Apple Inc. (AAPL) Expected To Keep Diversifying Suppliers

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Apple Inc. (AAPL) Expected To Keep Diversifying Suppliers
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Apple Inc. (NASDAQ:AAPL) has been making strides to diversify its supply chain this year and will continue doing so into next year, according to one analyst. KGI analyst Mingchi Kuo issued a report to investors this week highlighting the results of this diversification.

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Apple Inc. (AAPL) Expected To Keep Diversifying Suppliers

One of the most recent beneficiaries of Apple Inc. (NASDAQ:AAPL)’s efforts to diversify its supply chain is Taiwan Semiconductor Manufacturing Company (NYSE:TSMC), which the company was rumored to have made a deal with last month. Of course there are benefits both for Apple and for the companies it signs deals with this year and next.

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Benefits For Apple Through Diversification

Continued diversification in Apple Inc. (NASDAQ:AAPL)’s supply chain means less reliance on major competitor Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) for the company’s vital components. According to Kuo, Apple Inc. (NASDAQ:AAPL)’s bargaining power in terms of pricing will also strengthen because it is relying on more than just a handful of companies to deliver components. Also the company’s shipments will be more stable.

Suppliers Likely To Benefit From Apple’s Diversification

The analyst named a few companies believed to be the greatest beneficiaries of Apple Inc. (NASDAQ:AAPL)’s diversification, after Apple itself of course. KGI sees Compal Communications (TPE:8078), Wistron (TPE:3231) and Inventec Appliances as being the major beneficiary companies of the diversification. Compal Communications and Wistron are both new to the Apple family, and Inventec is reportedly trying to add to the products it manufactures, which currently only include the iPod.

If Compal Communications (TPE:8078) does become a supplier for Apple Inc. (NASDAQ:AAPL), it will be one of just a few mobile supply companies around the globe to supply for three of the major mobile operating systems, with Android and Windows Phone being the other two, all at the same time.

Threats To Apple’s Current Suppliers

Of course if Apple Inc. (NASDAQ:AAPL) does keep diversifying, it poses a threat to the company’s two main suppliers, Hon Hai Precision Industry Co., Ltd (OTCMKTS:HNHPF) (TPE:2317) and Pegatron Corporation (TPE:4938) (OTCMKTS:PGTRF). It’s believed that Pegatron is handing the greatest majority of production for the low cost iPhone and possibly also the next flagship iPhone. Foxconn Technology Co., Ltd. (TPE:2354) also is playing a role in the next iPhone model as well since it was said to be on a hiring spree this month in preparation for production.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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