Apple Inc. (NASDAQ:AAPL)’s smartest suppliers are the most careful

20 November 2014

GT Advanced Technologies Inc. (NASDAQ:GTAT) was previously a supplier of sapphire glass to Apple Inc. (NASDAQ:AAPL). However, earlier this year, GTAT Inc. (NASDAQ:GTAT) filed for bankruptcy. The rest of the Asian suppliers Apple Inc. (NASDAQ:AAPL) watched the scenario with more bemusement than fear.

As Apple Inc. (NASDAQ:AAPL) chose another supplier to replace GT Advanced Technologies Inc. (NASDAQ:GTAT), other supplier companies, in agreement with the iPhone maker, revised two important business lessons:

It is never sensible to rely too much on Apple Inc. (NASDAQ:AAPL)
Do not make promises that you cannot follow up

According to the suppliers, if you follow these two lessons, you will not end up in a mess like GTAT Inc. (NASDAQ:GTAT). The CFO of Pegatron, manufacturer of iPhones, Charles Lin said that his company would not see a fate similar to that of GTAT Inc. (NASDAQ:GTAT).

Pegatron had started manufacturing iPhones in 2011. In the early years, the company had to face losses as it wasn’t very good at making iPhones and often, batches were rejected by Apple Inc. (NASDAQ:AAPL) because they were not up to the mark. Pegatron suffered a lot. However, the company has a good and stable business in making personal computers so it could subsidize its production of iPhones. Now, Pegatron is able to make standard iPhones and their production earns a major buck for the company.

A manager at one of the supplying companies of Apple Inc. (NASDAQ:AAPL) said that Apple Inc. (NASDAQ:AAPL) keeps asking the suppliers to expand their manufacturing so that they can meet the high demands of new products. However, the high demand lasts for only a short period of time.

Taiwan forms an important part in the supply chain of Apple Inc. (NASDAQ:AAPL). Many firms and factories in the area assemble several devices for Apple Inc. (NASDAQ:AAPL) and also provide the internal modules for these devices such as metal casings, lenses for cameras and processors. All of the Taiwanese suppliers earn a lot of money for supplying Apple Inc. (NASDAQ:AAPL). However, none of these believe that Apple Inc. (NASDAQ:AAPL) will keep its word when the time comes. Apple Inc. (NASDAQ:APPL) has a habit of periodically changing their suppliers. So the supplying companies keep enough customers so that if Apple Inc. (NASDAQ:AAPL) decided to desert them, they do not fall. The companies are also very careful in terms of expanding their factories.

Wintek is a Taiwanese touch screen maker. It is a company that over-expanded its factories for Apple Inc. (NASDAQ:AAPL). Wintek had expanded in order to make more progress. However, soon, Apple Inc. (NASDAQ:AAPL) shifted to a new technology for thinner screens. Wintek began to lose orders. The company faced losses in the past few years.

Long-term suppliers of Apple Inc. (NASDAQ:AAPL) also try not to make many promises to the company. This is their attempt to protect themselves. In ways, it is difficult to be the supplier of Apple Inc. (NASDAQ:AAPL). Even though Apple Inc. (NASDAQ:AAPL) is a demanding client, the suppliers enjoy working for it.