Apple Shifts from Foxconn to Pegatron to Make Low-Cost iPhone

Apple is trying to reduce its dependence on electronic manufacturer Foxconn by offering more orders to Foxconn’s competitor and Apple partner Pegatron. In order to achieve balance between its supply chains, the Cupertino-based company is moving its iPhone components orders from Foxconn to Pegatron.

So far, Foxconn was the main iPhone and iPad manufacturer for Apple. Both of these devices rolled off the assembly line of a single company: the Taiwanese manufacturer, Foxconn. Apple’s current CEO, Tim Cook decided that the Fruit Company needs a change in the production and assembly line, and he divided orders between Foxconn and its rival Pegatron.

Pegatron as Apple's Manufacturer

At this time, Pegatron is already making some iPhones and iPad Minis. However, the company was chosen to assemble a low-cost iPhone, which is expected to be revealed later this year. The shift is also due to the fact that Foxconn encountered various problems with iPhone 5 production, when millions of units were returned to the producer because of some errors.

When Apple returned 8 million of components back to Foxconn, an official suggested that the handset was one of “the most difficult devices that Foxconn has ever assembled”. The device, which is relatively different, compared to its predecessor related to its thin and tall designed, has caused some supply issues.

In Pegatron’s case, the company is planning to increase its workforce in China by up to 40 percent during the second half of the year. This clearly suggests that the company is preparing its factories in order to produce the well-awaited low-cost iPhone.

When asked about the production of Apple’s low-cost handset, Charles Lin, Pegatron’s chief financial officer, declined to comment to whether the company will start producing a low-cost iPhone later this year. However, the official slightly suggested that more than 60 percent of Pegatron’s 2013 revenue is expected to come during the second half of 2013. This is the time that Apple’s CEO Tim Cook referred to as being a fruitful period for Apple to release new products.

September is regarded as the time for a new Apple product to be released. The $300 nonsubsidized iPhone is expected to bring in unit sales of 75 million next year. The handset will be designed for third marketplaces such as China, Brazil and more. The cheaper iPhone will go into trial production as soon as next month, but its release is expected in the third or fourth quarter of the current year.

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