Foxconn Able to Retain Apple Contracts with Razor Thin Profit Margins [Chart]

Bloomberg posts an interesting chart that illustrates just how important an Apple manufacturing contract means to Foxconn, builder of the iPhone and iPad. Since the debut of the iPhone in 2007, Apple’s profit margins have doubled, whereas Foxconn margins have decreased, to its current razor thin 1.5%:

“Hon Hai is willing to sacrifice margins so it can get volume and scale,” said Vincent Chen, an analyst at Yuanta Financial Holding Co. in Taipei who has a “buy” rating on the stock. “Apple is also getting so large that it needs a supplier that can provide such scale.”

Foxconn was previously reported to replace some of its workers with over 1 million robots over the next few years to combat rising labour costs and improve efficiency and yield rates, crucial to securing Apple’s lucrative business. Apple has rumoured to have seeked out other manufacturers, such as Pegatron Technology to produce the iPhone 4S.

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  • Rubdubish

    Apple is turning into the Walmart of the tech.  Their products cost a fair deal; everybody in the supply chain should do well. I’d even pay a little more to have them built in North America.  🙁   

  • The Walmart of tech? All major electronics are outsourced outside of North America. It’s tough to find any major brands made here.

  • Bill

    Apple = Greed.

    For the cost of the products, you’d think nothing was outsourced.

  • What about the iPad though? Its entry for a 9.7″ tablet is $499, which competitors have had trouble matching.

    Even if you compare the cost of unlocked iPhones, comparable Android phones are about the same or even more expensive.

    I would say the MacBook and iMac line is definitely a premium product. But can they be compared to Dells in terms of build quality?

  • Rubdubish

    Walmart, in regards of price squeeze. Read up on their bargaining tactics.

  • Poodles

    “Seeked out?” Please learn English. It’s “sought out.”

  • With all the actual labour being done by robots, exactly which jobs will be providing the money needed to have consumers be able to buy the things? Exactly how is this trend any different from a Soviet-style planned economy?