Hon Hai Precision Industry Company, better known as Foxconn, is one of the world’s largest electronic contract manufacturers. Now, the company is facing growing competition from another Apple supplier, the cross-town rival Pegatron Corp.
Foxconn’s competition might not seem highly dangerous for the company’s well-being since it is only a quarter of its size by revenue. This competition has developed around the contact pricing issue. Apparently, Pegatron is offering a better deal for Apple and the California-based company is not backing up in watching its best interests.
As far as Foxconn is concerned, the world’s largest electronics contract manufacturer, the company gathers more than 60 percent of its revenue solely from iPad and iPhone maker Apple. Foxconn’s smaller rival appears to have a lot of success in taking more orders from the Cupertino-based company, which is known for offering long-term contact prospects.
In a previous press release, Pegatron announced that the manufacturer plans to increase the number of workers with more than 40 percent this year. This rumor has generated many other rumors, and critics suggest the fact that the company is planning to catch up its rival Foxconn.
In the same time, the announcement has fueled the rumors that Apple is planning to release the low-cost iPhone in the third quarter, and Pegatron is trying to keep up with all Apple orders. However, this is nothing out of the range. As Apple’s CEO Tim Cook already suggested, the company is planning to launch new products in the fall, and it prepares “really great stuff” for this year.
As HSBC analyst Jenny Lai suggested,” “Pegatron’s margins are still a lot lower than Hon Hai’s. This is because Pegatron’s offering very competitive pricing and that is how it wins orders.” However, this low-price strategy appears to be very successful for Pegatron. The Taiwanese manufacturer manages to grab more offers to assemble the popular iPhone and iPhone from the California-based tech giant.
On the other hand, Foxconn has been required to improve standards and increase basic wage packets for its workers, which have generated lower profit margins for the manufacturer. Its net profits were around $638 million in the first quarter despite the fact that the company was forced to pay up to $256.8 million to replace eight million faulty iPhone units, which Apple has recently returned to its most important supplier.
In what concerns Pegatron, the company revenue grew with 29 percent in the same period from a year ago while its net profit reached $2.31 million, showing an 81 percent increase. At this time, Pegatron makes only older models for Apple such as iPhone 4S and iPhone as well as the iPad mini.