iPhone maker Wistron quits, saying Apple didn't let it make a profit

https://9to5mac.com/2023/05/22/iphone-maker-wistron-quits/

by ksec • 3 years ago

184 163 3 years ago

9to5mac.com

manuelabeledo• 3 years ago

What I read is that Wistron didn’t have a good strategy getting in India, and that cost them Apple’s business.

yalogin• 3 years ago

Didn't they also have some issues with payments and working conditions for their factory employees?

cowsup• 3 years ago

Correct. Story seems to be, Wistron was screwing over employees to save costs, and used those low-costs to secure a deal with Apple. Then they got caught by the government, and now have to play by the rules. Because of this, they asked Apple for more money, and Apple said no. So now the deal is done.

The deal really shouldn’t have happened in the first place, had Wistron played fair from day one.

elcritch• 3 years ago

Pretty sure Apple is partly guilty as well. I really doubt they didn’t know exactly how Wistron was bidding so low.

phone86753093• 3 years ago

This sounds like a case of Apple not doing due diligence on their subcontractors.

gwbas1c• 3 years ago

From TFA:

Back in 2020, there was a major riot at its Bangalore plant over underpaid wages, with millions of dollars’ worth of damage done. Both the Indian government and Apple investigated, and both found that Wistron was indeed guilty of serious labor law violations, including underpayment of its workers.

jasmer• 3 years ago

Yes, that's how Apple outsources those unsavory problems.

ihsw• 3 years ago

Wistron has has a rough history, including underpaying/withholding pay from employees[1]. Good riddance.

[1] https://www.businessinsider.com/apple-says-wistron-on-probat...

shp0ngle• 3 years ago

While Foxconn has... good history?

dogma1138• 3 years ago

Foxconn offers robust safety net for its employees…

(I’ll walk myself out now).

squokko• 3 years ago

Flagship customers often do this to vendors. They know that "Apple is our customer" is a big selling point, so they turn the screws tight and make the vendor serve them for no margin.

mannyv• 3 years ago

"We didn't understand our costs, so we underbid and now are blaming Apple." - Wistron

kitsunesoba2• 3 years ago

It does seem likely that this is a case of a bit of column A, a bit of column B.

Apple very well may have unrealistic demands, but I believe it's also likely that Wistron may not have dealt with the level of QC, precision, and consistency that is expected of Apple products and based their estimates on experiences of working with more typical hardware companies.

dfox• 3 years ago

Wistron is large part of the reason why IBM/Lenovo ThinkPads are regarded as some kind of etalon of quality and repairability. I assume that most of the issue there is misunderstanding of how to run a factory in India and how is that different from both Far East and Europe.

jalk• 3 years ago

Or perhaps even more damning (as the article also mentions): "We expected to get away with paying our workers lower than the legal minimum"

s1mon• 3 years ago

Yes, that's certainly a valid reaction, and is likely partially true. It's also true that Apple is very well known for very hard negotiation and squeezing their suppliers until there's only a few percent margin. You'd have to be insanely good at controlling all of your costs to make money all the time under that constraint. If yields change or component/material prices fluctuate the wrong way any predicted profit could disappear.

Apple also pays suppliers on net 90. With inflation the way it's been, any miscalculation there will sink things. Not all suppliers know how to be banks too. Considering how much cash Apple has, this is really reprehensible.

As a supplier to Apple, the gross numbers are so seductive since they are larger than just about anything else, but the net numbers are orders of magnitude less.

CharlesW• 3 years ago

It's also true that Apple is very well known for very hard negotiation…

No successful company is over-paying suppliers.

crazygringo• 3 years ago

You'd have to be insanely good at controlling all of your costs to make money all the time

But to be fair, that's what hardware manufacturers are supposed to be good at.

The whole point is that the ones who are good at it make money, the ones who aren't go out of business. That's capitalism in a nutshell at every level, and manufacturing especially.

lesuorac• 3 years ago

Apple also pays suppliers on net 90.

I've always been surprised at how much of the business world runs on credit. You hear stories about how payments have been months-years delayed (or never show up).

