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Apple Inc. (AAPL) Suppliers Looking for Fee Increases

Apple Inc. (AAPL)Apple Inc. (NASDAQ:AAPL) is trying to produce good sales numbers for its iPhone 5 and grease the skids for the launch of the iPad Mini and a rumored smaller MacBook Pro in the coming days, but the company is continuing to struggle with supply-chain problems. These problems have caused delays in the production of the devices, which in and of themselves have tamped down sales numbers. In the wake of this, however, there are reports coming out of Asia that several of the supply-chain partners will soon be in talks with Apple Inc. (NASDAQ:AAPL) to negotiate a higher contracting fee for their work in manufacturing and assembling the various iDevices.

The crux of the report comes from sources inside Taiwan-based Hon Hai Precision, who told local media that it looks forward to working out a new contracting deal with Apple Inc. (NASDAQ:AAPL), which may result in a 5 to 10 percent hike in what Apple Inc. (AAPL) pays Hon Hai to produce iDevices on its supply lines. A source claimed that several suppliers may unite in a joint negotiation. The companies likely are seeking the increase to help offset the rising costs of improving working conditions for laborers, which Apple Inc. (NASDAQ:AAPL) had stated before would be a priority for the company, and it would do what it could to help with that process.

It is reported that Apple Inc. (NASDAQ:AAPL) already accounts for 30 percent of Hon Hai Precision’s revenue in 2012, which means that any negotiation may have to be carefully handled by Hon Hai or it risks losing its largest client. iPhones and iPads account for about 25 percent of the company’s revenue, analysts said. What would be truly interesting is if all of the suppliers come forward at the same time requesting fee increases and Apple Inc. (NASDAQ:AAPL) grants them all, what would that do to the iDevice prices? How significant a jump could be seen? And how would a significant price jump affect sales of iDevices, and how would that affect investors in Apple Inc. (NASDAQ:AAPL0 stock, like billionaire fund manager Julian Robertson of Tiger Management?

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