Foxconn raising manufacturing costs for iPhone, iPad?

Is Foxconn about to increase what it charges Apple (and other companies) to produce products like the iPhone and iPad?

Oct 13 (Reuters) - Hon Hai (2317.TW), the world's largest electronic parts maker, will raise prices from October for some clients, including Apple (AAPL.O), according to a Citibank analyst, a Taiwan newspaper reported on Wednesday.

Citibank analyst Chang Kaiwei said Hon Hai would also raise prices for Nokia (NOK1V.HE), Microsoft (MSFT.O) and Sony Ericsson (ERICb.ST) (6758.T), helping to push up its fourth quarter profit, according to the Commercial Times newspaper.

If an iPhone was made in North America, it would probably cost $5000. Will Foxconn hold the line on prices at the expense of corporate profits (and, you know, maybe increasing their workers' standard of living?), will Apple give up margin and eat the increase to keep prices the same for consumers, or will will all be paying more for iPhone, iPad, and the other gadgets we love?

[New York Times]

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Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, Vector, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Foxconn raising manufacturing costs for iPhone, iPad?

35 Comments

Really?!! Apple giving up margins? Really. C'mon Rene...really. I'm sure every cent (or wan) Foxconn raises the price on Apple will result in a couple dollar price increase for the consumer.

This might be problem for Apple. The market has spoken and $199 is the price people are willing to pay for a smartphone. Many will pay the extra few dollars but many more wont and will look at less expensive alternatives.

I don't think consumer prices will go up, yet. The smartphone market is too competive right now. Also, they're right up against that $199 barrier. The next jump would have to be $249, and that won't happen until everyone's costs are so high they all have to change. More likely, they'll offset cost increases on other product lines until the entire smartphone industry hits the tipping point.

Just like increasing corporate taxes, increased production costs are usually passed on to the consumer. I hope Apple finds another way to offset the costs instead of sticking it to the consumer, but I'm not holding my breath. Apple loyalist would buy piss in a jar for $500 if it were Apple branded. I'm not a loyalist, I simply like the iPhone over android but will not pay a penny more that what I'm paying now for a new iPhone.

Wouldn't Att eat the cost bc they pay full price to Apple for the iPhone and give the consumer a discount because of the 2 year contract?

@Sterbuck
Why does ATT have to eat the increase. Are they not in their right to a high profit margin as well? That why I said a 3 yr contract might be the only way they'll still sell it at $199.

@Sterbuck, perhaps, and the carriers certainly have many ways to offset their costs. However, not every iPhone is purchased with the contract discount. The full retail price is already astronomical, and I think the same factors will prevent that from going higher. If Apple's costs go up, I think they'll get money from somewhere else-for now, at least. The competition is just too intense right now, with all the other cheap smartphones flooding out.

I'm sure that another cheap chinese company would LOVE to start manufacturing the devices for Apple... competition is still alive. Although I don't think it'd cost $5,000 if it was here in the US.

@keV but the 3 yr contract would be up to Att not apple. I think apple will raise their prices but it will be the carrier vs consumers on who would pay the increase.

@ CJ-
Shouldn't you be at a John McCain rally somewhere? This has nothing to do with corporate taxation, stop trying to bring politics into it. No one is interested in your opinion on the matter, or the fact that you wouldn't pay "a penny more" for an iPhone. If you want to cry about politics, go back to the Fox News website.
Also, that's an idiotic comment to make about Apple fans. Sorry that we enjoy and are willing to pay (more than) fair prices for quality products, I guess that means there's something wrong with us.

@CJ "I hope Apple finds another way to offset the costs instead of sticking it to the consumer, but I’m not holding my breath."
It's easy to find a way to offset the costs to consumers, reduce the "Apple Tax".
The iPhone off contract is the same market price as other smartphones. Their initial contract prices and EOL contract prices higher compared to other smartphones. The other things that Apple sells, heavily taxed.

