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Apple Inc. (AAPL) Snubbed Foxconn?

Steve JobsApple Inc. (NASDAQ:AAPL) is continuing to fuel rumors – by simply not responding to them – that it will be rolling out a lower-cost iPhone later this year, to come out alongside the iPhone 5S sometimes this fall. And with a second smartphones reportedly heading into the production cycle and with the challenges the company’s suppliers had with developing the iPhone 5 last year, it would make sense that Apple will be looking to spread out its workload or stagger the releases of the two phones.

But since virtually every rumor we have heard about these two smartphones confirming that they will be released at pretty much the same time, there likely will be very high demand and stress on the production line and in the supply chain to produce two phones that may be similar to each other but one will be lower-priced and have a few less features than its more expensive brother. In the process of developing the production line for the two phones, reports are that Apple Inc. (NASDAQ:AAPL) has chosen Pegatron over Foxconn to produce the new, cheaper iPhone model.

There likely are a few reasons for this decision. First, Apple Inc. (NASDAQ:AAPL) has been diversifying its supply chain in recent years and has especially been looking to do so in the wake of production problems at Foxconn last year with the iPhone 5, and the reports that Foxconn is still in the news for its labor practices and workplace conditions, which are suspected  of being at least a possible cause for a spate of worker suicides in the last year.

Pegatron is no stranger to Apple, and in fact is heavily involved in the production of the iPad Mini, which Apple introduced last fall. Pegatron is smaller than Foxconn, but it has lower labor costs for Apple, which means it will help the parent company with its margins when it sells a cheaper iPhone for a rumored $300 price tag. Foxconn costs, by the way, have increased in recent years due to the company’s investment in improving worker conditions at its Apple Inc. (NASDAQ:AAPL)-focused factories.

Reports are that Pegatron will increase its workforce by about 40 percent when in its in full production more for the new cheaper iPhone, which is slated to come out in September or October. What are your thoughts about this? Is this move just a cost-cutting measure, or an indictment of Foxconn’s reputation and its reflection on Apple? Let us know your thoughts in the comments section below.


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