Apple Set to Tighten Grip on MacBook Supply Chain and Cut Contractor Profits

by

Apple is set to tighten its control of its MacBook supply chain by directly negotiating prices with third-party suppliers of non-key parts such as screws and plastics, which are required by contract suppliers to produce major components.

According to a new report by DigiTimes, industry sources say the move by Apple will significantly reduce profit margins of its contracted supply partners, however Apple has neither confirmed nor denied the move.

macbook airs 2015
The Taiwan-based website's sources said that this will be the first time Apple has ever interfered with the procurement of non-crucial materials and parts by its contracted key component producers, who manufacture the processors, panels, batteries, chassis, and heat dissipation modules in Apple MacBooks.

Taiwan contracted supply partners of MacBooks were reportedly told of the new policy during a meeting they attended at Apple's headquarters in Cupertino.

If enforced in time for MacBook models to be released this year, the policy could erase 10 to 15 percent of profits currently made by contracted producers from the purchases of materials, leaving them with only the contracted MacBook manufacturing fees.

Apple has reportedly decided to expand its centralized procurement coverage to include upstream materials such as copper and cobalt, and non-key parts and components from third-party suppliers. The electronics giant will reportedly directly set the prices and order volumes for such materials and minor parts and components, instead of only screening the name lists of qualified third-party suppliers proposed by contracted supply chain partners and inspecting their supply quality and shipment schedules.

The same industry sources predict that when the policy goes into effect, contracted supply chain players will have to boost their self-sufficiency for components or look to other markets like cloud, AI and automotive electronics applications to claw back profitability.

Apart from typical MacBook refreshes, former KGI Securities analyst Ming-Chi Kuo believes Apple is working on a "more affordable MacBook Air" set to be released at some point in 2018.

We've heard a similar rumor from DigiTimes, which says Apple is working on a new entry-level 13-inch MacBook in the second half of 2018, which would serve as a replacement for the MacBook Air, but we don't expect it to surface during this year's WWDC.

There are no details on what features an updated MacBook Air could include, but if Apple is aiming to keep costs down, it could receive minimal updates. The MacBook Air remains outdated and continues to use a processor from 2014, so an updated version could include a new processor and new graphics. Thunderbolt 3 could also be added, and it's possible Apple will update the display.

Top Rated Comments

Lone Deranger Avatar
35 months ago
Maybe they can source cheaper screws from the same supplier that provided them for the iMac Pro VESA mount kit. I heard they do a real good price on them.

/s
Score: 24 Votes (Like | Disagree)
macpeach55 Avatar
35 months ago
Bet it doesn't bring the price of buying the MacBooks down though, even though they will claim that it allowed them to offer the new Models at a great price ;)
Score: 20 Votes (Like | Disagree)
Mirice99 Avatar
35 months ago

I find myself a bit torn on this topic. On one hand I understand the need to bring down expenses and see it as justified. The 10-15% hit on their contracted producers reflects that they were significantly over-charging and Apple is putting a stop to their extra money party. Justified.

But on the other hand, I’m like “really though?”

So if 10-15% is “significantly overcharging” what is apples 30% take on App sales?
Score: 12 Votes (Like | Disagree)
RightMACatU Avatar
35 months ago
Screw suppliers will get screwed :D
Score: 9 Votes (Like | Disagree)
gim Avatar
35 months ago
More penny-pinching! Good job, Tim!
Score: 9 Votes (Like | Disagree)
69Mustang Avatar
35 months ago

It's every manufacturer's duty to reduce supply cost as much as possible.

No it's not. It's every manufacturer's duty to maintain a healthy supply chain. When you race to the bottom penny pinching your suppliers, they in turn are forced to do the same. Eventually, what you get are subpar components fitted into supbar products charged at a premium price. I don't think any customer wants that. Especially since history tells us that there'd be no benefit to the customer in the form of reduced pricing.

That's not what the article says. The 10-15% is the reduction, not the current profit level for the suppliers.

The article also says:

If enforced in time for MacBook models to be released this year, the policy could erase 10 to 15 percent of profits currently made by contracted producers from the purchases of materials, leaving them with only the contracted MacBook manufacturing fees.

