Hon Hai Precision Industry aka Foxconn, Apple’s contract manufacturer of choice and the world’s largest product assembler, is under threat to losing orders to rival Pegatron, which has been building older Apple products Like the iPhone 4S and 4.
According to a new Reuters report, Pegatron “wants to grab more orders to assemble the fast-selling iPhone and iPad.” And in order to achieve this self-imposed goal, the Taiwanese manufacturer, which also builds the iPad mini, is reportedly ready to offer “more competitive pricing,” even if it has to sacrifice its margins. The news gathering organization reports that Pegatron “appears to be succeeding” in pulling in more orders from Apple…
The Reuters story opines that Pegatron’s margins would eventually improve on the basis of getting more component orders. For the time being, however, Pegatron’s margins are “a lot lower” than Foxconn’s because the manufacturer is compelled to offer very competitive pricing in order to win orders from such a demanding client.
Pegatron CEO last week dismissed as inaccurate a Bloomberg report which claimed that iPad mini demand was weakening. The Taiwanese firm also told its investors to brace themselves for a second-quarter revenue drop of between 20 and 30 percent, assumable due to seasonal Apple orders as the California firm preps to ramp up manufacturing of its upcoming iPhone and iPad devices.
Pegatron is now hiring as much as an additional 40,000 workers to increase its capacity ahead of Apple refreshes. According to the supply chain chatter, the company will get to assemble Apple’s elusive budget iPhone model.
At the same time, fellow Foxconn is under pressure as Apple accounts for as much as an estimated 60 percent of its revenue. It is believed that Apple returned up to eight million handsets to Foxconn “due to appearance of substandard or dysfunctional problems.”
With manufacturing costs around $200 per handset, Foxconn would have to eat in upwards of $1 billion to cover the bad batch, in turn leaving Apple with shorter-than-expected iPhone supply.
The New York Times reported that Foxconn is hoping to build a rumored standalone Apple television set. Both Pegatron and Foxconn assemble products for a number of other computer and consumer electronics makers such as Microsoft, Dell, Hewlett-Packard and Sony, among others.