The Supply Chain Matters blog highlights added reports related to reduced long-term demand for Apple iPhones, the consequent implications across Apple’s supplier networks, and a likely broader concern for high-tech and consumer electronics supply networks in 2019.

In our previous update in mid-November, we highlighted a report from Nikkei Asian Review indicating that Apple has requestediPhoneX its Asian based suppliers and contract manufacturers not to expand production capacity for the newer, recently announced and lower priced iPhone XR model.  Three of Apple’s suppliers, Lumentum Holdings, Japan Display and Qorvo, had each scaled back revenue expectations for 2019. In our blog commentary, we speculated as to increased ripple effects, and indeed, added developments are surfacing.

Since our last update, Nikkei Asian Review, citing informed sources, reported that Foxconn, Apple’s largest and most prominent contract manufacturer, intends to cut up to 100,000 workers by the end of 2018.  Further reported was that Taiwan-based printed circuit board supplier Career Technology has already cutback on “hundreds of contractors” in response to expectations of sluggish demand.  The Nikkei report cited the same sources as indicating that Foxconn anticipates that Apple and other consumer electronics product providers will seek price cuts in the range of 10 to 20 percent, which is somewhat normal, but likely harder to achieve with a significant cutback in annual production volumes. Foxconn declined to acknowledge the Nikkei report of job cuts. Bloomberg initially reported that Foxconn had plans to reduce costs by $2.9 billion in 2019, while implementing plans for added manufacturing automation.

This week, an additional Nikkei report indicated that Sharp, a subsidiary of Foxconn, has released more than 3000 foreign temporary workers in Japan, because of plans to move the production of iPhone sensors to an existing manufacturing Foxconn facility in China. Our readers may recall that during the 2017 new product introduction and manufacturing ramp-up cycle for iPhones, there were initially challenges related to the functioning and production yield of the newly designed fingerprint sensor.  Sharp was one of the supplier’s manufacturing such sensors, and according to the report, Sharp ramped-up the hiring of temporary employees to increase output with the number of temporary foreign workers peaking at upwards of 4000 in late 2017.


As noted in prior blog commentary, the effects of annual Apple iPhone production levels will continue to cascade across the various tiers of the supply network.

Compounding broader high-tech and consumer electronics supply networks is the current tariff actions involving China and the United States, which adds even more uncertainty as to volume expectations and added costs as a result of tariffs. Major electronics branded companies like Apple, as well as others across supply networks are seeking price concessions to buffer the added costs of tariffs. Where the buck stops is a major challenge. Another possible outcome may be a reluctance to engage in any multi-year component supply contracts due to the uncertainty of the current geo-political landscape which includes tariff actions, and potential reform of the World Trade Organization (WTO). With increased political uncertainties related to Brexit, the Eurozone, and added political turmoil in the United States, global supply chains are quickly reaching yet another point of high uncertainty.

What seems probable is that 2019 will present a lot of added challenges for high-tech and consumer electronics supply networks.


Bob Ferrari

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