What is not known is the overall profit margin. Were they getting 35% margins + manufacturing fees? Were they getting 10-15% margins + manufacturing fees? According to the info provided, they were getting 10-15% margins + fee. Going forward it would only be the fees. How much are the fees?
Score: 8 Votes (Like | Disagree)

Top Stories

lg wing

LG Considering Exit From Smartphone Business, Halts LCD Production for iPhone

Wednesday January 20, 2021 5:38 am PST by
LG is considering exiting the smartphone business entirely amid declining shipments and accrued losses of $4.5 billion over the past five years (via The Korea Herald). LG CEO Kwon Bong-Seok cautioned staff earlier today that the company is re-evaluating its presence in the smartphone industry: Since the competition in the global market for mobile devices is getting fiercer, it is about...
2019 mac pro side and front

Tim Cook Gifted Donald Trump 'First' 2019 Mac Pro

Wednesday January 20, 2021 5:45 pm PST by
Apple CEO Tim Cook gifted former United States President Donald Trump with the first 2019 Mac Pro that came off of the assembly line in Austin, Texas, according to a financial disclosure report that was released today (via The Verge). "Mac Pro Computer, the first created at the Flex Factory in Austin, Texas," reads the entry, which values the machine at $5,999, the base price for a Mac Pro....
Apple VR Feature

Bloomberg: Apple's First AR/VR Headset 'Pricey, Niche Precursor' to More Ambitious AR Glasses and Could Launch Next Year

Thursday January 21, 2021 3:27 am PST by
Apple's first virtual reality headset will be a "pricey, niche precursor" to a more ambitious augmented reality product, according to a new report from Bloomberg's Mark Gurman. As a mostly virtual reality device, it will display an all-encompassing 3-D digital environment for gaming, watching video and communicating. AR functionality, the ability to overlay images and information over a view...
Flat MacBook Air Feature

Bloomberg: Apple Working on 'Thinner and Lighter' High-End MacBook Air With MagSafe, Could Launch in Second Half of 2021

Friday January 22, 2021 3:34 am PST by
Apple is working on a "thinner and lighter" version of the MacBook Air that the company plans to release during the second half of this year at the earliest or in 2022, according to a new report by well-connected Bloomberg journalist Mark Gurman. It will include Apple's MagSafe charging technology and a next-generation version of the company's in-house Mac processors. Apple has discussed...
iOS 15 icon mock banner

iOS 15 Rumored to Drop Support for iPhone 6s and 2016 iPhone SE

Thursday January 21, 2021 11:58 am PST by
Apple's upcoming iOS 15 operating system, which we expect to see unveiled in June, is rumored to be dropping support for a few of Apple's older iPhones. According to French site iPhoneSoft, iOS 15 will not be able to be installed on the iPhone 6s, the iPhone 6s Plus, or the 2016 iPhone SE, all of which have an A9 chip. The iPhone 6s and 6s Plus were introduced in 2015 and are now more...
iphone 12 vs iphone 12 mini

Apple Shifting Some Production From iPhone 12 mini to iPhone 12 Pro to Meet Demand

Wednesday January 20, 2021 8:12 am PST by
Apple has reportedly cut production of the iPhone 12 mini by two million units to create more manufacturing capacity for the iPhone 12 Pro, according to a new Morgan Stanley investment note seen by PED30. Apple is believed to have made the switch for the first quarter of 2021 in an effort to combat continuing lead times for the more popular iPhone 12 Pro. iPhone 12 Pro lead times remain ...
iPhone 13 Notch Feature

iPhone 13 Rumored to Feature Smaller Notch, Pro Model Cameras to Use Larger Image Sensor

Thursday January 21, 2021 1:38 am PST by
Apple's iPhone 13 series will feature a redesigned Face ID system that will allow for a smaller notch at the top of the screen, according to a new report today. The rumor comes via hit-and-miss Taiwanese industry publication DigiTimes, whose supply chain sources also claim that the ultra wide-angle lens in Apple's next-generation iPhones is due for an upgrade. The next-generation iPhones'...
maxresdefault

Video Demos macOS Catalina Running on iPad Pro via x86 Emulation

Thursday January 21, 2021 11:36 am PST by
A video demonstrating macOS Catalina running on a current 2020 iPad Pro has been shared on YouTube, giving us a look at an interesting hack that has a Mac OS up and working on one of Apple's iPads. There's limited information about how the process of getting macOS Catalina on an iPad Pro works, but it uses x86 emulation and was done through the UTM software that allows virtual machines to...
iOS 14

Apple Seeds iOS 14.4 and iPadOS 14.4 Release Candidate to Developers and Public Beta Testers

Thursday January 21, 2021 10:14 am PST by
Apple today seeded the RC version of upcoming iOS 14.4 and iPadOS 14.4 updates to developers for testing purposes, with the new betas coming a week after Apple released the second betas. iOS 14.4 and iPadOS 14.4 can be downloaded through the Apple Developer Center or over the air after the proper profile has been installed on an iPhone or iPad. Paired with the HomePod 14.4 beta that is...
iPhone OIS Feature2

Sensor-Shift Camera Stabilization Rumored to Expand to Entire iPhone 13 Lineup

Wednesday January 20, 2021 7:46 am PST by
The entire iPhone 13 lineup will feature sensor-shift optical image stabilization, compared to only the iPhone 12 Pro Max among current models, according to a brief story preview shared today by Taiwanese publication DigiTimes. "Apple's next-generation iPhones slated for launch in the second half of 2021 will all come with sensor-shift stabilization technology, according to industry...