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Taiwan-Based Suppliers Are Resisting Apple's Discount Demands

Apple has been attempting to secure higher discounts than ever from Taiwanese suppliers, but the suppliers are kicking back
iMakers: Apple's Supply Chain
August 19, 2016

Faced with increasingly unreasonable demands for discounts from Apple, Taiwan-based suppliers have apparently been kicking back against the iPhone-maker and resisting en masse.

The news comes in a recent report from DigiTimes (via 9to5mac), which explains that Apple has apparently been requesting discounts in the region of 20 percent, despite placing 30 percent fewer orders for the upcoming next-generation smartphone. But the suppliers, the report explains, are beginning to resist.

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 isn't making demands across the board, mind you. Taiwan Semiconductor Manufacturing Company (TSMC) hasn't been asked to discount its quotes, “because it is difficult for Apple to find alternative sources to replace TSMC,” the report adds. TSMC, as a reminder, is said to be the sole supplier of A10 chips destined for the iPhone 7 series handsets.

For other suppliers, however, Apple is using the option of cheaper Chinese labor to bring about comparable quotes from Taiwanese suppliers.

Apple is leveraging the rising handset supply chain in China to force Taiwan-based companies to reduce their quotes comparable to those offered by China-based suppliers. But it makes no sense for such a requirment since the quality of products rolled out by Taiwan- and China-based suppliers is standing at different levels.

The iPhone 7 is expected to reach the market in September, launching perhaps as late as Sept. 18 after its anticipated introduction on Sept. 7. Apple has reportedly already placed orders for its subsequent Apple A11 chip with suppliers, and orders will likely be exclusively fulfilled by TSMC once again.