Apple shakes up supply chain to increase margins

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Apple is reportedly making changes to its supply chain, making its Taiwan-based manufacturing partners "purely" responsible for device production, instead of procurement as well as production.

Industry publication Digitimes said the changes would affect profitability of Taiwan manufacturers in the long term, as they generate some profit from procuring device components for Apple.

However by letting its OEM partners raise quotes to maintain their gross margins, Apple is expected to increase these partners’ profits in the short-term by between 3 and 5 percent, and as they will also be no longer be required to maintain standing component inventories, this should also reduce pressure.

Apple has historically required its manufacturing partners to maintain certain inventory levels of all manufacturing components.

The change should allow Apple to more effectively control cost and quality, eliminating unnecessary middle-men and thus increasing its profits.

Apple Chief Executive Tim Cook has adopted a strict approach to the company’s supply chain since inheriting the position, insisting on more frequent and in-depth inspections, thorough supplier evaluation and overall cost management.