I'd like to think if somebody got more than 100days behind I'd cut them off from the next shipment but never been in that spot.

coredog64• 3 years ago

The way that China has handled this is that they view those razor thin margins as an opportunity to move up the value chain. 1) Foxconn opens an assembly plant 2) Supporting infrastructure is backfilled into the area 3) There’s now a geographic industrial concentration that can support domestic electronic designers

halJordan• 3 years ago

It's good to know the full story, but it's reprehensible? I don't want to cast stones but a really easy connection to make is that wistron took the contact knowing they could only "be profitable" by not paying their labor. So I'm supposed to hate Apple for doing what a business is supposed to do (and frankly being excellent at it). And I'm supposed to champion Wistron for what they did? That's reprehensible if we're throwing the term around.

bdidbdidhdidh• 3 years ago

you really think apple gives a detailed build instruction on the bid war moment?

it probably is a room full of parts and to win you have to commit to the non present parts too.

just like fashion production bids btw

smoldesu2• 3 years ago

So... is it possible to make iPhones outside of China or not?

nradov• 3 years ago

Yes, iPhones are also manufactured in Brazil and India. This is largely due to trade barriers in those countries.

mdasen• 3 years ago

Yea, I think it started with trade barriers, but I think Apple likely wants to increase non-China manufacturing to reduce their risk a bit. Tensions with China have been a bit high and when you're Apple's size, it can be good to lessen the risk there. Even if it's unlikely that something would cause a disruption, when you're a nearly $3T company it's probably wise to diversify that risk. Apple's annual revenue is greater than the GDP of many countries like Finland or New Zealand. Ramping up manufacturing in India could be a good hedge against China or the US doing something that might impact their exports from China.

mouzogu• 3 years ago

https://nypost.com/2020/12/15/riots-at-apple-plant-in-india-...

this is what apple does. they use their clout, then they turn their back and play ignorant whilst placing unrealistic demands on the subcontractors who then place those demand on the labour.

from: https://www.macrumors.com/2023/02/14/only-half-of-indian-iph...

"Apple engineers told that Chinese iPhone suppliers and government officials have a "whatever it takes" approach to win iPhone orders, work was often completed weeks ahead of schedule at "inexplicable speed". In India, [we] are not running at this pace. "There just isn't a sense of urgency," one Apple engineer remarked."

Remember, this is a $3 trillion company, with resources greater than most countries. A company built on tight control of information. If you see lots of positive or misdrecting comments, it's not necessarily a coincidence (imo).

ly3xqhl8g92• 3 years ago

At least our current surface finishing technology has advanced so we no longer see the kid sized hand prints [1]. "Apple’s cobalt batteries are built on the backs of child labor in mines, causing severe physical harm to children and violating international standards of human rights." [2] Their PR: "Apple will use 100 percent recycled cobalt in batteries by 2025" [3].

[1] Kid sized hand prints on old victorian roof tiles, https://www.reddit.com/r/interestingasfuck/comments/13oser2/...

[2] 2022, Child Labor and the Human Rights Violations Embedded in Producing Technology, https://www.culawreview.org/journal/child-labor-and-the-huma...

[3] https://www.apple.com/newsroom/2023/04/apple-will-use-100-pe...

crooked-v• 3 years ago

You seem to be assuming that 3 is a lie, but I'm pretty sure someone would notice if Apple wasn't actually changing the sources of their rare earths.

phone86753093• 3 years ago

They're using the Walmart playbook

cptskippy3• 3 years ago

The book The United States of Wal-Mart by John Dicker laid this all out pretty clearly nearly 20 years ago.

* corrected spelling the author's name.

**https://www.amazon.com/United-States-Wal-Mart-John-Dicker/dp...

A4ET8a8uTh02• 3 years ago

Some context may be needed. Walmart is known in MBA circles for being one of the first companies to have used detailed data on products to negotiate new terms with suppliers ( usually to suppliers detriment ). Information asymmetry with main goal to increase a chance for an increased leverage is what it is all about.

reaperman• 3 years ago

This is the same playbook the auto industry has followed for the past 50 years or so.

petre• 3 years ago

"There just isn't a sense of urgency," one Apple engineer remarked."

