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WSJ: Pegatron, not Foxconn, to be primary source of 'low-cost iPhone'

updated 11:30 pm EDT, Wed May 29, 2013

Taiwan-based supplier has long history with Apple, rising star status

Apple may be turning to another of its partners and away from Foxconn as the primary supplier of some future Apple products, if a report from the Wall Street Journal is correct. The paper reports that Taiwan-based Pegatron, which has a history with Apple that goes back to the original iBooks, has won the contract to be the primary supplier of a future "low-cost" iPhone model that has been rumored for months. The company already produces most of the iPad minis, and recently announced it was hiring an additional 40,000 workers for an unnamed project.

Foxconn is expected to remain as Apple's primary supplier of iPhones, iPads and other products -- but has stumbled on some orders from Apple, leading to a decision to diversify the number of suppliers producing iPhones and iPads. Allegedly, Foxconn officials once changed component suppliers for a part in the iPhone without notifying Apple, complained publicly that the iPhone 5 was "difficult to assemble," and produced iPhones with scratches and scuffs out of the box -- leading Apple to return as many as eight million unsuitable units to the company.

Apple CEO Tim Cook is said to still have a strong, friendly relationship with Foxconn head Terry Gou, but believes that diversification of sourcing will be advantageous for Apple as long as quality levels can be kept up. Apple already uses multiple companies to assemble other products. Although Pegatron will, according to the report, be the primary supplier of the alleged "low cost" iPhone model, Foxconn will also produce them -- and in fact may be producing the entire "first run" of the device.

The move could also hint that Apple has run into past trouble with sole-source suppliers, causing delays in products or shortages of products. Such a scenario could explain why the second half of 2013 looks to be heavy with product refreshes and new releases compared to the long dry spell of the first half. Among the products expected to debut before the end of the year: new iPhones, new iPads, updated MacBooks, an all-new Mac Pro, updates to software including OS X, iOS and possibly even a revamped iWork suite, and alleged completely new products such as a wearable Apple device and an Apple-branding HDTV.

Pegatron is a trusted supplier, handling the bulk of the iPad mini production and also responsible for some iPhone production. The alleged "low-cost" iPhone model, aimed at emerging markets, is said to carry a price tag of around $350-$400, not quite half the unsubsidized price of a comparable new iPhone 5. If Pegatron is to produce such a device, it would easily explain the company's recent drive to increase its workforce by some 40,000 workers, or about 40 percent of its total employee count.

by MacNN Staff



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