Apple looking to add new Taiwanese suppliers to build 2014 iDevices

iphone 5 production zoom

According to the latest chatter, Apple of California is looking to introduce new Taiwanese suppliers to its supply chain in a bid to diversify manufacture of iOS devices beyond the current production partners Foxconn and Pegatron.

The development comes just as Foxconn reported better-than-expected June quarter earnings on increased sales of its TV set making business.

Meanwhile, a city in China’s Henan Province is helping Foxconn increase its production capacity and inviting Apple to set up a domestic sales center…

The reliable KGI Securities analyst Ming-Chi Kuo wrote in a note to clients obtained by AppleInsider that supplier diversification will see Apple commission Taiwan’s Compal Communications, Wistron and Inventec Appliances to help build iPhones, iPod touches and iPads in 2014.

Compal Communications designs and manufactures handsets for Nokia, Sony and Lenovo. Wistron is a supplier of EMS services to BlackBerry and Inventec Appliances is currently an iPod suppler so it would expand its contracts beyond the iPod.

The move, Kuo explains, will boost Apple’s bargaining power while strengthening shipment stability.

If Foxconn and Pegatron struggle to increase new iOS orders or high-end product exposure, we think their days of rapid growth, driven by Apple, could be at an end.

Currently, iOS devices are exclusively being assembled by Pegatron and Foxconn.

iPhone 5 (manufacturing process 003)

According to The Wall Street Journal, Pegatron is thought to have landed a lucrative contract to build a rumored less-pricey iPhone, a notion both supply chain rumors and its CEO semi-confirmed.

Kuo thinks the firm could handle as much as 75 percent of budget iPhone production. Apple has been recently reported as moving away from Foxconn as Pegatron ostensibly grabbed the majority of next-gen iPad orders.

One of the reasons for Apple’s distancing from Foxconn are manufacturing issues that resulted in dings and scratches on iPhone 5 units during the first few weeks of availability. Matter of fact, China Business reported in April that Apple returned up to eight million iPhones to Foxconn due to quality issues.

Black iPHone 5 scratch 002

Foxconn yesterday announced June quarter revenue of NT$897 billion, or about $30 million, a 0.6 percent annual increase and better than the NT$829 billion expected by analysts.

Bloomberg writes that Foxconn CEO Terry Gou believes profits will increase due to growing demand for television sets, which Foxconn builds for some Western brands. The contract manufacturer doesn’t expect the Apple biz to improve because new iOS devices are not expected until Fall.

Gou paid $840 million out of his own pocket for a 37.6 percent stake for Sharp’s cutting-edge LCD panel plant. It’s interesting that Apple is reportedly moving to IGZO panels for upcoming iPads and MacBooks.

IGZO (indium gallium zinc oxide) technology was co-developed by Sharp and Semiconductor Energy Laboratories and promises significant power savings as IGZO panels need just ten percent of power traditional LCDs consume.

In related supply chain news, Taiwan’s United Daily News reported Wednesday that the city of Zhengzhou in China’s Henan Province will create the conditions for Foxconn to increase production capacity at its precision plant.

Additionally, the city is said to be actively courting Apple to set up a domestic sales center in the city, according to Zhengzhou mayor said Ma Yi.

The precision plant has increased age requirement and is now only recruiting people between 23 and 40 years old, up from the previous 18-40 age range.