Apple meets India, nothing new. They'll just have to adapt.

https://youtu.be/BTd-PWYQy4Y

wincy• 3 years ago

As an aside, it’s ridiculous that video got flagged as a video for kids and suggests downloading the YouTube Kids app.

ralph84• 3 years ago

this is what apple does

This is what globalism does. Take the environmental destruction and shitty working conditions that would never be allowed in your own country to other countries and centralize the profits from doing so into the hands of a few.

slg2• 3 years ago

This is what capitalism does. Crossing borders might make things easier because laws and the cost of doing business will vary, but using your power to squeeze every cent you possibly can out of your business partners is a function of capitalism and not globalism.

mrfumier• 3 years ago

Globalism prevent wars by making countries dependant to each others (Montesquieu Doux commerce theory).

Globalism permits to all countries around the globe to develop.

Nobody is preventing these countries to set laws about environment and working condition (which they actually do).

And by the way, I invite you to go to these countries and visit the factories there, and you will realize that western companies are raising standards (security and quality) on their suppliers.

saiya-jin• 3 years ago

If you see lots of positive or misdrecting comments, it's not necessarily a coincidence (imo).

I like HN a lot but for this type of topic, its consistently, desperately, and annoyingly un-objective (if thats a word). I do get that we humans tend to form echo chambers by ourselves just to validate our viewpoints and decisions however subjective they may be, but I expect a bit more than what I see here from some of the smartest folks on Earth.

Their influence is very visible also in other places, ie otherwise great web for photography - dpreview.com is a pure echo chamber for Apple. Every apple product is discussed in details and glorified, any problems are completely ignored. Most competition is given almost 0 coverage, especially direct competitors or those that currently surpass some of their tech at given time. And we don't talk US-vs-China stuff, many phone manufacturers don't have any China ties at all, or are outright US companies.

There is no way in hell Apple is not pouring tons of cash into ironing their fuckups, or just errors in judgement, infrequent as they are, and HN is way too visible and important to not be part of such an operation. To skip it would be a very junior mistake, and there are no juniors in this space in 2023, not with richest company globally.

kyleyeats2• 3 years ago

a sense of urgency

I've never heard this phrase from anyone that wasn't nakedly seeking power and compliance from others.

SkyMarshal2• 3 years ago

I first heard it from the military, where training seeks to recreate the stressful fast-pace conditions of an actual battle or war.

Years later I started hearing it in business too, as if management circles thought it would be useful in increasing production rates. Not accounting for the fact that levels of urgency similar to military training may not be sustainable in peacetime, and result in workforce burnout and other problems.

A better alternative I’ve seen in high-impact academic research groups is “focus”, rather than urgency. Focused effort produces research results, and can even be energizing rather than draining and burnout inducing. I would hope business circles would adopt that academic approach rather than the military one.

treis• 3 years ago

That is not my experience at all. It's even used by sports announcers. As an example: "The offense needs to move with more sense of urgency given the clock."

Krasnol• 3 years ago

If you see lots of positive or misdrecting comments, it's not necessarily a coincidence (imo).

And right there the topic drowns in whataboutisms before it disappears from the frontpage.

dirtyid6• 3 years ago

Not just Apple manufacturing, seems like they're divesting from India in general after 10 years, also killing their plans to make laptops and EV components. My understanding is they were barely making money throughout their time in India. Wonder if Tata takeover of iphone assembly going to do better? Kind of expected outcome for TWnese companies known to treat their labourers like shit and India gov unable to manage their population from breaking things after being treated like shit. Which has caused problems for more than just Wistron. Yes it's good workers standing up for themselves, but smart thing is to do that after you've proven indispensible, otherwise reinforces India being difficult place to do business in.

alephnerd4• 3 years ago

Winstron's divestment to Tata was honestly a good move.

A big reason Foxconn, Winstron, and other Taiwanese/Malaysian/Singaporean assemblers were able to succeed in Mainland China was due to cultural competency within the existing Chinese diaspora (eg. knowing how to communicate to who, how to manage workers, etc).

Foxconn, Winstron, and co would just straight up have Taiwanese/Malaysian/Singaporean/Thai Chinese move to Mainland China (in reality mostly Guangdong, Fujian, and Zhejiang due to cultural and familial connections plus the easy commute from Hong Kong or Shanghai) to help manage operations.

Taiwanese companies don't have that kind of advantage within South Asia. At that point, it makes sense just to work directly with Indian conglomerates like Tata, who already have in house domain experience manufacturing everything due to India's Chaebol-esque corporate culture, or Japanese+Korean companies that are open to training from scratch.

