Apple's supply chain is crucial to its success, and it's more dependent on it than it's willing to admit

Whether we’re willing to admit it or not, Apple is a juggernaut that can make or break companies on a whim. The recent devastation of Imagination Technologies is proof enough of that.

The thing with the iPhone is that it sells a lot. A lot. Hundreds of millions of units. And that’s just one of Apple’s many product lines. The manufacture and assembly of each component of the iPhone is enough to support a number of companies that serve no other purpose than to supply Apple the parts it needs to build the devices it sells. Some accessories makers, for example, have made a business out of making iPhone cases and nothing else.

In the case if Imagination Technologies, the company designed and built the iPhone’s graphics chips. Apple recently announced that it would start winding down its reliance on Imagination’s chips and that it was already designing its own products. This one piece of news was enough to wipe off over 60 percent of the company’s market cap.

It’s not just Imagination of course. A factory that was to produce sapphire glass for Apple’s iPhones disappeared overnight when Apple dumped the idea.

Now, however, it appears that Apple’s suppliers are biting back.

Take Samsung for instance, it’s simultaneously Apple’s biggest supplier and biggest rival and is the sole source of the OLED (Organic Light Emitting Diode) screens that Apple needs for its upcoming iPhones.

As a Bloomberg report explains, Samsung sells more phones than Apple and competes with Apple in the high-end market. For a company that’s very secretive about its research and new technology, having to hand out classified, confidential technology to a manufacturer that is also its arch-rival must be very irksome.

Samsung is getting a lot of money from its dealings with Apple of course. Apple is said to have ordered 100 million Oled panels after all, but the real price is actually higher. Alongside the money, Apple is handing over its technology. When Apple perfects the IR-LED-based, embedded fingerprint sensor, you can bet that Samsung will as well.

A supplier like Samsung can, at will, bring Apple’s iPhone production to a grinding halt if it thought it necessary.

The AirPods are another example of Apple struggling with its supply chain. Apple’s solution to the sacrificed headphone jack was the wireless AirPod. Today, a year after the headphone-jack less iPhone 7 released, supply still hasn’t caught up with demand.

Even when it shifted to USB-C on its MacBooks last year, Apple didn’t have enough supply of its USB-C to USB-A dongles, USB-C to Lightning adapters and others.

Is it any wonder that Apple is working to eliminate its dependence on external suppliers? The company is very interested in nearly bankrupt Toshiba’s fabrication units, has invested heavily in LG’s Display unit and is going out of its way to hire chip designers and engineers.

As oppressive as Apple’s actions may seem to small, dependent manufacturers, it doesn’t seem like Apple has much of a choice in the matter either.

Published Date: Apr 20, 2017 12:53 PM | Updated Date: Apr 20, 2017 12:53 PM