Apple is shifting iPhone production away from long-time sole supplier Foxconn in favor of relative newcomer Pegatron — which likely explains Foxconn’s big earnings miss just a month ago.
In fact, Apple’s new lower-cost iPhone will be primarily built by Pegatron, according to a Wall Street Journal report today, although Foxconn will continue to manufacture the bulk of high-end iPhones.
Foxconn reported an almost 20 percent drop in earnings in the past quarter. At the time that seemed like a sign of lower iPhone unit sales. However, Tim Cook has warned multiple times in recent appearances against reading too much into the shifting value of Apple outsourcing contracts.
Sixty to 70 percent of Foxconn’s revenue is dependent on assembling Apple iPhones and iPads, and the company was once the only manufacturer of Apple’s mobile products. At the time, opinion was divided between this being a bad sign for Apple sales — which had been good that quarter — or simply an indication of Apple switching up manufacturing partners to some of its 748 other suppliers.
This latest news is a strong indicator that Cook was not simply blowing smoke.
Pegatron become a partner last year in the manufacture of iPad Minis, though it reportedly experienced production issues. But it is staffing up, with 40,000 new workers expected to join the company in the second half of 2013, and it said that 60 percent of its 2013 revenue would come from the second half of 2013.
Those are all strong signs that a massive order is coming from Apple. And Apple needs new products badly, as its growth has considerably slowed over the first half of the year.