@Mike, It's idiots like you that make my day. Thank you very much. Let us know when your mom let's you move out of her basement. Also, you might learn something from taking an economics class.....that's assuming you have the aptitude for learning. After reading your brain dead comment, I doubt you can wipe your own butt without mommy's help.

@Erik, good point! Thank you for taking the time to put together a coherent thought.

CJ-
It's the Republicans like you that need the schooling, friend. Throwing around insults without factual information to back it up? Yep, but I'm the idiot.
Again, taxes have nothing to do with this conversation. If you want to go spout your insults and fear politics, go join your fellow Tea Partiers and continue drawing Hitler mustaches on pictures of Obama. Speaking of economics classes, do try even have classrooms in your hick neck of the woods? I guess you're one of those "real Americans" . You know, the ones who live in states where the governments are so poor they cant even fund schools. Or hospitals. Or paved roads. Or infrastructure. Or police. But hey, you saved a couple bucks on taxes!! Yay! Now your kids can grow up to be as smart as you! And so the cycle of geniuses continues. Great!
And, more on target, if me paying "an extra cent" for my phone or iPod means that the workers who assemble them can move a bit closer to a satisfactory quality of life, then that's fine by me. I don't mind paying a fair price for a quality product. But you patriotic Republicans really don't care about the little guy, do you? You'd rather them suffer so you can save a few bucks, just like here in America. It's that kind of illogical mentality that has caused the problems were facing today.
...But you're right, in the idiot.
(And I apologize for the slightly off topic conversation, but a response was necessary.)

@ Dan,
No, not really a big Obama guy. I'm pretty independent.
What I am a big supporter of is intelligence, logic, and fairness in business on ALL levels, not just the top. It's pretty simple.

@Erik. Apple will want to keep their high margin and will probably only lower it if sales are impacted. If they pass along the increase to ATT then they're going to want the consumer to either pay more for the phone and like CJ many consumers will take their business elsewhere if the iPhone is more than $199. So the alternative to a price increase might very well be a longer contract.

This won't change the price of current models, I don't see how Apple sells that. It'd have to be the next gen line, the iPhone 5 or whatever, that sees an increase to over $199, if anything.

I agree with Chris on the first post, any manuf price increase from foxconn will reflect on Apple bumping up prices on their products which ultimately we'll end up paying extra for. Apple is not going to eat anything unless they really really really have to.

@Dan
I can smell a lib a 100 meters away and you are it. Only a lib would accuse somebody of being McCain supporter AND being a conservative. McCain may have a R after his name but he is in no way shape or form a conservative. He's what we call a RINO.
As far as a possible rise in price with the iPhone? I don't think it will happen. But Apple does like to surprise it's people. Sometimes not in a good way.

Hi, this isn't CNN.com or any other major news website that allows people to rant and rave about politics for no reason.
If Foxconn raises costs so they can improve employment conditions, then that's good. If they raise costs so they can make money and don't change anything else, that's gonna suck.

@tom
I was referring to his '08 campaign, not his prior career. You know, where he dropped that Frankenstein Sarah Palin on us. Pretty conservative move, I'd say. Though back in the day, he certainly wasn't a true conservative. Now, he really has no direction lol.

This is stock market news not CE news. Do people think it's going to be more than cents on a phone with the volume we are talking about? This is completely irrelevant from an end user standpoint.

Maybe AT&T can eat the extra costs? I already pay them way more than other carriers. 100$ with 450minutes and unlimited text messages. Really? :/

Time for people to remember that the Chinese are actually human beings and deserve to be paid a heck of a lot better.

Why is Foxconn the focus when Hon Wai, the parts maker, is the one raising prices? The parts prices may very well lead to an increase in manufacturing costs from Foxconn, but that is not a given.
As for economics, yes Chinese workers are paid much, much less than American workers, but the cost of living in China is also much, much less, overall, even though their iPhones cost about the same.
As for liberals, they always want to be generous and "fair" with other people's money.