Profit Margin Tensions Souring Relationship Between Apple and Foxconn

The relationship between longtime partners Apple and Foxconn is eroding due to a battle over profit margins, according to a new report from The Information. While Apple's gross profit margins are close to 40 percent, Foxconn's profit margins are in the single-digit percentage points, leading Foxconn to employ questionable tactics in an effort to grow its profits.

foxconniphone12
For manufacturing projects, Foxconn routinely tells Apple that it hired more workers than it actually did. Foxconn has also used Apple-owned equipment when making devices for Apple's rivals, and has taken shortcuts on component and product testing. As a result, Apple has increased monitoring and tracking of Foxconn employees and its equipment that's in Foxconn facilities.

More than two dozen former Foxconn and Apple employees told The Information that the relationship between the companies is changing as Apple seeks to diversify its supply chain. Apple originally spoke to Foxconn about manufacturing the AirPods Pro, for example, with Foxconn expecting to win the contract and retrofitting a facility for production purposes only to see the contract go to Foxconn's competitors.

Foxconn manufactures between 60 and 70 percent of the iPhones sold each year, and Apple is by far Foxconn's largest customer, so supply chain diversification is a major threat. Under Tim Cook, Apple has sought cost reductions and implemented aggressive audits of manufacturing lines.

To generate more profit, Foxconn has tried selling its own equipment for manufacturing and component testing with limited success, as well as moving some manufacturing products in-house. Foxconn developed its own chemicals for polishing the iPhone's screen rather than relying on chemicals from a Japanese company, for example.

Foxconn has disregarded some of Apple's policies, using Apple equipment for non-Apple products as mentioned above and providing Google employees with a tour of a Foxconn factory manufacturing the 12-inch MacBook ahead of its release. Foxconn also reportedly cuts corners with manufacturing. With the ‌iPhone‌ 7, some reject phones had loose screws or tiny bits of metal that were supposed to be disassembled, but Foxconn instead opened the flawed phones, removed debris, and resealed them to avoid wasting materials, a process hidden from Apple.

More detail on the souring relationship between Foxconn and Apple and additional examples of tension between the two companies can be found in The Information's full report, which is well worth reading.

Top Rated Comments

chachawpi Avatar
28 months ago
Maybe Apple should use its size and power for good and take a cut in their own profit margins for the purpose of bringing the manufacturing home.
Score: 46 Votes (Like | Disagree)
rjp1 Avatar
28 months ago
Apple’s greed ... every where ... will probably be what will bring about their downfall.
Score: 28 Votes (Like | Disagree)
nwcs Avatar
28 months ago
I’m surprised it took this long for this to occur. This may be the reason why Apple has been diversifying its manufacturing rather than political issues or humanitarian ones.
Score: 18 Votes (Like | Disagree)
robjulo Avatar
28 months ago
Of course...greed that would be excoriated on this site if it were any other company other than Apple, will be cheered by the usual suspects here.
Score: 16 Votes (Like | Disagree)
JetBlack7 Avatar
28 months ago

Maybe Apple should use its size and power for good and take a cut in their own profit margins for the purpose of bringing the manufacturing home.
If they wanted that, they would be manufacturing in the US a long time ago. They just prefer to get a much larger profit margin with much cheaper labor.
Score: 13 Votes (Like | Disagree)
chachawpi Avatar
28 months ago

We need to include *all* the tech giants in this, not just Apple. And we also should not forget the telecomms.

Jacques Attali was right. Corporations and their CEOS are becoming the new feudal overlords.
A company with Apple's size, power, and influence should feel obligated to move the goalposts and set an example for others.
Score: 11 Votes (Like | Disagree)

Related Stories

AppleVsFoxconn Feature 2

Apple Supplier Foxconn Forced to Suspend Operations in Shenzhen Due to Lockdown

Monday March 14, 2022 2:12 am PDT by
Apple's leading supplier, Foxconn, has been forced to suspend operations in Shenzhen, China, following a city-wide lockdown that sees nonessential businesses close, public transportation halted, and residents advised not to leave their home unless for essential activities only. As Nikkei Asia reports: Shenzhen is home to major tech companies such as Huawei, Oppo and TCL, and is also one of ...
vanarama apple car concept

