Despite Warm & Fuzzy Public Image, Apple Using Slash-and-Burn Tactics to Increase Profits

By NTK Staff | 04.24.2017 @7:00am
Despite Warm & Fuzzy Public Image, Apple Using Slash-and-Burn Tactics to Increase Profits

The tech giant is cutting out long-time suppliers and not paying others just to increase its margins…

Saturday was Earth Day, and in an effort to portray a warm and fuzzy public image, tech giant Apple released a series of feel-good videos about the company’s commitment to renewable energy.

But behind the videos lies a more concerning issue. Apple is systematically “squeezing” its suppliers to increase its profit margin. Examples of this have popped up in the news lately:

On Monday, Apple said it would be “reducing its future reliance on Imagination’s technology” over the next 15 to 24 months. Imagination, a U.K. firm that designs graphics processing units (GPU), is a key part of Apple’s products like the iPhone.

Apple’s “squeezing” of chip manufacturer Qualcomm is similar in nature, but different in approach. In that case, Apple’s contract manufacturers are underpaying royalties owed to Qualcomm, whose earnings report read:

Apple’s contract manufacturers reported, but underpaid, royalties in the second quarter of fiscal 2017. However, our revenues were not negatively impacted as the contract manufacturers acknowledged the amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple under our Cooperation Agreement that are currently in dispute. The Cooperation Agreement expired December 31, 2016.

These kinds of cutthroat business tactics don’t just benefit Apple’s bottom line, they threaten American innovation.

The main risk is that Apple misses new technology trends that bubble up through a large supply chain. Relying more on internally created components, it’ll have fewer suppliers lining up to show it the latest innovations.

By cutting out longtime suppliers who rely heavily on Apple and underpaying others, the tech giant is prioritizing profit margins over technological advancements that benefit all consumers.

And that kind “bottom-line above all else” strategy does not jibe with the warm and fuzzy public persona the company tries to present toward the consuming public.

 

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