Apple and Foxconn have known each other for years. Foxconn is the prime contractor assembling iPhones since 2007. Apple is also working with him on other products. But today the two groups have some tension in terms of profits.
According to The Information, the relationship between Foxconn and Apple is no longer as good as it used to be. While Apple’s gross margins are close to 40%, Foxconn’s don’t exceed 9%. This situation is annoying for the subcontractor.
For product assemblies, Foxconn regularly reports to Apple that more employees have been hired than announced. The group has also used Apple hardware to make devices for competition from Apple. As a result, Apple has stepped up the monitoring and tracking of workers in manufacturing facilities.
The tense relationship can also be explained by Apple’s decisions. The group relied heavily on Foxconn at the beginning. Today he tries to diversify. This is in part to save money. For example, Apple initially wanted Foxconn to assemble the AirPods Pro. But the contract was eventually signed with a competitor. This obviously offered a lower manufacturing cost.
Foxconn does not follow certain Apple guidelines
Apple is Foxconn’s largest customer. The latter produces between 60% and 70% of iPhones every year. Any change by Tim Cook and his teams can therefore have a significant financial impact.
To make more profit, Foxconn attempted to sell its own equipment for manufacturing and testing components, with limited success. On the flip side, the subcontractor developed its own chemicals to polish the iPhone screen instead of relying on chemicals from a Japanese company.
In addition, the Taiwanese group has not fully followed certain instructions from Tim Cook’s company. As mentioned earlier, he used Apple devices for other brands’ products. He also allowed Google employees to visit the factory where the 12-inch MacBook will be assembled before it becomes available. Foxconn also took apart the iPhone 7 to remove metal parts and lost screws. The group should have assembled new iPhone 7s with valid components from the failed models.