Apple may rope in Pegatron Corp. to produce its cheaper iPhones

Apple is looking at Pegatron Corp. to the be primary assembler of its low-cost iPhones, that it may bring out later this year, reports The Wall Street Journal. Apple’s reasons for this shift - from Foxconn to Pegatron Corp. - are strategic. The Cupertino-based company is reportedly looking at risk diversification after Foxconn’s manufacturing glitches with the iPhone 5, caused scratches on the metal casing. Apple is also looking to widen its product lines as competition from rival Samsung thickens.

In 2011, Pegatron Corp. had emerged as a minor producer of iPhones, and last year it even began making iPad Mini tablets.

Pegatron Corp. may produce the low-cost iPhone

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In fact, analysts say that Pegatron Corp. has been willing to accept thinner profits too, but did not comment on its pricing. Pegatron, which has about 100,000 employees in Taiwan and China, is looking to increase its China workforce in the second half of the year by around 40 percent, according to Chief Financial Officer Charles Lin. Analysts are attributing this development largely to the expected production of low-cost iPhones.

Foxconn’s cost advantages from scale have been lessening now, as it is working on improving the working conditions in its factories. In the past, Foxconn had been getting increasingly frustrated owing to the complexity of Apple’s products, like the iPhone 5, which it says made it tough for them to produce the volumes that Apple required.

Over the years, Foxconn has been grabbing global headlines for all the wrong reasons. The illegal work schedules and the conditions of the labourers in its many factories got them a lot negative media and came under scrutiny after instances of suicides were reported. In fact, workers at Foxconn’s Wuhan production plant in China had threatened the manufacturers with claims that if their dues weren’t paid, they would commit suicide by jumping off the roof of the factory. Later, the management reportedly, worked out on a middle ground with the workers, convincing all, but 45 of them to return back to work. It was late last year then, that a New York Times report threw some light on the first sweep of changes that had begun taking place in some Foxconn factories in China.