I've seen first hand how South Korean and Japanese companies managed their assembly plants in my dad's village in India (they manfuacture the electronics and computers for Wind Turbines) and it was a night and day difference to a similar attempted Taiwanese operation there.

The difference was SK+JP companies would actually try to hire management locally, and if there wasn't anyone qualified, then invest in actually training from scratch, or alternatively, make a partnership with an existing company in India to help manage the local operation.

Meanwhile, the attempted Taiwanese operation underbid severely, saw significant timeline overruns, tried to manage everything in-house, and the project was eventually scrapped and given to a private sector South Korean-Indian consortium. There was also a bit of corruption/malfeasance with the Taiwanese operation which pissed people off in the district.

All this happened in the 2009-2012 timeframe

dirtyid6• 3 years ago

I rememeber in 90s, local mid-level managers who worked for MNC in PRC tend to like their SKR bosses and frequently hated TW bosses simply because cultural overlap allowed them to push harder. With SKR they could at least feign ignorance with language barrier but TBH still got their work done. I can imagine shitshow of having language barrier and still not meeting KPIs because they're not cross culture competent.

Anyway Tata feels like a good fit, always felt like matter of time before audit/tax or political shenanigans drive foreign electronics assemblers out and eventually consolidate under India champions. Still seems a little premature, but I remember numbers last year that 2500/12000 registered forreign companies closed Indian operations since mid 10s, so maybe it's time for India chaebols to take over.

gnabgib2• 3 years ago

After 15 years they are not planning on exiting India, just the iPhone aspect.

"Wistron entered India in 2008 with a repair facility servicing PCs, laptops, servers and other devices it manufactured. In 2017, it started making iPhones for Apple and now makes the iPhone 14, iPhone 13, iPhone 12 and the iPhone SE. The company will continue with its repair facility."

https://economictimes.indiatimes.com/tech/technology/wistron...

dirtyid6• 3 years ago

They were hoping to expand to manufacturing laptops, IoT and EV components a few years after they spung up iphone assembly. Some of the reporting suggest this won't happen anymore. An established electronics manufacturer stuck with repair depot work, i.e. the portfolio they entered country with, after 10 or 15 years is not a good look.

buescher3• 3 years ago

If Wistron was having quality problems, as has been rumored about iPhone production in India [1], this could have been the sort of deal where both sides lost.

[1] https://www.theapplepost.com/2023/02/26/apple-disappointed-w...

MuffinFlavored• 3 years ago

what portion of apple assembly for things like macbook/watch/iphone aren't 100% done by machine, and if they aren't 100% done by machine (which they aren't), it sounds extremely not easy to do by hand (especially at scale, for "low wages")

what parts can't they automate?

MichaelZuo2• 3 years ago

Most of the final assembly is done by hand. Hence why so many people are needed in the final assembly factories of Foxconn, Wistron, etc.

buescher3• 3 years ago

Automation doesn't guarantee quality, and it is hard to do at a high quality level, at scale, also.

eunos• 3 years ago

Wistron exit from India https://economictimes.indiatimes.com/tech/technology/wistron...

cush• 3 years ago

Apple is so huge that they treat their manufacturers like a freelance design contracts... "We'll let you build our devices. We can't pay you, but think how amazing it will look to have Apple in your portfolio!"

unicornmama• 3 years ago

It might appears unfair from Apple's side to take advantage of their position. However, hardware manufacturers do not resemble naive and exploited children. Commoditized vendors experience pressure to zero their margins from their largest customers. Every big customer does this (Wallmart, Google, Amazon, etc.) It's textbook business strategy.

avmich3• 3 years ago

Capitalism. If manufacturers can't count their beans, who'll do that for them? Of course same applies to actual freelance persons - where the dynamics is substantially different.

southwesterly• 3 years ago

“Oh, by the way, sign this NDA so you can’t even talk about it.”

mise_en_place• 3 years ago

Interestingly, it seems first mover advantage backfired on this company. Due to lack of margins and vendor lock in.

genr82• 3 years ago

a similar situation just happened between Nvidia and EVGA. NVidia makes the chips, And So, holds all the bargaining chips so to speak, and EVGA is just the board partner that has to find some way to make the price work. At some point it becomes impossible and they have to actually walk away in order to not be taken advantage of. We know this much, and I'm going to assume the situation was similar here with Apple and Wistron.

kitsunesoba2• 3 years ago

I think the Nvidia/EVGA situation might be a little different in that it looks like Nvidia is intentionally trying to squeeze out board partners like EVGA in favor of self-branded cards. The closer parallel is probably when Apple killed the Mac clone program by making it extremely difficult for clone makers to compete.

fomine33• 3 years ago

Nvidia still doesn't sell their FE so much outside of US, so I don't think their intension is to selling more FEs.

thr0waway001• 3 years ago

I guess that's how you get to be a trillion dollar company.

