Dive Brief:
- Apple intends to begin designing its own iPhone main power management chips, possibly as soon as next year, the Nikkei Asian Review reported last week. The company currently depends on the U.K.'s Dialog Semiconductor, which lost 19% stock value in afternoon trade as a result.
- Apple's growing drive toward independence became evident when it broke with Imagination Technologies in April, before going on to engage in a protracted lawsuit over royalties with Qualcomm, a modem chip producer.
- At present, Dialog is Apple's sole supplier for power management chips for the iPhone, iPad and Apple Watch. Dialog earned 74% of its annual revenue from Apple in 2016.
Dive Insight:
Apple has continually signaled its intention to claim greater control of its own supply chain.
Advance coverage of Apple's newest phones, including the Apple X, mostly speculated on uncertain release dates, caused by an array of supply chain issues, including its parting of ways with longtime chipmaker Qualcomm. Though the top smartphone maker has not broken with Foxconn Technology Group, profits fell at the Chinese assembler by over 35% thanks to OLED component and other delays.
Untempered risk is the primary culprit in the Apple release date debacle, since relying on a single supplier, assembler, or manufacturer is well known to create problems within an effective supply chain. In the case of Apple, it's not just the Cupertino giant experiencing headaches; significant loss of profits has affected nearly every business involved with the delay.
Apple's response is to reclaim elements of its own design and production. Though the process has already become contentious and could even break some suppliers, they too erred by falling into dependence on one skittish client, regardless of the strong profits and false security they may have enjoyed.
The trend here with Apple — and other big companies like Boeing — is an attempt to more tightly control sprawling supply chains with multiple suppliers by moving some production in-house and distributing risk among suppliers. This strategy will cut costs, reduce conflict and alleviate some supplier risk, as well as help these big companies operate more cohesively.
