Profit Margin Tensions Souring Relationship Between Apple and Foxconn

The relationship between longtime partners Apple and Foxconn is eroding due to a battle over profit margins, according to a new report from The Information. While Apple's gross profit margins are close to 40 percent, Foxconn's profit margins are in the single-digit percentage points, leading Foxconn to employ questionable tactics in an effort to grow its profits.

foxconniphone12
For manufacturing projects, Foxconn routinely tells Apple that it hired more workers than it actually did. Foxconn has also used Apple-owned equipment when making devices for Apple's rivals, and has taken shortcuts on component and product testing. As a result, Apple has increased monitoring and tracking of Foxconn employees and its equipment that's in Foxconn facilities.

More than two dozen former Foxconn and Apple employees told The Information that the relationship between the companies is changing as Apple seeks to diversify its supply chain. Apple originally spoke to Foxconn about manufacturing the AirPods Pro, for example, with Foxconn expecting to win the contract and retrofitting a facility for production purposes only to see the contract go to Foxconn's competitors.

Foxconn manufactures between 60 and 70 percent of the iPhones sold each year, and Apple is by far Foxconn's largest customer, so supply chain diversification is a major threat. Under Tim Cook, Apple has sought cost reductions and implemented aggressive audits of manufacturing lines.

To generate more profit, Foxconn has tried selling its own equipment for manufacturing and component testing with limited success, as well as moving some manufacturing products in-house. Foxconn developed its own chemicals for polishing the iPhone's screen rather than relying on chemicals from a Japanese company, for example.

Foxconn has disregarded some of Apple's policies, using Apple equipment for non-Apple products as mentioned above and providing Google employees with a tour of a Foxconn factory manufacturing the 12-inch MacBook ahead of its release. Foxconn also reportedly cuts corners with manufacturing. With the ‌iPhone‌ 7, some reject phones had loose screws or tiny bits of metal that were supposed to be disassembled, but Foxconn instead opened the flawed phones, removed debris, and resealed them to avoid wasting materials, a process hidden from Apple.

More detail on the souring relationship between Foxconn and Apple and additional examples of tension between the two companies can be found in The Information's full report, which is well worth reading.

Popular Stories

maxresdefault

Apple Releases iOS 18.4 With Priority Notifications, Ambient Music, New Emoji and More

Monday March 31, 2025 10:03 am PDT by
Apple today released iOS 18.4 and iPadOS 18.4, the fourth major updates to the iOS 18 and iPadOS 18 operating system updates that came out last year. iOS 18.4 and iPadOS 18.4 come two months after Apple released iOS 18.3 and iPadOS 18.3. Subscribe to the MacRumors YouTube channel for more videos. The new software can be downloaded on eligible iPhones and iPads over-the-air by going to...
iPhone 17 Pro 34ths Perspective

iPhone 17 Pro Launching Later This Year With These 10 New Features

Sunday March 23, 2025 10:00 am PDT by
While the iPhone 17 Pro and iPhone 17 Pro Max are not expected to launch until September, there are already plenty of rumors about the devices. Below, we recap key changes rumored for the iPhone 17 Pro models as of March 2025: Aluminum frame: iPhone 17 Pro models are rumored to have an aluminum frame, whereas the iPhone 15 Pro and iPhone 16 Pro models have a titanium frame, and the iPhone ...
top stories 2025 03 29

Top Stories: WWDC 2025 Announced, iPhone 17 Pro and iOS 19 Rumors, and More

Saturday March 29, 2025 6:00 am PDT by
Apple's big developer event is a little over two months away, and rumors about what we can expect to see in Apple's next major operating system updates are becoming increasingly frequent. A public release of iOS 18.4 is also imminent with a number of updates and improvements, although we won't be getting the major Apple Intelligence Siri upgrades that had reportedly been planned for this...
Magic Mouse Green

What to Expect From the Magic Mouse 3

Saturday March 29, 2025 10:15 am PDT by
Apple is reportedly working on a new Magic Mouse. Below, we recap what to expect. The two key rumors for the Magic Mouse 3 so far include a relocated charging port, along with a more ergonomic design. It was briefly rumored that the Magic Mouse 3 would also feature voice control, but that was misinterpreted information. Relocated Charging Port While the Magic Mouse switched from...
iOS 18

iOS 18.4 Expected Next Week - Here Are the Release Notes

Friday March 28, 2025 2:01 pm PDT by
With the second release candidate of iOS 18.4 that Apple seeded out today, the company finally provided us with release notes that give a full rundown on what to expect. There's an Apple Vision Pro app, new Apple Intelligence features for notifications and additional language support, plus an Apple News Food feature for Apple News+ subscribers, and several updates that should improve the...
iOS 19 Mock WWDC25 Feature

iOS 19 Expected to Run on These iPhones

Monday March 31, 2025 5:28 pm PDT by
iOS 19 will not be available on the iPhone XR, iPhone XS, or the iPhone XS Max, according a private account on social media site X that has accurately provided information on device compatibility in the past. The iPhone XR, iPhone XS, and iPhone XS Max all have an A12 Bionic chip, so it looks like iOS 19 will discontinue support for that chip. All other iPhones that run iOS 18 are expected...
Foldable iPhone 2023 Feature Homescreen

Six Things to Know About Apple's Upcoming Foldable iPhone

Friday March 28, 2025 3:54 pm PDT by
We've been hearing rumors about a foldable iPhone for almost a decade now, but it looks like we might finally see the device come to fruition in 2026. We're going to be waiting many more months for the foldable iPhone, but so far we're hearing good things. Apple wants to make it creaseless. It's taken Apple multiple years to design a foldable iPhone that it's satisfied with because Apple ...
iOS 19 visionOS UI Elements

Apple Codename Provides Clue About iOS 19's Rumored New Design

Sunday March 30, 2025 6:40 am PDT by
Multiple sources have claimed that iOS 19 will introduce a new design with more translucent buttons, menus, notification banners, and more, and there is now another clue that points towards this glass-like appearance. Bloomberg's Mark Gurman today said the new design project is codenamed "Solarium" internally. A solarium is a room with glass walls that allow in plenty of sunlight, so this...

Top Rated Comments

chachawpi Avatar
58 months ago
Maybe Apple should use its size and power for good and take a cut in their own profit margins for the purpose of bringing the manufacturing home.
Score: 46 Votes (Like | Disagree)
rjp1 Avatar
58 months ago
Apple’s greed ... every where ... will probably be what will bring about their downfall.
Score: 28 Votes (Like | Disagree)
nwcs Avatar
58 months ago
I’m surprised it took this long for this to occur. This may be the reason why Apple has been diversifying its manufacturing rather than political issues or humanitarian ones.
Score: 18 Votes (Like | Disagree)
robjulo Avatar
58 months ago
Of course...greed that would be excoriated on this site if it were any other company other than Apple, will be cheered by the usual suspects here.
Score: 16 Votes (Like | Disagree)
JetBlack7 Avatar
58 months ago

Maybe Apple should use its size and power for good and take a cut in their own profit margins for the purpose of bringing the manufacturing home.
If they wanted that, they would be manufacturing in the US a long time ago. They just prefer to get a much larger profit margin with much cheaper labor.
Score: 13 Votes (Like | Disagree)
chachawpi Avatar
58 months ago

We need to include *all* the tech giants in this, not just Apple. And we also should not forget the telecomms.

Jacques Attali was right. Corporations and their CEOS are becoming the new feudal overlords.
A company with Apple's size, power, and influence should feel obligated to move the goalposts and set an example for others.
Score: 11 Votes (Like | Disagree)