigm shift for Apple, with Foxcon being their sole manufacturer of iPhones since it was first launched in the year 2007.

According to WSJ's sources, the move may simply be a ploy to manage risk. Foxconn has been reportedly struggling to build the IPhone 5 to Apple's standard norms and specifications, which led Apple to return a batch of iPhones to Foxconn as they were not fit for sale.This move could help Apple mitigate the risk of any such glitches in manufacturing.

The move to go for new manufacturers could also be to slash the prices of the new iPhone. As Apple has an eye on developing markets such as China , India and Latin America for its upcoming phone, which means costs must be kept as low as possible.The new manufacturers Pegatron is also reportedly willing to accept lower margins than Foxconn.

Pegatron which has about 100,000 employees inTaiwan and China, expects to expand its workforce by 40% by the end of the second half of the year. Experts suggest the staffing increase largely to high volume production of low cost iPhones.

A contract of such magnitude with Pentagron could be risky, which can be attributed to the fact that its production for the iPad minis last year was lower than expected, leaving Foxconn to make up for the shortage.

Apple has denied to make any comment on the new deal with Foxconn and Pegatron and any plans for its upcoming iOS devices.

Source: WSJ