Apple Suppliers Envisioning Long-Term Apple Car Supply Chain

Thursday March 3, 2022 4:43 am PST by
Apple suppliers are positioning to manufacture and assemble the company's long-rumored electric vehicle (EV), according to a report from DigiTimes. Apple Car concept render by Vanarama based on patents filed by Apple The report claims that Foxconn, the colossal manufacturer behind most iPhone models, and Luxshare Precision, the assembler behind Apple devices such as AirPods, are angling to...
china floods foxconn

iPhone Supplier Foxconn Says China Floods Not Impacting Operations

Wednesday July 21, 2021 1:12 am PDT by
Apple supplier Foxconn, which is Apple's largest and most important supplier for the iPhone, has said that torrential floods that have hit the Henan province in China, where it houses its main iPhone production plant, have not been impacted operations. Photo credit to China News Service (via Focus Taiwan) In a statement to CNBC, Foxconn says that its main factory in Zhengzhou, the capital of ...
Untitled

Foxconn Offers 'Record-High' Bonuses to Recruit Workers for iPhone 13 Assembly

Tuesday June 22, 2021 7:29 am PDT by
Apple's largest manufacturing partner Foxconn is offering "record-high" signing bonuses in an effort to recruit workers for iPhone 13 production over the next few months, according to the South China Morning Post. ‌iPhone 13‌ Pro in Matte Black render via EverythingApplePro The report claims Foxconn is offering up to 8,000 yuan ($1,235) as a signing bonus to former workers willing to return...
iphone12 lineup wide

Foxconn's iPhone 12 Output in India Hit By Local Lockdowns

Tuesday May 11, 2021 3:23 am PDT by
iPhone 12 production at a Foxconn factory in India has been cut by more than 50% amid a lockdown, and multiple reported cases of COVID-19 infections for workers at the plant, according to a new report from Reuters. The main factory located in Tamil Nadu, a state under extreme lockdown measures, has been forced to significantly cut back on production. According to sources who spoke to Reuters,...
bloomberg lordstown

Apple Supplier Foxconn Agrees to Buy Ohio Car Factory for $230 Million

Friday October 1, 2021 4:27 am PDT by
Apple supplier Foxconn has agreed to buy a former General Motors factory in Ohio, a move that potentially puts it in a better position to assemble cars for Apple, should the tech giant choose to formally enter the automotive sector in the future (via Bloomberg). Image credit: Dustin Franz/Bloomberg The purchase is part of a $280 million deal Foxconn has agreed with embattled automaker...
iPhone 12 Made in India

Apple Puts Foxconn Factory in India on Probation Following Protests

Wednesday December 29, 2021 4:23 am PST by
Apple has put Foxconn's factory near Chennai in southern India on probation following worker protests and the discovery of substandard living conditions (via Bloomberg). The factory in Sriperumbudur, which assembled iPhone 12 models prior to operations being suspended, has been shut down until "necessary improvements" are made. An Apple spokesperson told Bloomberg:Following recent concerns...
chinafoxconn

Apple Supplier Foxconn Says Shortages Now Easing

Thursday February 10, 2022 5:40 am PST by
Foxconn, the biggest assembler of iPhones, today announced that the component shortages that have constrained the supply of devices over the past two years are now showing signs of easing, Bloomberg reports. The first quarter of 2022 is said to be experiencing a "major improvement" in parts shortages, and "overall supply constraints" are expected to ease in the second half of the year, a...

