Report Says Apple and Foxconn Relationship Is Going Sour over Low Profit Margins

The partnership between Apple and Foxconn has stood the test of time. However, things seem to have gone south with Apple and Foxconn’s relationship “eroding” over profit margins. A report by TheInformation highlights how Foxconn’s profit margins are still in the single digits while Apple is reporting nearly 40 percent profit. Furthermore, the report also highlights how Foxconn is employing various means to increase its profit margins.

Typically, before starting manufacturing, Foxconn informs Apple on the number of workers needed. The report claims Foxconn exaggerates the count of workers and hires fewer workers to make more profit. That’s not all; Foxconn is also using Apple-branded equipment to manufacture smartphones for Apple’s rivals.

The report also highlights that Foxconn is taking shortcuts when it comes to product testing. This has forced Apple to increase the vigilance and track Foxconn employees in its manufacturing facility. Foxconn employed the same method when it was asked to manufacture AirPods Pro. The company gave Apple an inflated count and instead “negotiated Foxconn’s billings with Apple representatives.”

It wasn’t the first time Foxconn did this, say numerous Foxconn employees. The manufacturer has routinely asked Apple for a higher headcount than required, as Foxconn has tried to eke out more profit or win new lines of business from Apple to boost its razor-thin margins.” Apart from this Apple is working on diversifying its supply chain and it did not go down well with Foxconn.

Our Take

Razor-thin margins are characteristics of the hardware and smartphone manufacturing industry. Apple has successfully penetrated the premium market and is known for its brand loyalty. It is also not fair for Foxconn to employ dubious means to inflate manufacturing costs and increase profits. We hope both the companies resolve their issue and focus on what they do best.

[via TheInformation]