Supply chain

Apple’s eighth annual Supplier Responsibility Progress Report highlights the progress made on reducing child labor and enforcing working hour limits, and shows a significant increase in the environmental standards Apple’s suppliers are expected to meet.

The number of cases of underage workers fell from 106 last year to 11 this year. Compliance with Apple’s requirement of a maximum working week of 60 hours hit 95 percent, with 97 percent meeting the requirement of at least one day off a week. Apple reported that the average working week of a supply chain employee was less than 50 hours … 
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Photo: Thomson Reuters

Several former execs at Foxconn have been charged with taking bribes from companies supplying the company with iPhone components, reports the WSJ.

Following a year of investigation, prosecutors said Thursday they have detained a former Foxconn general manager for allegedly taking kickbacks from supply chain partners. Prosecutors said three other former Foxconn employees were released on bail [after being charged] … 
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Mockups: T3

Rumors of a larger iPad have been bouncing around since May (complete with the world’s silliest name). They gained credibility (minus the name) when reported by the WSJ in July, and our poll certainly suggests there would be demand for it, with 24 percent of 9to5Mac readers declaring that they love the idea. There have, however, so far been few supporting specifics.

Digitimes is not always the most credible of sources, but it is today suggesting that the 12.9-inch iPad will be manufactured by Quanta Computer, launched in October and targeted at the education market, citing its usual anonymous “supply chain sources” … 
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Bloomberg has a lengthy piece illustrating just how great a challenge it is for Apple and other multinational companies to ensure the fair treatment of workers in complex supply chains.

When one of Apple’s suppliers like Flextronics wins a new contract, it needs to take on additional workers – lots of them, and fast. Those workers are recruited through employment brokers, which are required to adhere to Apple’s rules. But many of them are brought in from other countries, like Malaysia and Nepal.

Alok Taparia, the managing director of Transworld Manpower, another of the four Nepalese brokers retained for that drive, says he was given clear instructions: Workers shouldn’t be charged; Flextronics would pay the brokers. But Taparia and the other Nepalese brokers say Flextronics demanded so many men so quickly that there was no way to do it without tapping the country’s network of subagents, stretching into Himalayan villages reachable only by foot. As Apple itself has described in reports on its supply chain, the subagents always charge…

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An analyst note from a usually reliable Ming-Chi Kuo (郭明錤) seemingly confirms our expectation that Apple will not announce new iPads on September 10th, but at a separate event later in the year.

The note makes supply chain forecasts suggesting that assembly production of the iPad 5 and iPad Mini 2 will start with low-volume production this month, and enter mass-production in the final quarter. If the tablets were to be announced on September 10th, we would expect them to be much further along the production cycle by now.

As expected, both iPad models are said to use the A7X processor, which should see be a particularly noticeable improvement on the existing A5-based Mini.

There were a couple of surprises in the note … 
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Hon Hai Precision Industry Co, better known by its parent company name Foxconn, posted record quarterly profits in the final quarter of last year, citing increased production and improved efficiency of iPhones and iPads, as reported by Bloomberg.

Net income rose 5.6 percent to $1.2 billion, ahead of analyst expectations, but may face more challenging times ahead …
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One of the biggest controversies surrounding the launch of the iPhone 5 has been the light scratching and chipping that some users have reported witnessing on the device’s coated aluminium backside. Apple’s Marketing Senior Vice President Phil Schiller called the scratching “normal” for aluminium products, as scratching on the coated surface reveals the natural silver color underneath making it more noticeable to users than an all-glass design. There have even been reports that quality control issues related to the scratching have lead to shortages and troubles in Apple’s supply chain.

While Apple is standing behind the design for the most part (they will swap your iPhone 5 for a new one if it’s scratched out of the box), there is another solution on the market for your scratched iPhone 5. iPhone5mod, the same people behind one of the first Lightning connector docks on the market, is today releasing rear panel replacements that it claimed are 100 percent original.

