The Information: ‘Inside Apple’s Eroding Partnership With Foxconn’

Truly remarkable report by Wayne Ma for The Information:

In 2013, demand for the iPhone 5C, a budget model with a colorful plastic shell, was so weak that hundreds of thousands of the devices piled up in Foxconn warehouses, according to two former Foxconn employees in its iPhone unit. Foxconn executives complained to Apple that they couldn’t keep storing the phones for free, but Apple had no incentive to take them because it doesn’t have to pay for its products until they leave the warehouse, they said. Apple cut short the iPhone 5C production schedule, while Foxconn began giving out the phones as gifts to employees, one of the people said. Apple eventually drew down the remaining inventory, the person said.

This is the best confirmation I’ve ever seen that the iPhone 5C was a dud sales-wise. I mentioned this a few weeks ago (on a podcast?) and a few people disputed it, but only with anecdata. I liked the 5C, and I know it was popular with Apple’s own employees, but I never saw many in the real world and, most tellingly, Apple never again made another iPhone anything like it.

In another incident, according to an internal Apple presentation reviewed by The Information, Apple accused Foxconn of giving employees of rival Google a tour of a factory in China that made the metal frame of the 12-inch MacBook, which was released in 2015. When Apple security managers learned of the Google visit, they asked Foxconn for security footage and visitation logs, but Foxconn refused to cooperate, according to the presentation.

Foxconn has taken other liberties with its Apple relationship, former employees said. In 2015, Foxconn used idle factory equipment that Apple owned to work with other clients, according to two former employees. These people said they shipped dozens of Apple-purchased machines for radio-frequency compliance testing to another Foxconn site, where they were used to test smartphones made for Huawei, an Apple rival based in China.

The Apple-owned equipment was shipped back to its original location before Apple audited the production lines, these people said. The practice became harder to get away with after Apple started attaching RFID tags to some of its equipment to keep track of where it was going, according to four former Apple and Foxconn employees.

All sorts of other allegations in Ma’s reporting, including Foxconn billing Apple for employees it never actually hired. One can only imagine how much Foxconn has tried to get away with this year, with coronavirus travel restrictions keeping many Apple employees out of China.

Tim Culpan, longtime Bloomberg columnist who has covered Foxconn extensively, finds the allegations credible and explosive.

Wednesday, 28 October 2020