TradingPlaces• 3 years ago

Foxconn somehow made $137m profit in the past 12m.

xxs• 3 years ago

You mean by installing the suicidal protection net, Foxconn barely makes it? Foxconn has 1m3 employees. If they made just 137m in profit - that's just $8 profit per employee a month.

AYBABTME2• 3 years ago

"just" 8$ per employee/m versus which similar industry's standard?

buescher3• 3 years ago

I think those numbers are Taiwan dollars, and "m" is for billions i.e. milliards. So closer to $300 USD per employee per month. For fun, compare to McDonald's.

supernova87a• 3 years ago

Apple does help its suppliers to make a profit -- but the amount of profit that sustains a healthy set of vendors for Apple, at quality levels and corporate practice levels that Apple evaluates as "fair".

Now, you may criticize that this holds vendors over a barrel and squeezes them to narrow margins, etc. But at least give Apple credit for having a view to the long run and trying to create a pool of vendors that it can rely on in a sustainable way, and not just some surge capacity for the next quarter only to drop them. Apple thinks longer than that. Their procurement function is quite skilled.

And it's not like the vendors would magically have some source of business at better terms than Apple that would be good for them in the long run either. You want suppliers to somehow be raking in great margins in excess of what was "fair"? You want an employer who's more clueless and lets you make lots of extra on the top?

A successful supplier to Apple knows what it's capable of and what its costs are, signs on to grow with Apple and become successful, and share in the practices that make a company efficient, skilled, productive. They can choose to join this train. Or not. It's voluntary.

rullelito• 3 years ago

Vendor says they can't make profit. Wall-of-texter on HN says they can.. So hard to know who to believe..

lotsofpulp• 3 years ago

Given that Apple has delivered tons of devices into people’s hands for well over a decade and continues to do so, I am going to go with the common sense that Apple’s suppliers must be earning a profit, otherwise they would not be doing charity work for Apple.

madeofpalk• 3 years ago

Back in 2020, there was a major riot at its Bangalore plant over underpaid wages, with millions of dollars’ worth of damage done. Both the Indian government and Apple investigated, and both found that Wistron was indeed guilty of serious labor law violations, including underpayment of its workers.

I’m not sure either are a great source to be honest.

ShadowBanThis013• 3 years ago

Does relying on Chinese companies in India really accomplish the goal of independence from China? If there's some kind of political conflict, isn't it likely that China can shut those down using leverage at home?

huyage• 3 years ago

Isn't wistron literally a taiwanese company?

ShadowBanThis013• 3 years ago

I don't know, but they're exiting the business anyway. The article also mentions Foxconn and Luxshare, which are Chinese.

dahwolf• 3 years ago

You can hear the western executive think: India has lots of people and poor people specifically, so let's just roll out the China model there.

They're going to be in for a shock. India does not have the "submissive communist" mindset where the individual sacrifices everything for the greater good of society, tolerating near-infinite abuse and exploitation.

That loyalty model breaks much sooner. And whilst it incidentally breaks in disruptive ways (riots), more often than not it manifests as silent sabotage. There will be instability and if there's anything fatal to manufacturing...

gnabgib2• 3 years ago

The original news article from [Wistron exits Apple India business after tripping over scale, work culture](https://economictimes.indiatimes.com/tech/technology/wistron...) from The Economic Times (referenced in the article) seems like a better submission.

pfannkuchen• 3 years ago

I’m surprised Wistron gave comment on Apple allegedly pushing them around, it makes them sound weak (which companies usually avoid doing).

fomine33• 3 years ago

Wistron (Taiwan based) sold plants to Luxshare (PRC based) - so is Apple failing moving from China?

iPhone maker Wistron quits, saying Apple didn't let it make a profit

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