The standalone rear case is apparently “the same thing you are seeing and touching in your iPhone 5 right now.” It would not be all that shocking considering China-based iPhone5mod also claimed to have “original Lightning controller chips from Apple’s supplier” for its iPhone 5 dock.

The replacement part is available for $99 now in both black and white from iPhone5mod.com. Apple has been quick to issue takedown notices for the company’s products in the past, so there is a possibility these won’t last long.

Setteb.it noted that Apple would do a live broadcast of CEO Tim Cook’s remarks tomorrow at the Goldman Sachs Technology and Internet Conference. Cook usually talks numbers and trends at these events but they are not usually broadcasted live.

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The high-profile Apple business with Asian contract manufacturer Pegatron Technology is facing scrutiny as the iPhone-maker is reportedly exercising its supply chain influence by asking Pegatron to drop new Ultrabook orders from Asustek or else it will lose orders for iOS devices. According to today’s article in Chinese-language Commercial Times, the similarities between Apple’s MacBook Air and Asustek’s Zenbook (released last year) instigated the Cupertino, Calif.-based firm to demand that Pegatron choose sides. As you know, the unique unibody metal enclosure of Apple’s notebooks is manufactured by Catcher Technology.

Pegatron currently assembles Asustek’s ultra-thin Zenbook family, but it will stop doing so by the end of March. As a result, Asustek will have to outsource the Zenbooks to either Compal Electronics or Wistron. Pegatron only recently landed iPhone orders and is hoping to assemble iPads, too. The Japanese blog Macotakara reported last month that Pegatron and Foxconn began assembly of iPad 3 for an early-March launch.

Even though the initial batch of Ultrabooks largely disappointed, upcoming models are looking to close the gap with lower prices and a unibody construction. Chinese-language Apple Daily reported in January (via DigiTimes) that Pegatron landed orders for at least five Ultrabooks by second-tier brands set to ship in April or May. One tiny interesting bit: Pegatron is an Asustek spin-off that happens to make Ultrabooks for other vendors, too.

Apple’s MacBook Air (left) and Asustek’s Zenbook (right). Image vie Ecoustics.com

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[vodpod id=Video.16054122&w=650&h=420&fv=]

After The New York Times published a lengthy two-part piece covering the controversial working conditions of Apple’s supply chain within Foxconn factories in China, other publications are doing their own investigative work to find out more informtion. The NYT’s second installment brought us the backstory of Foxconn worker Lai Xiaodong leading up to his death at a factory explosion in Chengdu. Today, CNN published a video of journalist Stan Grant who recently sat down for an interview with a current Foxconn employee and iPad display assembler:

“I can’t bear it anymore. Everyday was like, I get off from work and I go to bed. I get up in the morning, and I go to work. It became my daily routine and I almost felt like I was some kind of animal.”

The video starts off with Grant showing “Miss Chen,” who requested her name be changed for the interview, and the finished iPad she helps assemble on a daily basis but has never used. Miss Chen told CNN her Foxconn bosses informed her not to talk with media or “criminal liability shall be investigated according to law.” Chen, a poor Chongqing university student, said she took the one-month job with no experience on promises of “great benefits and little overtime.” Chen described her experience upon arriving at Foxconn:

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A report this evening from DigiTimes said the next iPad will have a monster battery that will more than double the current  6579 mAH to a whopping 14,000mAH.  Apple currently uses battery suppliers Simplo Technology and Dynapack who both denied to comment on the report.

Furthermore, Apple is set to unveil two versions of its next-iPad, “One for the high-end segment and one for the mid-range segment” according to another DigiTimes report.  Strangely, the report said the new iPads will be released at Macworld/iWorld in late January, a show that Apple has no plans to attend right now and bowed out of completely two years ago.

Apple is set to unveil its next-generation iPad – which will come in two versions – at the iWorld scheduled for January 26, 2012, according to sources at its supply chain partners

This is extremely unlikely; however, perhaps, a same-time but separate release could happen.  More details that are interesting were reported, as well….

