Apple Seeking to Shift iPhone Production to Pegatron to Offset Chinese Qualcomm Ban

Apple is reportedly looking to shift production of older iPhones to Taiwanese supplier Pegatron in an effort to avoid losing billions in revenue as a result of its patent dispute with Qualcomm.


Earlier this week, Qualcomm was granted an import ban on the iPhone 6s through iPhone X in China after the court found those devices violated two Qualcomm patents.

However, according to documents seen by Nikkei Asian Review, smartphones produced by Pegatron are exempt from the ban because the Taiwanese supplier paid license fees for the contested software, whereas rival iPhone assemblers Foxconn and Wistron did not.
One of the sources with direct knowledge of the situation said Apple had held initial discussions with Pegatron about whether the Taiwan-based company could take on more iPhone production to make up for the impact of the ban. No decision has yet been taken, however.

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Taking into account a consumer shift to newer models, it is estimated that the order barring production of older iPhone models by Foxconn and Wistron could hit Apple's sales by some $5 billion in 2018 or 3% of total iPhone revenue.

This could be halved to about $2.5 billion if Pegatron is exempted, two sources said. And if Apple later decides to ask Pegatron to step up production, the impact would be even less, the sources added.
Apple has warned that upholding the iPhone ban would cause "truly irreparable harm" to Apple, other companies, and consumers if it is forced to withdraw its devices from the market.

Late on Thursday, Apple said it will release a software update to iPhone users in China early next week that the company says should address the patent-related issues.


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Foxconn Expected to Assemble Bulk of 2018 iPhones

Taiwanese manufacturer Foxconn will assemble the majority of Apple's widely rumored trio of new iPhones expected to launch in 2018, according to the Taipei Times, citing research from Fubon Securities.


Foxconn, formally known as Hon Hai, will reportedly assemble all of the second-generation iPhone X, 90 percent of the so-called iPhone X Plus, and 75 percent of an all-new, lower-priced 6.1-inch iPhone.

Taiwanese manufacturer Pegatron is said to fulfill the remaining orders:
Hon Hai has been selected to assemble the bulk of the new iPhones, including all of the premium 5.8-inch OLED model and 90 percent of the 6.5-inch OLED phones, as well as 75 percent of the 6.1-inch LCD model, with the remainder given to Pegatron, the report said.
Wistron, another Taiwanese manufacturer, will not assemble any of the new 2018 iPhones, according to the report.

Fubon Securities predicts that the 6.1-inch iPhone will be priced around $799 in the United States, and use nearly all of the same materials as the iPhone 8 Plus, at an estimated cost of $275 to Apple.

Last month, respected Apple analyst Ming-Chi Kuo said all three new iPhones will be both announced and made available to order this September. In a previous research note, he indicated that Apple has resolved the manufacturing challenges that resulted in the iPhone X's delayed launch and supply shortage.

Related Roundup: 2018 iPhones

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