Apple Suppliers Talk About Apple Specs, Secrecy, Inspections

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Apple's suppliers in China might fight for contracts with the Cupertino company, but it doesn't stop them from complaining about the terms required by Apple to get the contract. Several suppliers talked with Reuters about this process - all of them under the cover of anonymity - and talked about Apple's penchant for secrecy, its demands for non-standard components, and its policy of allowing on-site, unscheduled inspections.

"What usually happens is that we will receive a call from Apple, and by then they usually already have some idea of what exactly they want," one anonymous source told Reuters. "They usually give us a couple of options, we present some stuff to them, and they look at quite a lot of samples before coming to a final decision, sometimes just weeks before the rumored launch."

Another supplier complained about Apple's need for unique and non-standard sizes and specifications, which stems from Apple's design philosophy of building its products from scratch according to its needs instead of merely designing its products around off-the-shelf components like other PC manufacturers.

Not mentioned by Reuters is Apple's practice of shifting the risk of these non-standard components to its suppliers, which is part of how the company turned its supply chain into one of the most efficient, if not the most efficient, chains in the industry. Apple has consistently reported average on-hand inventory as little as a day or less since Tim Cook took over responsibility for operations at the company shortly after Steve Jobs came back to the company in 1997.

"That means we won't be able to use a common platform or rework those components to serve other clients. And if there's any inventory left, it cannot be used any other way," the supplier said to Reuters.

The big issue for Apple, of course, is secrecy, as Apple keeps its product plans close to its vest. As Apple moved its manufacturing and component supply chain to manufacturers based in Taiwan and China - suppliers not directly controlled by Apple - those vendors have become the biggest source of product leaks outside of Apple's own controlled leaks.

According to Reuters's supply sources, Apple has built in a fine system in its contracts that would result in the suppliers paying Apple a fine if a leak came from its employees. Apple has yet to actually use this fine, according to the sources, but the company has "verbally warned" some of its suppliers to tighten security.

"Unless there's a recording or an e-mail that can be clearly identified to a certain Apple supplier, it's all going to be a blame game with everyone pointing fingers at everyone else," one of the sources told Reuters.

Comments

Mike

I wish US companies would stop doing business with China and India for once and for all.  Its time to bring manufacturing back home and to stop outsourcing everything.  Apple’s products are the exception, but, just about everything from China is crap.

JulesLt

It’s not that goods from China are rubbish - as you say, Apple products are one exception.

The problem is that what outsourcing usually represents, which is doing the job as cheaply as possible (not just cheap labour, but cheap everything) to deliver as cheaply as possible.

The same problems also exist with local production - say food - when we put a similar pressure on price.

But manufacturing is only going to come back home if people will pay more for things - which they typically only do for luxury goods.

Bryan Chaffin

I’ll add that I have other products made in China that are fantastic, most notably my A5 speakers from AudioEngine.

A blanket statement like that, Mike, ignores reality.

The race to the bottom pursued by most U.S. companies - and perhaps most companies on the planet - is indeed annoying, but we can’t blame that on China. It’s American companies that started the process of outsourcing, and it’s American consumers that rewarded those companies who did so by buying cheap, cheaper, cheapest at every turn.

And, of course, Wal-mart and every Wal-mart customer has played a major role in that process.

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