Apple Set to Tighten Grip on MacBook Supply Chain and Cut Contractor Profits

Apple is set to tighten its control of its MacBook supply chain by directly negotiating prices with third-party suppliers of non-key parts such as screws and plastics, which are required by contract suppliers to produce major components.

According to a new report by DigiTimes, industry sources say the move by Apple will significantly reduce profit margins of its contracted supply partners, however Apple has neither confirmed nor denied the move.

The Taiwan-based website's sources said that this will be the first time Apple has ever interfered with the procurement of non-crucial materials and parts by its contracted key component producers, who manufacture the processors, panels, batteries, chassis, and heat dissipation modules in Apple MacBooks.

Taiwan contracted supply partners of MacBooks were reportedly told of the new policy during a meeting they attended at Apple's headquarters in Cupertino.

If enforced in time for MacBook models to be released this year, the policy could erase 10 to 15 percent of profits currently made by contracted producers from the purchases of materials, leaving them with only the contracted MacBook manufacturing fees.

Apple has reportedly decided to expand its centralized procurement coverage to include upstream materials such as copper and cobalt, and non-key parts and components from third-party suppliers. The electronics giant will reportedly directly set the prices and order volumes for such materials and minor parts and components, instead of only screening the name lists of qualified third-party suppliers proposed by contracted supply chain partners and inspecting their supply quality and shipment schedules.

The same industry sources predict that when the policy goes into effect, contracted supply chain players will have to boost their self-sufficiency for components or look to other markets like cloud, AI and automotive electronics applications to claw back profitability.

Apart from typical MacBook refreshes, former KGI Securities analyst Ming-Chi Kuo believes Apple is working on a "more affordable MacBook Air" set to be released at some point in 2018.

We've heard a similar rumor from DigiTimes, which says Apple is working on a new entry-level 13-inch MacBook in the second half of 2018, which would serve as a replacement for the MacBook Air, but we don't expect it to surface during this year's WWDC.

There are no details on what features an updated MacBook Air could include, but if Apple is aiming to keep costs down, it could receive minimal updates. The MacBook Air remains outdated and continues to use a processor from 2014, so an updated version could include a new processor and new graphics. Thunderbolt 3 could also be added, and it's possible Apple will update the display.