By Pete Abilla
This is my 2007 article on the Apple iPhone Supply Chain Analysis. It’s a dated article and many things have changed. But, it may still be an interesting read for those interested in supply chain in general as well as electronics manufacturing.
I thought it might be fun to map the supply chain of the new Apple iPhone and, at some point, the supply chain of the Apple TV, hoping that this might help to demonstrate the complexity involved in manufacturing the Apple iPhone — a feature-rich product I wish I could have, if I could afford it (update: I’ve had several iPhones now).
I conducted some research and found some interesting information on the suppliers of the Apple iPhone. My data comes from The Wall Street Journal, January 14, 2007; Supplier Code of Conduct, Apple Corporation; and, some speculative assertions from Ars Technica, Engadget, and New York Times.
Note: Some or all of my data may be wrong. One fact I do know for sure is that the Apple iPhone is assembled, staged, and fulfilled from Apple’s Shenzhen, China facility.
From a high-level, we speculate that the following are the material suppliers of the Apple iPhone:
1.Samsung: The Singapore facility manufactures CPU and Video processing chips.
2.Infineon: The Singapore facility manufactures Baseband Communications hardware.
3.Primax Electronics: The Taiwan facility manufactures Digital Camera Modules.
4.Foxconn International: The Taiwan facility manufactures internal circuitry.
5.Entery Industrial: The Taiwan facility manufactures connectors.
6.Cambridge Silicon: The Taiwan facility manufactures bluetooth chipsets.
7.Umicron Technology: The Taiwan facility manufactures printed circuit boards.
8.Catcher Technology: The Taiwan facility manufactures stainless metal casings.
9.Broadcomm: The U.S. based facility builds touch screen controllers.
10.Marvell: The U.S. based facility builds 802.11 specific parts.
11.The Apple Shenzhen, China facility assembles the hardware, holds inventory, and handles the pick, pack, and ship steps of the fulfillment process.
If I am correct in any of my research and assertions above, it’s easy to see that if there is any disruption in material flow of any supplier into
Apple Supply Chain: Taiwan Wins Big
Again, if I am correct in my research and assertions in this article, Taiwan supplies 6 of the 10 parts that comprise the Apple iPhone. This can be viewed as a strategic approach by Apple, concentrating sourcing the majority of the parts from one country, or this could be seen as a bottleneck or constraint — a potential risk: if there is any turmoil in political economy in Taiwan, then material and product flow might be disrupted.
Conclusion
Again, if I am correct in my research and claims in this article, then to make one Apple iPhone, material comes from 3 countries, traveling to China to be assembled, inventoried, and then fulfilled to retailers and to customers via purchases from the Apple Store. Is it any wonder they are asking for $500+ per unit? It is important to note, that the price has nothing to do with the costs structure — Lean and Friedman both teach us that the price has everything to do with what the market will bear. The firm has a target cost structure, a break-even point, but the price they go-to-market with is about the market demand, not internal cost structure. Assuming that I’m correct in my assertions in this article, I can only imagine that this complex supply chain is a challenging one to manage.