Who's Making Your iPhone?
January 12, 2009
The iPhone may have an American face—the face of the bearded, balding Steve Jobs—but its innards are pure Taiwanese.
Like so many “American” high tech products in recent years, the iPhone is MIT, Made In Taiwan. Exactly who made it has been a matter of intense speculation ever since rumours started to drift out from Taiwan that Apple had placed a large order of 12 million units of phones with some companies.
While companies involved are bound by a non-disclosure agreement to keep mum, experience with iPod suggested Foxconn International Holdings is definitely one of the chosen few. Foxconn, listed in Hong Kong and recently an index stock, is a subsidiary of Hon Hai Precision Industry, the world’s largest electronic contract manufacturer by revenue.
Hon Hai was the main contractor for the iPod, Apple’s phenomenally successful portable digital music player. It was, in fact, through a leak in Hon Hai that news of the iPhone was first released to the market.Then there is Catcher Technology, which specialises in making stainless-metal casing (think iPod) that has become popular with cellphones and notebook computers in recent years. And Primax Electronic, a maker of digital camera modules for cellphones, Entery Industrial Co, manufacturer of the humble but essential connectors that join other components; and Unimicron Technology Corp, producers of the ubiquitous PCB or printed circuit boards.
All of these companies are specialists, top in their field. And every last one has a manufacturing arm in China to help drive down costs. Hon Hai/Foxconn, in fact, is so steep in China that its subsidiary in China has been named the country’s top exporter three years in a row.
The specialities of the Taiwanese and their cost advantages made them indispensable allies of American high tech firms. When Dell in the late 1990s drove down prices of personal computers, and drove Compaq into the arms of Hewlett-Packard, it was relying on Taiwanese firms to help deliver the goods. And when HP overtook Dell in the PC market in recent years, much of the credit should have gone to its Taiwanese subcontractors, though HP never acknowledged its debt publicly.
Today the Taiwanese make some 80% of the laptops in the world, and an increasing percentage of the cellphones. Among them the biggest player is Hon Hai, run by the militaristic Terry Guo, named by Forbes as Taiwan’s richest man.
Guo started Hon Hai (“Wide Sea”) in 1974, when he was in his early 20s. It was a tiny company that made knobs for television sets. Today Hon Hai is a gigantic conglomerate that makes products ranging from Dell PCs to Sony PlayStation game consoles and, of course the iPod.
Last year its revenue was an astounding US$39 billion. Of this, a substantial part came from Foxconn, one of the biggest cellphone makers in the world. Foxconn, which counts Motorola as a customer, rides on the global boom for cellphones and saw its share price rise some six times since it was listed in Hong Kong two years ago.
But working with Americans carries its own perils. Foxconn, if indeed it is the main subcontractor of the iPhone, may lose the Motorola business. Moreover, US firms are increasingly concerned about human rights and proper treatment of workers. This goes against the Taiwanese mode of operation, which treats workers, especially those in China, like so many indentured labourers. Hon Hai got into trouble recently for its treatment of workers. If human rights activists have their way, Hon Hai would be the last company to get any business from Apple.
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