As thousands of developers descend upon Silicon Valley for Apple’s annual worldwide developer’s conference, should they be wary of getting into business for the tech giant?
Apple’s Worldwide Developer Conference (WWDC) kicks off on Monday, meaning that Silicon Valley will be flooded with developers hoping one day their company will partner with Apple. But before these developers get too excited about this prospect, should they be wary of the tech giant?
WWDC will reveal to developers and IT professionals technical information about new Apple products, which many in attendance will be looking to partner with Apple on.
Who could blame them. Apple is one of the biggest and hottest companies in the world, with an estimated worth of $750 billion and showing no signs of slowing down anytime soon. Partnering with the tech giant would prove lucrative for any developer.
These developers should know though that Apple has a history of doing anything to ensure it remains profitable, and that smaller companies are often the ones who suffer the most.
Apple’s tactics include bankrupting smaller companies, defrauding the public, engaging in lengthy litigation, and throttling smaller companies out of the marketplace.
There are multiple examples of Apple’s bullying business dealings.
There’s the case of GT Advanced Technologies (GTAT), which partnered with Apple and less than a year later ended up bankrupt because of the tech giant.
GTAT announced in September 2013 that they had entered “into a multi-year supply agreement with Apple Inc. to provide sapphire material” for the iPhone 6. The deal between Apple and GTAT was for approximately $578 million and was supposed to create an estimated 2,000 jobs in Arizona.
Seems like a pretty good deal on paper, however, this deal was doomed to fail from the start.
GTAT was not equipped to handle the massive influx of orders from Apple. It ended up spending $900 million to try and meet Apple’s demands, considerably more than the $439 million provided for this large scale up. Compounding that problem was Apple constantly changing the product’s specifications.
In the end, Apple decided to abandon the project claiming that GTAT, “hadn’t met the contract’s output or quality requirements,” and withheld its final payment of $139 million to GTAT.
The unexpected cost, Apple’s changing demands, and it’s refusal to pay GTAT $139 million resulted in GTAT filing for bankruptcy in 2014, almost exactly a year after it had gone into business with Apple.
Leaked court documents involving Apple and GTAT show Apple “as a bully whose tactics played a part in GT Advanced Technologies’ early October bankruptcy.”
“The documents, which followed a request earlier last week from a judge that more information regarding their relationship be released, paint Apple as a colossal company flexing its muscles at GT Advanced when the two were negotiating a supply agreement for sapphire materials.”
Apple has often renegotiated deals with its suppliers, which end up damaging their earnings only to protect Apple’s bottom line.
In 2016, Apple was struggling to sell its latest iPhone and forced California parts suppliers to accept price cuts. The Wall Street Journal reported that this move by Apple “is likely to hurt some suppliers’ earnings in the second half of the year.”
The most recent example of Apple’s questionable business practices is its ongoing legal battle with Qualcomm, in which Qualcomm alleges “that Apple deliberately didn’t use the full potential of Qualcomm chips in iPhone 7 phones so that they wouldn’t perform better than the modems provided by Intel.”
According to reports, “Qualcomm says Apple ‘threatened’ it to keep quiet about the differences between Intel and Qualcomm iPhones, preventing Qualcomm from making any public comparisons about the superior performance of the Qualcomm-powered iPhones.”
Apple is “attempting to use its enormous market power to coerce unfair and unreasonable license terms from Qualcomm” for its chip. Even worse, Apple has stopped paying royalties to suppliers for phone patents owned by Qualcomm, in turn leaving these suppliers unable to meet long-standing contractual obligations with Qualcomm.
If consumers think Apple cares about them more than its developers, they would be mistaken.
Apple was forced to pay a $450 Million settlement in 2015 after it was found guilty of price-fixing e-books in New York. A United States Justice Department lawyer portrayed Apple “as a corporate bully that swaggered into the market for electronic books in 2010, forcing an end to price competition and costing consumers hundreds of millions of dollars.”
Developers attending WWDC should pay attention to these cautionary tales before they decide to go into business with a company that has a well-documented history of doing anything to ensure it remains profitable at anyone’s expense.
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