WSJ: Apple contracts two new manufacturers to build iOS devices

iPhone 5c (Manufacturing 001)

Apple has long relied on Foxconn, the world’s top manufacturer, to assemble its gadgets. In small part, Apple also taps Foxconn’s rival, Taiwan-based Pegatron, on a regular basis for some orders. According to a new Wall Street Journal report Wednesday, Tim Cook & Co. have now contracted an additional two companies to help assemble iPhones and iPads amid growing demand for the products.

Mind you, it’s not like Apple suddenly stopped loving Foxconn – the company will continue to build the iPhone 5s – but the report makes a passing mention of Apple apparently being dissatisfied with the high repair costs over defective iPhone 5 units and ongoing labor controversies surrounding Foxconn…

Lorraine Luk, writing for WSJ, learned Apple contracted Compal Communications and Wistron as it “tries to ensure adequate supply to meet consumer demand”. The former will get to assemble the iPad minis and the latter is tasked with building the iPhone 5c.

Meanwhile, Foxconn will continue to focus on iPhone 5s manufacture.

iPhone 5 (manufacturing process 003)

Wistron also assembles Nokia and BlackBerry phones, while Compal builds Lenovo tablets and smartphones for Nokia and Sony. Both companies are based out in Taiwan.

An unnamed Foxconn exec told WSJ:

Hon Hai Chairman Terry Gou is not willing to cut contract prices substantially to get more orders from Apple. Hon Hai is also aware of the risk of building gigantic production capacity for a single customer so it is adopting a more cautious stance on expanding production.

Compal “has also reserved a plant” to produce iPhones in China next year, though the report states that Apple has yet to place orders. The company will start building the iPad mini next year, people familiar with the matter told WSJ without specifying whether Compal will get to build the first-generation iPad mini or the upcoming Retina device.

iOS 7 teaser (iPhone 5c ad 007)

Wistron is scheduled to start mass-producing the iPhone 5s “later this year”.

In addition to Wistron, both Foxconn and Pegatron also act as iPhone 5c assemblers.

While I believe that Foxconn’s labor problems and iPhone 5 quality control issues have been ticking Apple off for some time, diversifying your suppliers makes a lot of sense to mitigate risk and make these companies compete for contracts.