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Apple's OEM FoxConn Launching Its Own Retail Stores
Two weeks ago, when summarizing the state of the US vs China escalating patent war (for now manifesting itself in the courtroom brawl between Apple and Samsung, but soon to drag many more comparable companies down in drawn out litigation), we observed that while AAPL may have the upper hand, iPhone 5 map fiasco notwithstanding, that "the Chinese politburo can one day decide to pull FoxConn's operational license, in the process bankrupting AAPL overnight" if China really wanted to turn the tables. Obviously, this was the "thought experimental" MAD outcome which leads to loses for everyone involved: both Apple and China (where Apple's contract manufacturer FoxConn employs over 1 million workers). There is one other alternative: that FoxConn, by now having reverse engineered the peak of Apple's brilliance (whose latest evolutionary step was "lighter" and "longer", which anyone could have come up with), decides to brave it alone, and instead of being a contract manufacturer, to simply slap on a FoxConn sticker, a la Acer and ASUS, and sell all Apple-equivalent products at 50% off while collecting all the revenue. Impossible, you say, Apple would never allow it? It is already happening, first in high-growth Brazil, where FoxConn is now launching its own stores.
From Valor International:
Chinese contract manufacturer Foxconn, which produces Apple's Iphone, will create a direct to consumer store at its new R$1 billion factory in Itu, in the state of São Paulo, offering several of the brands manufactured by the company. The plant's project was presented Thursday in the São Paulo's state government headquarters. It will be the 9th Foxconn factory in Brazil, but the first not to be created in leased land, representing a more permanent home for the Chinese giant. The new factory will employ between 5,000 to 10,000 people up to 2016.
As to what products will FoxConn will sell, it is for now unclear but will likely focus initially on merely being a reseller of Apple and other beneficiaries of its OEM supremacy. If this is the route Hon Hai's factories decide to go, it means that the "magic" of the Apple retail experience will soon be rapidly commoditized, once the inventory of the Apple store is replicated down the street at another retail location, one which has its own selling culture.
One thing is certain: if and when it so chooses, FoxConn having reverse engineered a stunning half of the world's entire OEM electronic device product flow, will have its choice of what it wants to bring direct to retail. As a reminder:
Apple’s position as the world’s leading computing device company has driven manufacturing partner, Foxconn, to seize an astonishing 50 per cent of the world’s electronic manufacturing services market, said iSuppli today. Half of the world’s production of consumer electronics devices come from a Foxconn factory, with Apple’s production demand driving this record, iSuppli explains. This is now an Apple world.
“Foxconn’s customers are some of the hottest companies in the electronics business today, most notably Apple,” said Thomas Dinges, iSuppli associate. “As Apple and others have gained share, so has Foxconn.”
With revenue of $17.1 billion, Taiwan’s Foxconn, aka Hon Hai Precision Industries, was the dominant EMS provider in the first quarter of 2010, dwarfing No. 2 player Flextronics International, which posted revenue of $5.9 billion during the same period. Apple represents the fastest-growing customer for Foxconn, which manufactures products including the iPad and the iPhone 4.
In simple terms it's called "economy of scale", or in this case "monopoly", and soaring leverage to do whatever FoxConn chooses. Even if that means taking on some of its core OEM customers: after all where are they going to go?
Which begs the question: what happens to Apple margins and future innovation cycle if it ever were to lose its primary OEM channel should the infighting between the US, Korea (Samsung) and China (HTC), aka West vs East, continue escalating? Not to mention its $600 billion market cap.
And even if FoxConn merely becomes a reseller of Apple and other brands, how long until people realize that at the end of the day absent the creative genius that took Apple to the pinnacle of electronic device innovation under Steve Jobs, all it really is, is a sticker of a fruit affixed to a bunch of products made and packaged by a company operating out of China, which also is the beneficiary of the GDP boost courtesy of iPhone 5 sales, not the US - all the US consumer gets is the credit card bill to fund Chinese economic growth.
