Mainland suppliers fail to make the iPad grade
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No mainland Chinese companies were included in the supply chain for the Apple iPad, which hit the shops last Sunday. But some Taiwanese contractors with production sites in the Pearl River and Yangtze River deltas were chosen.
International electronics giants including Samsung, Toshiba, Infineon, and Broadcom are supplying the chips for the iPad. South Korea's LG and Austrian firm AT&S are delivering the touch screen and printed circuit boards. At least six Taiwanese companies were chosen as suppliers by Apple. InfoAcer, Catcher Technology and Foxlink are contracted to provide the battery and USB ports. Hong Hai, Taiwan Semiconductor and ASE group will assemble the final product.
The Taiwanese companies have production facilities in the Pearl River Yangtze deltas so some assembly work will be done on the mainland. But it is thought poor quality associated with the "Made in China" tag may have led Apple to rule mainland-owned electronics firms out of consideration.
The Taiwanese companies selected have extensive experience as contract manufacturers, and Foxconn and ASUS are already Apple OEMs.
But the iPad suppliers will struggle to make money out of the contracts given the huge markup that will go to Apple. The 16GB, non-3G iPad retails in the U.S. for US$499 but costs just US$260 to produce. The 3-G model sells for US$829, more than double its estimated production cost of US$350.
For mainland companies, the remaining route to make money from the iPad is by building software applications. This may well turn out to be the more profitable option given that the mainland Chinese market is too big for Apple to ignore.
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