Apple lists more than 200 suppliers in its annual supply chain report. Many suppliers have received a shot at glory because of that. Photo: AFP
Apple Inc.’s rise to become a $1 trillion company is a story of innovation, new possibilities and one iconic product.
A posse of suppliers and partners has been part of the journey by selling key components, assembling the devices, or simply connecting iPhones to their networks.
I took a selection of these companies and analysed how they fared in comparison to the superstar they shadowed over the past 11 years—from the time Apple hit a $100 billion valuation in May 2007 to last week when it became what we might call a ‘trunicorn’. It’s not a complete list, merely a sample of Cupertino’s large entourage.
Two companies stand out as crucial parts of Apple’s supply chain throughout that time. Taiwan’s Hon Hai Precision Industry Co., aka Foxconn, is without a doubt the iPhone inventor’s most important partner. Not only has it been the chief assembler of the devices, it also makes a lot of the components including metal casings and display modules. Yet Hon Hai’s upside from Apple’s success has been minimal. Chairman Terry Gou has consistently failed to leverage his pole position in the supply chain into superior revenue, net income and market-cap growth, especially when compared to Samsung Electronics Co.
South Korea’s biggest company had an early relationship with Apple, supplying flash storage chips back in the iPod era. It then became a primary supplier of the core processor in iPhones. After Apple dragged smartphones into the 21st century with hardware and software innovations, Samsung followed – indeed, Steve Jobs accused it of copying – to become the world’s biggest maker of the devices. The South Korean company’s rise hasn’t matched that of Apple, but it’s done exceedingly well.
Thanks to this explosion in smartphones, hitherto unknown suppliers like Shenzhen-listed O-Film Tech Co. and Largan Precision Industry Co. of Taiwan got their shot at glory, and they took it. They’re not alone. Apple lists more than 200 suppliers in its annual supply chain report. Both of these companies have since won orders from non-Apple clients, helping them keep the growth momentum. Meanwhile, telecom companies like AT&T Inc. were set to benefit from demand for faster networks due to the popularity of social media and mobile video. This didn’t quite pan out as expected.
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As my colleague Shira Ovide pointed out last week, profitability is the cloud hanging over Apple. Some of its entourage face similar headwinds. Hon Hai’s margins have shrunk, as have O-Film’s. Yet Samsung and Largan have managed to keep expanding profitability by balancing R&D and other costs with the development of products for which clients are willing to pay a premium.
In the future, the key for all of those in the Apple posse will be how to offer products of such value that the hippest clients can’t do without them. That may even mean dumping Apple itself in order to find a new megastar.