Supply chain Stories March 30, 2016

AAPL: 109.56

1.88

Apple issues 2016 supplier responsibility report w/ supply chain + environmental data & more

Apple has released its 2016 supplier responsibility progress report including a new letter from recently named COO Jeff Williams detailing Apple’s commitment to the people who create its products.

Supply chain Stories January 8, 2016

AAPL: 96.96

0.51

Analysts pile the pressure on AAPL saying company over-optimistic or “deliberately overstating” position

As if Apple’s management wasn’t under enough pressure from the stock falling below $100 yesterday, two firms of analysts have said that the company was either over-optimistic in its iPhone sales expectations or has even been guilty of “deliberately overstating underlying trends.”

Business Insider quotes excerpts from investor notes from Pacific Crest and UBS, each suggesting that Apple has over-estimated iPhone demand. Both point to apparent contradictions between Apple’s predictions of continued growth and supply-chain reports of reduced orders.

UBS says that it believes Apple has been taken by surprise with the relatively low numbers of people upgrading from older iPhones.

We think the most likely reason for a shortfall is that the upgrader portion of unit demand has stalled significantly in recent months and is failing to meet Apple’s own expectations.

The note from Pacific Crest goes much further.

Management’s confidence now looks highly likely to be misplaced, which suggests that it was either ignorant of the challenges it faced or deliberately overstating underlying trends. The former seems unlikely, which suggests that management has taken a much more aggressive tone as growth in the high-end smartphone market has slowed. This reduces our confidence in Apple’s commentary going forward.

Business Insider notes that the Wall Street consensus is for significant year-on-year fall in the current quarter, ranging from Stifel, Aaron Rakers and team forecasting an 8% drop in sales through to Pacific Crest at 18%. Even noted Apple bull Katy Huberty at Morgan Stanley is predicting a 15% fall this quarter.

As we noted earlier, Apple’s guidance for the current quarter will be issued when it reports its holiday quarter numbers on January 26th.

Photo: wallpapersfine.com

Supply chain Stories January 7, 2016

AAPL: 96.45

-4.25

In a radio interview on the syndicated show Conversations on Health Care, Apple COO Jeff Williams said that the reason Apple has come under attack for the use of child labor in its supply chain is that the company actively goes out looking for it. Other companies, he said, simply keep their heads down.

No company wants to talk about child labor. They don’t want to be associated with that. We shine a light on it. We go out and search for cases where an underage worker is found in a factory somewhere and then we take drastic actions with the supplier and the labor groups to try and make a change.

Then we report it publicly every year. We take a lot of heat for that. But we think the only way to make change is to go hit it head-on and talk about it.

Apple has come under fire over the years when underage workers were found in the company’s supply chain, and Williams has spoken before about Apple’s unusual stance on these issues …

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Supply chain Stories January 6, 2016

AAPL: 100.70

-2.01

[Update 2Reuters reports that Foxconn has published an earnings report showing a 20% fall in December revenues. However, the company says that its December earnings were “as expected,” and its full-year earnings are up 6.42% on the previous year, only marginally short of analyst expectations of 7%.]

[Update 1: StreetInsider reports that Foxconn has denied reports that workers started their lunar new year holiday early, and says that the government payout relates to ‘an insurance premium,’ but makes no reference to any response to the claim that it has been laying off workers.]

The WSJ is today suggesting that Apple is scaling back iPhone orders, noting that iPhone manufacturer Foxconn has been laying off workers and has received a $12.6M subsidy from the Chinese government through a program designed to minimize unemployment.

The piece notes that the subsidy is for Foxconn’s Zhengzhou plant, which is mostly devoted to iPhone production, and says that Apple has also reduced order forecasts for iPhone component makers.

Chinese iPhone factories had some idle capacity in the final two months of the calendar year, when they would typically be racing to chongliang, or “rush quantity,” for Apple, in factory-speak. Some workers at Foxconn’s Zhengzhou factory in inland China were let go on early holiday last month, one of the people involved in the supply said, although the typical new-year holiday season doesn’t start until February.

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Supply chain Stories October 22, 2015

AAPL: 115.50

1.74

Majority of iPhone/iPad workers at Pegatron’s Shanghai factory exceed 60-hour work limit, claims China Labor Watch

China Labor Watch says that an undercover investigation at a Pegatron factory manufacturing iPhones and iPads found that 58% of workers there were working in excess of 60 hours a week – the limit laid down by Apple for its suppliers. It also said that overtime, which is supposed to be voluntary, is effectively mandatory, reports CNET.

The report claimed that the standard shift was nine hours, but that – between September and December last year – staff worked an additional minimum of 20 hours of overtime each week, usually split up between an extra two hours each week day and one 10-hour shift on Saturdays. […] This overtime was essentially a requirement, according to the investigator, who claimed to be told by a trainer that working eight-hour shifts five days a week “does not conform to our hiring requirements.”

The report says that many workers in any case said that significant overtime was necessary to meet their living expenses, with wages at the local minimum wage of around $1.85 per hour.

The report also alleges that Pegatron falsifies documents shown to Apple to give the appearance of complying with supplier audit requirements while failing to do so in reality.

Despite providing only about eight hours of pre-job safety training—where Chinese law requires 24 hours—Pegatron forces each new worker to sign a form that “certifies” that she has undergone 20 hours of safety training. A worker also must sign a trainer’s name on the form. The factory has workers quickly copy answers to the safety information quiz. These falsified forms are the types of documentation that are provided to Apple in their audits.

The report notes some improvements since 2013, with partial improvements in sick leave and the ending of claimed discriminatory hiring practices. CNET says that neither Apple nor Pegatron responded to requests for comments on the report.

It’s not the first time that China Labor Watch has criticized working conditions in factories run by Apple’s suppliers. A report last year on another Apple supplier detailed claims of 22 violations ranging from hiring practices to safety concerns.

A BBC documentary based on an undercover investigation at another Pegatron factory prompted Tim Cook to say he was “deeply offended” by the claims and the show’s failure to include facts and perspectives provided by Apple.

Apple publishes an annual Supplier Responsibility Progress Report in which it details the issues it faces in its supply chain and the steps taken to address these.

Photo: AP Photo/Kin Cheung

Supply chain Stories July 6, 2015

Engadget Japan has shown a purported schematic of the iPhone 6S which it attributes to a reliable source in the Chinese supply chain. While the diagram does not appear to have originated from Apple, the design and marked dimensions are consistent with casing photos we obtained from a proven source.

We noted that any change in thickness was imperceptible, and the thickness marked on the schematic is 7.1mm – just 0.2mm thicker than the iPhone 6, and the exact same thickness as the iPhone 6 Plus. This also matches (within 0.03mm) that shown in a drawing we reported earlier …  expand full story

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