If there’s one thing that’s certain about the next iPhones, it’s that Apple will make plenty of money off them. Even if the devices are going to be “boring” to some people. Even if they fail to set a new sales record. The iPhone 7 will still be a huge cash cow for the company, and Apple is doing everything it can to protect its profits while also dealing with slowing iPhone sales. Apple suppliers will be the first to suffer alongside the company, and a new report reveals that Apple is squeezing component makers to protect its margins. What’s interesting is that suppliers may complain about Apple’s desire to cut prices and orders at the same time, but there’s really nothing they can do about it.
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The Wall Street Journal says that negotiations over cuts in component prices started in January, and their effects have been felt across the board. Apple is currently experiencing iPhone sales declines for the first time ever, so orders to its suppliers are obviously lighter. But even so, Apple is looking to help offset lower than expected iPhone demand by paying less for components, being fully aware that none of Apple’s suppliers can afford to lose its business.
“The reason why everybody is extremely unhappy about it recently is because they played a ‘double cut,’ cutting both the price and the volume of orders,” said a person from one of Apple’s suppliers said.
Companies including TSMC and Largan have strong bargaining positions, the Journal says, as they make critical iPhone components including processors and camera lens modules. But for everyone else, Apple has alternatives. Some component makers have already said that Apple has threatened to take its business elsewhere if they didn’t agree to price cuts.
On the other hand, Apple also told suppliers that despite the volume cuts, orders would still rise significantly after its new iPhones are released.
The Journal doesn’t mention the price of the iPhone 7, but it’s likely Apple won’t change its pricing structure compared to last year. The report does mention the iPhone 6s is currently cheaper in China than the US, since local telecom operators are running special deals to clear out stock before the new iPhone arrives.