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10 Major Companies Tied to the Apple Supply Chain (AAPL)


Apple, Inc. has been a true innovator and millions of customers are willing to pay a high premium for the quality, design and features of Apple devices like the iPhone, iPad, iPod, and Apple Watch. But Apple doesn’t make all of its devices on its own. It procures components from a large number of suppliers and there are service-vendors responsible for assembling those different components into the final product.

Apple is one of the most valuable companies to date, with nearly two-thirds of its revenue coming from iPhone sales. That’s because the tech giant operates one of the most efficient supply-chain management systems on the market right now. In this article, we take a look at a few of Apple’s top supplies and explore the benefits and drawbacks of using this business model. (Note: This list is not exhaustive and is arranged alphabetically. The locations of suppliers listed here are limited to the facilities that supply Apple. Suppliers may also have other facilities.)


Analog Devices, Inc. (ADI)

NASDAQ-listed ADI is based in Norwood, MA and provides the capacitive touchscreen controllers for the iPhones and the Apple watch. The company supplies these components from facilities based in Ireland, the Philippines and the U.S. Back in March 2015, ADI stock soared after Barclays reported that Apple was considering using ADI to source its then-anticipated 3-D touch feature. That report pushed ADI’s stock price up 9.8% over the course of a day to the company’s highest levels in a decade, which indicates the impact of Apple’s business on its suppliers’ valuations.


Glu Mobile, Inc. (GLUU)

NASDAQ-listed Glu Mobile doesn’t supply Apple with hardware but is a major provider of iOS apps and mobile games. Valuewalk reports that “Glu Mobile makes 64% of revenue from Apple,” implying its major dependency on Apple.


Jabil Circuit Inc. (JBL)


Micron Technology, Inc. (MU)

Micron and its subsidiary companies, like Elpida Memory, are based in multiple locations across the U.S., Taiwan, Singapore, China and Japan. They supply various memory modules like DRAM, LPDDR3 and LPDDR2 for Apple devices. These modules are used by smartphones and electronic devices to efficiently multitask and run various applications. The recent iPhone 6 uses LPDDR3, while the company is currently testing the next version LPDDR4, which is expected to be up to 60% faster and low on power consumption.


Murata Manufacturing Co. Ltd.


Nidec Corp.


Qualcomm, Inc. (QCOM)

NASDAQ-listed Qualcomm is the world leader in semiconductor, mobile and telecom products and services. It is known to supply multiple electronic components to Apple, including Envelope Power Tracker, Baseband Processor, Power Management module and GSM/CDMA Receiver and Transceiver. These are various instruments used in the devices’ power management systems and in mobile signaling. However, the most important component that is missing from the Apple’s own A-chip processor is the cellular baseband modem. Qualcomm has filled this important space for Apple devices, offering the needed modem technology.


Samsung


STMicroelectronics (STM)

STM is a Geneva, Switzerland-based electronics and semiconductor multinational company. It supplies a low-powered, three-axis gyroscope and accelerometer to Apple, used to detect the orientation and altitude of a mobile device. Along with Apple, STM’s top clients include BlackBerry, Nokia and Cisco. However, recent reports suggest that all may not be well between STM and Apple. Apple has been sued by a patent troll for allegedly infringing seven STM patents after Apple decided to go with STM’s competitor InvenSense to procure gyroscope and accelerometer parts for the iPhone 6.


Texas Instruments, Inc. (TXN)

TI serves Apple through its multiple facilities spread across Taiwan, the U.S., Malaysia, Japan, Mexico, the Philippines, the United Kingdom, Germany and China. In the Apple Watch, TI is expected to provide the current operational amplification system, which in turn, contains 30 different components itself. For iPhones and iPads, it supplies the touchscreen controller, power management chip, and a control device. According to past reports, TI was “said to receive a significant number of orders from Apple,” which generated “thousands of jobs” for this supplier.


How Does This Supply Chain Benefit Apple?

Apple is known to maintain one of the best-managed supply-chains in the world. Using its stature and global reach, the tech giant is able to demand high-quality products and impose stricter terms on its suppliers. When one of Apple’s Chinese suppliers of “tactic engines” for the iPhone 7 proved unreliable, for example, the company quickly procured them from the Japanese firm Nidec Corp. Apple has hundreds of such suppliers willing to abide by the terms Apple sets forth. What’s more, by outsourcing its supply-chain and assembly operations, Apple can do what it does best — concentrate on designing great products that offer rich functionality and are easy-to-use.


How Does This Supply Chain Benefit Suppliers?

Being associated with a brand like Apple can be a remarkable boon for a supplier firm. Apart from the small novice firms, who may derive much of their business from Apple, even larger companies like Samsung use the relationship to their advantage. As we noted above, Samsung continues to compete with Apple in the mobile phone market, however, large orders from Apple allow Samsung to increase bulk production which reduces manufacturing costs for its own mobile phone components.

Another advantage for suppliers is that Apple has a reputation for innovation. Regardless of how specific products have performed and despite missteps that have occurred, people expect Apple to come out with something new on a regular basis and eagerly anticipate these products. To a certain extent, this shields Apple suppliers, who will continue to see new demands for their goods and services.

It should be noted, however, that failing to please Apple can spell doomsday for a small or medium-sized supplier that has built its business around iPhone sales. If suppliers do not maintain high-quality goods at the right price, Apple is likely to dispose of them for a competitor.


The Bottom Line

Apple needs suppliers and suppliers need Apple – it’s a streamlined relationship that is often mutually beneficial but not without tension. Suppliers have major exposure to Apple and its overall market performance. Financial reports of supplier companies are frequently used by market analysts to project sales for Apple products. For a supplier, this can quite literally be a “do-or-die” moment. Do it well, and you just might experience windfall gains. But fail Apple, and you should be prepared for the worst.



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Written by sortiwa

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