Made by Apple in Name Only
Foxconn and other contract manufacturers earn most of the revenue but little of the profit
The worldwide consumer electronics marketplace might appear to be a vast jungle of different brand names and product lines. But this diversity is deceiving. Even though every major brand around the world outsources some—and in some cases all—of its manufacturing, there are just 10 major players in electronics contract manufacturing. Industry leader Foxconn Technology Co. (based in Tucheng, Taiwan) makes not only Apple’s iPods, iPhones, and iPads but also computers and components for Dell, Hewlett-Packard, and Acer; phones for Sony Ericsson and Nokia; and other electronics for Intel, Cisco, Nintendo, and Amazon.com.
It’s a business high in revenue but low in profit. According to a recent report [PDF] by the United Nations Conference on Trade and Development, those 10 top electronics original equipment manufacturers (OEMs) made US $196.5 billion in 2009 (the most recent year for which data are available). But Foxconn, even with its booming iPhone and iPad lines, actually lost money in 2010, according to its annual report.
Despite all that revenue, Foxconn isn’t about to become the next Apple or Cisco, says Timothy J. Sturgeon, senior research affiliate at MIT’s Industrial Performance Center. He notes, however, that “over time, the center of gravity for electronics manufacturing will certainly shift to China.” In fact, he says, with 6 of the top 10 electronics OEMs in China and Taiwan, “that process is already well under way.”