Apple caught in the vortex of class action under the crisis of the "fruit chain" suppliers out of the way?

This article is transferred from: Securities Daily Network

Reporter Jia Li

Tech giant Apple and its CEO Cook are locked in a wrangling lawsuit.

On February 14, it was reported that Apple was involved in a class action lawsuit due to CEO Cook's remarks on the demand for iPhones in the Chinese market. At the same time, due to the large-scale "jelly screen" of the iPad Mini6, Apple has also been accused of false propaganda and encountered a class action lawsuit.

Some supply chain people told the "Securities Daily" reporter: "In recent years, under the pressure of tight chips and weak sales, Apple has chosen to reduce costs in order to protect its high gross profits, which has further squeezed supplier profits or led to loopholes in the quality control link." ”

"Concealing the decline in sales in China" Apple suffered a class action lawsuit

On February 14, according to media reports, Apple was sued by a local council in the United Kingdom for comments made by CEO Cook three years ago about China's iPhone demand. Cook said at the time that Apple's sales pressure had increased in some markets, but "I wouldn't include China in it." The remark was pointed out by shareholders: "Concealing the decline in sales in China." The case is currently eligible for class action. All shareholders affected by this can participate in class actions and potentially increase the risks to Apple. Apple said Cook's comments were merely an expression of opinion and were therefore protected.

At present, the relevant litigation is still ongoing. If the class action lawsuit is passed, Apple could face a fine of more than $1 million (about $6.35 million) to compensate for shareholder losses.

Around 2019, the sales of the iPhone in the Chinese market suffered a decline. Canalys data shows that in 2018, the global sales of iPhones were 225 million units, and sales in the Chinese market fell by nearly 20% year-on-year; in 2019, the sales of iPhones in the domestic market were 27.5 million units, down 21% again compared with 2018.

Since last year, on the black cat complaint platform, iPhone13 pink screen, unlimited restart, battery drum pack, bad signal and other problems have become hot spots for complaints, and a large number of fruit fans on the forum shouted "disappointment". Although in the fourth quarter of 2021, the iPhone gained a high share of 23% in the Chinese market, a record six years, but its trust crisis has not been lifted. Due to the "jelly screen" on iPadmini6, users in North America have filed a class action lawsuit with the court, and the trial will soon begin.

Another door to the "fruit chain" enterprise is opening?

It's no accident that Apple products experience quality issues repeatedly.

In the view of Ma Chao, a financial technology expert and Ali MVP, the emergence of "jelly screen" is mainly due to the lack of strict quality control. "In recent years, the tight supply of chips and other products has led to product sales being restricted, and Apple can only increase profits by reducing costs." In order to further reduce costs, Apple has reduced the sampling rate of suppliers, and the cost reduction has compressed the profit margins of suppliers, and quality control cannot be guaranteed. ”

"With the increase in raw material costs, in order to ensure the stability of gross profit, Apple can only suppress costs, in recent years, Apple's requirements for sampling rates have been significantly relaxed, and supply chain companies have been repeatedly required to reduce prices." An Apple supply chain source revealed.

According to the data, the scale of Apple's suppliers has been maintained at about 200, and in 2021, the number of companies from China has reached 98, accounting for 49% of the total number of suppliers. There are many listed companies.

Xiang Ligang, a high-level consulting expert on high-quality development of the Ministry of Industry and Information Technology, told the Securities Daily reporter: "At present, Apple has changed from an innovative enterprise to an ecological chain enterprise, which needs to spend a lot of energy on industrial chain management, and the quality control of each link will affect product quality." iPadmini has a large area of 'jelly screen' and some models of Apple mobile phone quality problems frequently, which is the lack of its quality control links, control loopholes, the fundamental reason is its excessive pursuit of profits caused. ”

Apple's "changeable" has also increased the pressure on suppliers. According to supply chain sources, affected by the fluctuations in upstream supply and downstream demand in the past two years, Apple often temporarily notifies changes to production plans, resulting in large-scale overtime restrictions and various excuses to reduce general workers in the off-season, but suddenly requires factories to work overtime when demand increases.

In the fourth quarter of 2021, Apple suddenly cut a large number of mobile phone orders, and factories such as Bern Optics announced a large number of layoffs, involving 5,000 temporary employees. At the same time, for a long time, the "fruit chain" enterprises have also been trapped in the risk of being kicked out of the Apple industry chain, and the bargaining power has been greatly weakened, and the performance of many listed companies last year has also dived.

An Apple supplier said: "Apple's requirements for sampling rates are reduced, and quality problems in the products delivered by some suppliers are inevitable, which is a vicious circle." In this process, suppliers have been the most affected, and some companies have suffered terribly. ”

But companies in these supply chains have also realized the impact of a single business and are diversifying to reduce their dependence on Apple. Recently, "Fruit Chain Brother" Luxun Precision announced that it will cooperate with Chery to develop another new industry - the vehicle ODM model, which will detonate market enthusiasm. Previously, OFILM, Lens Technology, Wingtech Technology, etc. have all increased their new energy vehicle business. For fruit chain enterprises, another "door" may be opening under the crisis.

(Editing by Shangguan Monroe)