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You losers. youve gleefully told us that 'iPods' would be gone in a year (btw-whats a Zune)? that the iPhone would bomb-the the iPad wouldnt last 6 months-then you puked on Apple in relation to slave labor at Foxcomm, until it came to light that nearly every other major US/Japanese electonic company uses Foxcomm to build their hand held goodies-*now that Apple has turned the table on the Antiquated OS of Windows-you cant scream loud enough about wanting to "bring Apple down". pathetic losers
anyone who feverishly wishes someone else to lose is sick-
-Monique
if youre literate, look up Foxcomm on Wiki
Never underestimate a cult member.
70% of the sheep will have nothing but social security checks when they retire. Yet, they bough every single iPhone, iPad and iPod model ever sold...
IF they HAVE social security. A federal court ruled that social security is not a retirement plan, it is a TAX, and that paying into the plan guarantees absolutely NOTHING to ANYONE. The pay out of any "social security benefit" is completely "optional and voluntary" on the part of the government.
That's why social security retirement money goes into the general fund and gets spent. There is no "lockbox", and there are no segregated monies. It's all nothing more than a scam...
If the government can "opt-out" why can't the taxpayer? Why should I be forced to pay for something I'll never get?
Oh, wait a minute.............
wanna wager on that SS?
Nice work Tyler.
LOL ... Apple, the biggest company in history, controls nothing of its productive operations except via the good will of the Chinese Government.
A fox in the orchard is as bad as a henhouse, who would have thought. Do I have to stand in line for my iFox?
Outsourced manufacturing is an exit strategy for a company. It just takes a decade or two to wind things down. Look at Silicon Valley and HP if you think otherwise.
Outsourcing is a exchange that increased the bonuses and golden parachutes of a handful of executives for selling the entire wealth of the West to Asia.
OVERDUE CORRECTION LOOMS.
Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:
SPX, DOW, NASDAQ, NZDUSD, GBPUSD, AUDUSD, COPPER, CRUDE, GOLD, SILVER. [USD strength will return]
http://www.zerohedge.com/news/2012-12-24/market-analysis
http://trader618.com
My question is why does Apple manufacture its over rated products in China anyway? They could manufacture this crap in countries that actually follow the rule of law and still sell billions of units.
Maybe to generate the same profit they would be selling an I phone for $20 bucks more but the idiots who line up for the latest offering from the Igods would still be standing there worshipping the new Ipod.
By the way the things that Apple sells are just minor changes on the crap that you already have in your pocket. You can get along with out the newest one. It won't change your life. Girls wont be throwing themselves at you because your Iphone has a better screen. Buy a quarter ounce of gold instead and keep your old iphone that you paid way too much for.
Because these "brilliant" American business managers and the people who invested in these companies never figured out that the Communist Government in China.. is... surprise... a Communist government.
I can't wait until China starts producing its own versions of all of the US products supposedly protected by the fiction of "intellectual property". Business models that depend on a government monopoly grant are going to find out that that grant is only as good as the willingness of the government (of both the US and China) to co-operate with them. Chinese companies can produce and sell all of Apple et. al.'s products and there is nothing they can do about it.
The handwringing here makes me think that Apple's wits are being lumped in with the likes of the US Government.
How many seriously think Apple hasn't seen and planned for this development?
How many seriously think Apple hasn't been applying their considerable manufacturing engineering skills to removing the vast majority of labor content in iToys? The US private sector is making a fairly silent, but dramatic move to recover manufacturing. Sadly, not manufacturing jobs. Those are gone.
This is a conflict and pain phase. All pimples blow out. Apple will survive and prosper.
As Karl Marx said, (I paraphrase), "We must remove control of the means of production from the Capitalists and provide these to the proletariat." This is not some new tit-for-tat retaliation. This has been the plan in China for 16 years, since acquiring most-favored nation status. Take the means of production... give these to the proletariat (read Chinese government) and destroy Capitalism (read The West / United States). How much is that Apple stock worth? Hewlett Packard? Walmart? Best Buy? The correct answer is $0.
scrollin all the way down to the bottom. . .
what if "communism" and "capitalism" (et al) are just like competing religions, or competing nationstates, or competing football teams, in that they're i-Deas sold to the masses to argue the fine points of. . .
while those who control the show behind the scenes, and who have no such divisive illusions, just get on with their "work" -???
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