Apple is continuing to examine its supplier cost structures and making adjustments to maximize profitability. This week, Digitimes reported that in an effort to further reduce costs, Apple is seeking out new suppliers for its servers at lower quotes in order to put pressure on existing suppliers.
“The company has been seeking new server suppliers with lower quotes and expects the move to give its existing server partners pressure on reducing their prices, according to sources from the upstream supply chain.
Apple has recently increased orders for server system integrator ZT, which is a partner of Taiwan-based Inventec, and added China-based Inspur to its server supply chain. As a result, server supply from Apple’s existing partner Quanta Computer has dropped, the sources noted.
In the past, Apple’s biggest concern was mainly improvements in technologies and yield rates on the supply side, but the company is now focusing more on reducing costs.”
Earlier this year, Apple had launched similar efforts to pressure the component suppliers for iPhones and MacBooks. Recently, analysts at RBC Capital markets also send a note to their clients describing this phenomenon.
It is becoming abundantly clear that Apple is pursuing all necessary initiatives across its product lines to hold on to its gross margin profitability, which had slipped by 100 basis points to 38%.
It is interesting that this news comes at a time when Warren Buffet increased his stake at Apple by 55%.
Does all this focus on cost optimization combined with slowing innovation at Apple point to a company that is starting to become a value play as opposed to a serious growth contender?
Apple’s stock has increased by 21% over the last three months. Perhaps there is a lot of hope that this fall as well as much of 2017 will see new innovative product offerings from Apple.