Why suppliers must not go bananas over Apple

 
Shruti Tripathi Chopra
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World Aids Day At Apple Store Berlin
Beware of the supplier switcheroo (Source: Getty)

Apple has never been juicier: shares are up over 42 per cent this year and hit an all-time high this month when its iPhone and Mac sales smashed forecasts. In more good news for the tech titan, the noise around production delays of the new £999 iPhone X was somewhat drowned out by the astonishing demand for it. However, this hasn’t been easy on the ear for some Apple suppliers.

Foxconn is one of them - the sole assembler of the iPhone X reported a 39 per cent fall in quarterly profit yesterday - far worse than expected and its largest drop since the recession.

The Taiwanese giant’s lacklustre performance shows that depending on a single customer or contract for a chunk of your revenues, or putting all your apples in one basket, could prove to be a risky strategy.

AJ Bell analyst Russ Mould points out that Foxconn relies on Apple for over half of its sales. With its share price having peaked more than two years ago, investors may begin to worry that you can indeed have too much of a good thing.

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It’s easy to understand the attraction of hitching yourself to a near trillion-dollar company, but Apple’s lack of loyalty has stung some big names in the past. In April, UK chipmaker Imagination Technologies’ shares fell a staggering 70 per cent after Apple, its largest customer, unexpectedly revealed it would stop using its graphics processors. Come June, the group put itself up for sale and a deal with a private equity firm was agreed by September. Other tech suppliers that have met a similar fate over the years are Portal Player and Wolfson that were sold off following Apple’s supplier switcheroo.

Of course, if a company the size of Apple comes knocking on your door you don’t turn it away. But, like any other business, Apple suppliers need to future-proof themselves by diversifying. They need to cash in on the credibility that comes with being an Apple supplier to attract new clients where possible, while creating new products and exploring new markets.

No doubt, there are suppliers such as Qorvo, Skyworks and Taiwan Semiconductor Manufacturing Company that are currently riding the wave of Apple’s success. But they must bear in mind that Apple takes no prisoners in its quest for domination, nor does it carry passengers. If it finds a more competitively-priced or better-quality supplier, it may well hang up on you overnight.

Read more: Crunch time for Apple as iPhone fanfare fades

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