Executive Briefings

It Isn't Always Easy Being an Apple Supplier

Apple sold 150 million iPhones last year, each carrying dozens of parts made by other companies. That's why Apple is a perennial kingmaker among component manufacturers: Each time the company releases a model, some suppliers end up winners and others losers.

Apple has a reputation as a brutally tough negotiator with companies in its supply chain, demanding advanced technology at razor-thin margins, and it doesn’t hesitate to drop longtime suppliers with little notice, says Francis Sideco, a senior manager at market researcher IHS. At least nine publicly traded companies get more than 40 percent of their revenue from Apple, data compiled by Bloomberg show.

Among them is Taipei-based touchscreen maker TPK Holding, which produced the touch controls in the first iPhones. Largely on the strength of its Apple ties, the company held an initial public offering in 2010. Two years later, Apple changed the design of its iPhone screens and began buying from TPK rivals, including LG, instead.

To keep what Apple business it could, TPK resorted to assembling screen parts made by other companies—a less profitable task, says a former TPK executive who’s barred from discussing the matter by nondisclosure agreements. TPK’s net income last year fell about 50 percent, and its share price has fallen 73 percent from its 2011 high, to NT$190 ($6.30). Apple and TPK declined to comment for this story.

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Apple has a reputation as a brutally tough negotiator with companies in its supply chain, demanding advanced technology at razor-thin margins, and it doesn’t hesitate to drop longtime suppliers with little notice, says Francis Sideco, a senior manager at market researcher IHS. At least nine publicly traded companies get more than 40 percent of their revenue from Apple, data compiled by Bloomberg show.

Among them is Taipei-based touchscreen maker TPK Holding, which produced the touch controls in the first iPhones. Largely on the strength of its Apple ties, the company held an initial public offering in 2010. Two years later, Apple changed the design of its iPhone screens and began buying from TPK rivals, including LG, instead.

To keep what Apple business it could, TPK resorted to assembling screen parts made by other companies—a less profitable task, says a former TPK executive who’s barred from discussing the matter by nondisclosure agreements. TPK’s net income last year fell about 50 percent, and its share price has fallen 73 percent from its 2011 high, to NT$190 ($6.30). Apple and TPK declined to comment for this story.

Read Full Article