Foxconn Electronics wants to make a massive iPhone
manufacturing shift in order to streamline operations and reduce
the losses incurred by one of its divisions. According to
, Foxconn wants to move iPhone orders from Foxconn Electronics to
Foxconn International Holdings, which typically handles the
firm's handset production duties.
The shift is subject to approval by Apple (NASDAQ:
). Without the Mac maker's consent, Foxconn will be forced to
continue producing iPhones within its electronics division.
This rumored adjustment comes only months before the iPhone 5S
-- the unconfirmed update to the iPhone 5 -- is expected to go
into production. Apple is largely believed to be planning a new
iPhone for release in the third or fourth quarter, coinciding
with the September/October timeframe of the last two iterations.
Apple is also expected to update the full-size iPad, iPad Mini
and other key devices around the same time.
While Foxconn is still the world's largest manufacturer of
electronic devices, the company's headset division has suffered
greatly now that Motorola and Nokia (NYSE:
) have taken a dive. Both firms used to make up a significant
portion of FIH's business. Now that they are selling fewer
phones, they are placing fewer orders with Foxconn.
Since the company currently manufactures iPhones at Foxconn
Electronics, it is not yet clear what affect it will have (if
any) on that division.
More importantly, it is yet known if this would negatively
impact the production of the current iPhones or any future models
Apple hopes to produce. What may be good for Foxconn could end up
being terrible for Apple.
That being the case, one would imagine that Apple would not
approve the manufacturing shift -- or delay it until after the
next iPhone is completed.
Apple has reportedly rejected as many as
eight million iPhones
manufactured by Foxconn over quality concerns. Each returned
iPhone is said to cost Foxconn $32 apiece, leading to a couple
hundred million dollars in potential losses.
This could be what the company means when it aims to
streamline operations. By shifting to FIH, Foxconn may either
plan to produce fewer faulty devices or simply offload the
mistakes onto an ailing division.
If quality is really a Foxconn goal, then Apple might want to
question why FIH did not produce the smartphones all along.
Louis Bedigian is the Senior Tech Analyst and Features Writer
of Benzinga. You can reach him at 248-636-1322 or
louis(at)benzingapro(dot)com. Follow him
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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