Look_at_Iphone's_Supply_Chain

iPhones were designed by Apply company, the high-tech components were purchased worldwide, and the final assembly was done in China. When the finished iPhones were sent back to America, the whole supply chain has been completed. iSuppli Research, a market investigation company, conducted a teardown report that looked into the costs in Apple’s supply chain. It was reported that processors and flash-memory chips are the essential components that Apple pays the bulk while manufacturing and assembly work that usually take place in China is the least costly part of the process-about 7 percent of the overall costs, and the profit for those suppliers is very slim. Author David Barboza pointed out that the manufacturing in recent days is becoming far more expensive in China. In the recent five years, there has been a sharp increase in the wages by more than 50 percent due to the worker shortages and government pressure, the cost of labor in China increased dramatically. Besides, China’s currency against the United States dollar has appreciated quickly which makes exports more expensive. Big pressure and challenge have been posed to those contract electronics manufacturers who contend ferocious on price to get small amount of profit. Foxconn, Apple’s major contract manufacturers in China employing 800,000 workers, survive by military style efficiency as they are low margin, high volume. The production is very labor-intensive and workers are managed under a non-human system keeping work like machines. The company is now under the pressure of the increasing costs and searching means to squeeze more costs. The first consideration is moving production to inland parts of China because the wages are lower by twenty to thirty percent. In addition, Foxconn is looking for sourcing with larger and cheaper raw materials worldwide. Furthermore, Arthur Huang, a Foxconn spokesman said they could research and manufacture their own components. To conclude, Mr. Wang from iSuppli Research claimed that Foxconn’s operation model was not sustainable. The kind of contract manufacturing and assembly work is also not preferred in China any more as the returns and values to companies or even the country are small and limited. Innovation and knowledge will improve the profitability and bring more value.