Will suppliers refuse Apple orders?

According to reports, Apple asked Taiwan's downstream component suppliers to reduce the price of component products by nearly 20%, and unsurprisingly, the suppliers refused. For suppliers, reducing component prices will cause the company's product profits to decline severely. So, why did Apple do this? Is it really just because of Apple's sales difficulties?

Apple's predicament: sales and profits continue to fall

For Apple, both the iPhone 6s and the iPhone SE launched at the beginning of this year have not been very good in terms of reputation and sales. In particular, the iPhone SE was considered by Cook to be a product that would save Apple before the launch of the iPhone 7. However, except for a slightly better performance in India, sales in other regions were not as good as expected. Now that Apple's product sales have been declining for three consecutive quarters, profits have continued to decline, and Apple's industry myth is slowly collapsing.

We all know that iPhones have a small update once a year and a big update every two years. The iPhone 6 is a big update, so its sales are very impressive. However, the iPhone 6s has some minor upgrades in hardware and software, and the appearance that users care about the most has not changed much. In addition, some models of the rose gold version of the 6s have slow response speeds due to hardware and system problems, which has caused bad reputation and brand impact. A series of backlog problems came at the most difficult time for Apple. Although some users bought the 6s later, it was far from comparable to the 5s. It took less than a year for the initial growth rate to decline to negative growth.

In addition, the sluggish smartphone market has also affected the sales of Apple phones. As Android phones gradually occupy the market, although the market share of mobile phone manufacturers such as Huawei, Xiaomi, and LeTV is not particularly high, they cannot be underestimated when added together. Apple iOS can no longer compete with Android models. The only problem of the Android system, slow operation and lag, has also changed with the upgrade of Android versions, and it is no problem to meet the needs of non-professional users. Therefore, the situation of Apple phones is very embarrassing, especially now that the iPhone 7 is being criticized by the industry, and Apple is in urgent need of a product to carry the banner of the iPhone.

The conflict between Apple and its suppliers, and the lack of understanding of the performance of the Chinese market

After cooperating with Taiwanese component suppliers for many years, Apple should understand the principle of business, so why does it still ask suppliers to lower prices? This is obviously unreasonable. When Apple's sales are declining and product innovation is weak, Apple should work harder on products instead of components. The industry is also puzzled.

If we look at the performance of Apple phones in the Chinese market, we can see that Apple, as an imported product, is still not easy to adapt to the Chinese market. While OPPO and Vivo have taken advantage of their channel advantages to quickly seize the market, launching star phones with national functions such as photography and charging, and seeking new designs, Apple has only launched a small-screen model. In addition, domestic smartphones are now gathering to hold press conferences, with new products one after another, while Apple still launches one model a year, and only has a major update every two years, which can no longer meet the needs of market users.

Now, asking Taiwanese suppliers to reduce the price of parts is considered unreasonable by the outside world. Unless there is a reason that the supplier cannot refuse, if it is based solely on a long-term cooperative relationship, it would underestimate the profit-seeking nature of businessmen.

Apple is well prepared, but this is not the worst outcome

Apple certainly does not only have these suppliers. On the contrary, it has been looking for other component suppliers. Xinbang Technology and Wangsi Technology will join the supply of components for Apple iPhone 7, and there will be other new suppliers for future new products. However, we should not forget that after four years of love and hate, Hon Hai won the fat piece of Sharp. Obviously, Hon Hai also wants to provide Apple with screens and other components. Once the deal is reached, Hon Hai's status will rise and it will have a say in Apple. For Apple, it is not a good thing for a supplier to provide too many services. So, will the negotiations between Apple and suppliers be a response to Hon Hai's ambitions? It is very likely.

However, Apple is still in a low period, and it is impossible to openly embarrass suppliers. Moreover, the iPhone 7 is about to be launched. If the relationship with suppliers is strained, it will inevitably affect the shipment of iPhone 7. Therefore, it has not yet reached the point of being out of control, and it will not develop to that point. Suppliers focus on their interests. If Apple is willing to negotiate, there is still a chance. After all, although Apple is in a low period, it is still a wise choice to obtain Apple orders.

The author believes that although the relationship between Apple and its suppliers will not break down immediately, after this incident, the relationship between them is no longer as unbreakable as before, and both sides will inevitably be on guard against each other. In the near future, Apple will not be particularly strong in asking suppliers to lower prices, and suppliers will not really refuse Apple's orders. Both sides need a downhill slope, but if the iPhone 7 can once again increase the sales of Apple products and raise Apple's brand value, the result is hard to say. Whether Apple will lower the price of components by ordering volume, we will only know when the time comes.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.