Suppliers resist price drops, is Apple losing it’s mojo?

The recent data from IDC shows a declining market share for both the Apple of the West and Apple of the East. Both companies deny that these declines mean anything significant but everyone knows that it does, and both Apple and Xiaomi are making efforts to amend their mistakes.

A new report from Digitimes explains that Apple’s efforts to secure lower component pricing from iPhone suppliers has been met with strong resistance. Apple has historically been able to wield quite a bit of power when it comes to securing favorable contract terms, but with iPhone sales currently on the decline (general iPhone unit sales fell 15 percent last quarter), Apple has clearly lost a bit of its negotiating power.

The report claims that Apple in recent weeks sought to convince component manufacturers to reduce their quotes for iPhone parts by 20%. Generally, Apple is able to get some of the best deals on components because suppliers can make up the difference on volume and Apple is famously willing to pay up-front for parts. But with orders for iPhone components set to decline 30% year over year, it’s easy to see why some suppliers were quick to balk at Apple’s demands.

TSMC and Largan, the companies that produce the applications processors and the cameras for the iPhones, did not receive requests for price reductions. Digitimes noted that it would be hard for Apple to find replacements for the two, though it may be able to with its other Taiwanese suppliers. The tech giant has been trying to leverage lower bids from Chinese factories as a convincing discount factor.

Apple’s current CEO Tim Cook has been known in the industry fro his operational wizardry Even in Steve Job’s times, as the head of International Operations for Apple, Tim Cook was highly regarded for getting Apple the absolute best deals on components.

Apple’s sudden demands of a 20% discount on these components could be due to the declining sales, or as another theory suggests, the components used in the iPhone 7 may be slightly ore expensive than the ones used in the 6s and Apple is trying hard to protect it’s precious profit margin.

Source : Digitimes


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