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Digitimes tonight reports that next generation iPads are expected to be available in the next 3-4 months as manufacturers in the supply chain have started delivering parts and components for the new tablets to OEM contractors while reducing those prepared for iPad 2.  The report follows a Citi Analyst last week who said that “several sources” have confirmed the next-gen iPad will launch in February saying, “there do not appear to be any significant technical hurdles remaining”.

Current production of iPad 2 will reportedly remain high at 14-15 million units in Q4 2011 but tail to 4-5 million units in the first quarter of 2012 as anticipation for the next iPad grows and inventory is cleared out.

Meanwhile, Foxconn Electronics will begin to produce the next-generation iPads in January and to ramp up the production volume starting February, according to a Chinese-language Commercial Times report, which quoted Kevin Chang, an analyst of Citigroup Global Markets, as indicating.

Production of the new iPads is expected to reach 9.5-9.8 million units in the first quarter of 2012, estimated sources in the supply chain. Sales of iPad products totaled 25.06 million in the first three quarters of 2011 and are likely to reach 40 million units for all of 2011, the sources estimated.

The next generation iPad is expected to have a Retina display, a faster A6 processor – possible Quad Core, and be slightly thicker than the current model…
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Apple has been no stranger to environmental concerns regarding their manufacturing and supply chain abroad, most recently a report from five independent environmental organizations in China in August accused the company of taking “advantage of the loopholes in developing countries environmental management systems” and awarding contracts to known polluters. Yesterday Apple responded to the accusations in a three-hour meeting with five Chinese environmental NGOs, admitting fifteen of their current manufacturing partners are contributing to pollution in surrounding areas by agreeing to perform audits of the companies. This followed several meetings with Apple following the group’s report in August, including one with Apple execs in Cupertino.

According to a report from WSJ, Ma Jun, of the Institute of Public & Environmental Affairs in Beijing, had this to say following the meeting:

“This is a major step forward… They asked these companies to take corrective plans and give a timeline, and Apple will verify whether all these issues have been resolved.”

As a result of the meeting, Apple is apparently vowing to improve its environmental standards within its supply chain, a move that could not only alter the manufacturing process of components, but also impact contracts awarded to manufacturers and suppliers in the future. According to the report, to avoid issues like massive amounts of waste water, Apple will encourage alternative manufacturing processes for components such as printed circuit boards. Apple also confirmed that this and other environmental concerns will play a role when awarding future contracts to suppliers.

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Digitimes says we’ll only have to wait until March to get the long sought after 15 (and possibly 17) inch MacBook Airs.

Upstream suppliers of Apple have recently started shipping a small volume of components for a 15-inch ultra-thin notebook model from Apple in November and the device could be either MacBook Air or just a thinner MacBook Pro….Estimated by the product planning, mass shipments of the notebook device will start in March…While a 15-inch ultrabook model would be considered a full function machine, which consumers normally expect to have an optical drive, limitations over the thickness restriction of 0.8-inch for the ultrabook means the launch of a 15-inch machine with an optical drive and a thickness of less than 0.8-inch may not be in the plans until a later time.

It is uncertain whether these machines will be called MacBook Pros or Airs or just “MacBooks” at that point.  The industry has been moving away from hard disc platter computers with optical drives and the recent flooding in Thailand, where many hard drives are manufactured, has only served to hasten that migration.

Intel is also expected to produce quad core Ivy Bridge i7 CPUs based on a 22nm platter that will shave 10W off the current chip power consumption, thereby allowing quad-core ultra portable laptops.

Apple in particular is limited to 35W in its 13-inch MacBook Pro chassis, we may see a quad-core option in the 2012 13-inch Ivy Bridge MacBook Pro as a result.

Beyond energy consumption benefits, Ivy Bridge processors have a 20% increase in CPU performance and up to 60% increase in integrated graphics performance over current Sandy Bridge models. They should also support 4K video.

The new MacBook is expected to appear as early as the second quarter of 2012, according to the report.
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