Bloomberg reports in an article today that Apple's margins have widened at the expense of its main supplier as Foxconn Technology Group cuts prices to retain orders for the iPhone and iPad.
The profit spread at Hon Hai Precision Industry, Foxconn's Taipei-listed flagship, has narrowed to 1.5 percent since the debut of the iPhone in June 2007 as Apple's operating margin more than doubled over the past five years, surpassing 30 percent.
Apparently, Foxconn as well as Pegatron are willing to sacrifice profit margins in exchange for volume and scale. Both companies have seen profit margins decline despite increase sales due to rising salaries and lower sale prices to Apple Corp. on Ipads and Iphones.
This process puts both companies under increasing pressure to get more from workers for less. So if salaries go up it becomes critical to increase worker productivity.
Maybe this has something to do with repetitive motion disorders, stress disorders, suicides and explosions at plants not ready for production but which are pressed into service nonethless (see my previous blog).
See http://www.bloomberg.com/news/2012-01-04/apple-profit-margins-rise-at-foxconn-s-expense.html for more information.