Popular Stories

maxresdefault

Can't Get an iPhone 14 Pro? Here's Why You Should Wait for the iPhone 15 Ultra

Monday December 5, 2022 11:44 am PST by
Due to production issues at Apple supplier factories in China, the iPhone 14 Pro and iPhone 14 Pro Max are backordered and basically out of stock at every store. If you were planning to gift or receive an iPhone 14 Pro model for the holidays and didn't already get one, you're basically out of luck because they're gone until late December. Subscribe to the MacRumors YouTube channel for more ...
iPhone Measure Height

Newer iPhones Allow You to Measure Someone's Height Instantly — Here's How

Saturday December 3, 2022 10:23 am PST by
iPhone 12 Pro and Pro Max, iPhone 13 Pro and Pro Max, and iPhone 14 Pro and Pro Max models feature a LiDAR Scanner next to the rear camera that can be used to measure a person's height instantly in Apple's preinstalled Measure app. To measure a person's height, simply open the Measure app, point your iPhone at the person you want to measure, and make sure they are visible on the screen from...
General iOS 16 Feature Yellow

iOS 16.2 for iPhone Launching This Month With These 8 New Features

Thursday December 1, 2022 8:44 am PST by
Apple plans to publicly release iOS 16.2 for the iPhone in mid-December, according to Bloomberg's Mark Gurman. The update remains in beta testing for now, with at least eight new features and changes already uncovered so far. iOS 16.2 introduces a number of new features, including Apple's new whiteboard app Freeform, two new Lock Screen widgets for Sleep and Medications, the ability to hide...
14 vs 16 inch mbp m2 pro and max feature 1

Major RAM Upgrade Coming to Next-Generation MacBook Pro

Friday December 2, 2022 2:03 am PST by
The next-generation MacBook Pro models could feature faster RAM, according to a recent report from a reliable source. MacRumors Forums member "Amethyst," who accurately revealed details about the Mac Studio and Studio Display before those products were announced, recently provided information about Apple's upcoming 14- and 16-inch MacBook Pro models. The new machines are expected to feature...
iOS 16

When Will iOS 16.2 Launch?

Friday December 2, 2022 2:13 pm PST by
Apple in late October began testing iOS 16.2 and iPadOS 16.2 updates, providing betas to both developers and public beta testers. As of now, we've had four total betas, with the fourth beta having been released earlier this week. iOS 16.2 and iPadOS 16.2 are expected before the end of the year, and we thought we'd try to narrow down the launch timeline. With only four betas released since...
apple ar headset concept 1

Kuo: Apple Headset Shipments Potentially Delayed Until Second Half of 2023

Sunday December 4, 2022 7:38 am PST by
Mass shipments of Apple's long-rumored AR/VR headset may be delayed until the second half of 2023 due to unspecified "software-related issues," according to the latest information shared today by tech analyst Ming-Chi Kuo. Apple headset render by Ian Zelbo Kuo said mass shipments of components for the headset are still likely to begin in the first half of 2023, but he believes that mass...
iPhone 14 Pro Purple Side Perspective Feature Purple

iPhone 15 Pro Rumored to Have These 5 Exclusive Features

Saturday December 3, 2022 10:55 am PST by
While we're still around nine months away from Apple unveiling the iPhone 15 lineup, rumors already suggest that the higher-end Pro models will have even more exclusive features than usual compared to the standard models next year. There are currently at least five features rumored to be exclusive to iPhone 15 Pro models:A17 chip: iPhone 15 Pro models will be equipped with an A17 Bionic...
nothing phone 2

Nothing Plans to Launch Smartphone in US to Take on Apple's iPhone

Monday December 5, 2022 12:38 am PST by
UK-based tech company Nothing plans to launch a smartphone in the US to directly compete with Apple's iPhone, according to a new report out today. In an interview with CNBC, Nothing CEO Carl Pei said the startup is in "early conversations" with American cellular carriers about launching a new phone in the US, but he stopped short of naming any of the carriers or the phone model. Nothing...
introducing apple music sing

Apple Music Adding a Karaoke Experience With Apple Music Sing

Tuesday December 6, 2022 7:09 am PST by
Apple today announced Apple Music Sing, a new feature in Apple Music that lets users sing their favorite songs with adjustable vocals and more. Apple Music Sing will utilize Apple Music's real-time lyrics to allow users to sing to their favorite songs using adjustable vocals, background vocals, and duet view to allow more than one singer.Apple Music Sing includes: Adjustable vocals: Users...