For years, InvenSense was the main supplier of the motion sensors for the iPhone. All of that is apparently about to change, according to Bloomberg. A person famliar with the deal says that Germany-based Bosch has won orders from Apple for the motion sensors.
InvenSense Hinted This Would Happen
In August 2016, InvenSense Chief Financial Officer Mark Dentinger reported the company was “the largest player” in supplying the motion sensors. However, Dentinger also said that the company was “splitting some share now with our primary competitor.” In fact, teardowns of the iPhone 6S and iPhone 7 suggest that the motion sensors were supplied exclusively by InvenSense.
The CFO acknowledged it was unlikely that InvenSense’s position as the primary supplier for the motion sensors might not last much longer. It’s unusual for Cupertino to maintain any type of “sole supplier” deal with a company, preferring instead to divide production of components among several suppliers. This allows for easier negotiation for cheaper prices.
Bad Timing for InvenSense
According to Bloomberg’s supply chain analysis, Apple currently accounts for 60 percent of InvenSense’s revenue. InvenSense is trying to complete a $1.4 billion sale to TDK, a deal that is aimed at boosting the Japanese company’s business with Apple. With as much as half of the motion sensor orders being shifted to Bosch, there’s no telling whether TDK will want to continue with the sale.
To highlight what this might mean for InvenSense, we need only look at chip developer Imagination Technologies, a United Kingdom company supplying graphics chips for iOS devices. After Cupertino announced it was developing its own “independent graphics design” and would reduce its future reliance on Imagination Technologies, the U.K. company saw its shares drop by as much as 69 percent.
Doing Business With Apple Might Be Good, but It’s Dangerous
According to Statista, there are at least six major companies that rely upon Apple for at least half of their revenue. InvenSense isn’t on that list, but it seems clear that Apple is the largest source of revenue for the company. As Cupertino makes new deals, it’s easy to see how these companies could eventually fail miserably if they don’t maintain their business relationship with Apple.
The moral of this story is that chip developers and others in the mobile phone supply chain clearly need to be careful. While it might have been lucrative at the time for InvenSense to supply all of the motion sensor chips to Apple, that wasn’t a situation that would remain forever. Apple’s history of sourcing components from at least two suppliers makes that clear. InvenSense might not go bankrupt over this, but it’s certainly going to hurt the company’s bottom line.