As Apple starts to lose ground in the market, it is starting to lose control of its suppliers.
For years, Jobs’ Mob was able to force its suppliers to subsidise its overpriced toys for the privilege of being identified as an Apple supplier. The payoff for the supplier was that they could make their money back on expensive call packages.
However, according to Reuters, now that Apple is losing ground rapidly in the mobile phone market, the tables have turned and Cupertino is on the back foot.
Recent comments from executives at phone carriers and component suppliers show they see room for at least some shift in the balance of power.
T-Mobile USA has announced that it will stop subsidising smartphones around the time it starts selling the iPhone in three months. This means the iPhone will start appearing at its full price and users will be looking for something a little cheaper.
To stop this happening, Apple will have to drop the price of its phone to stay in the running. If it does that, then its other suppliers will demand price drops for them too and the next thing that will happen is Apple’s gravy train pulling into the station and never leaving.
If Apple’s customers and suppliers smell blood and take a much harder line in negotiations, Apple’s huge gross margins, which slipped to 38.6 percent in the last quarter from 44.7 percent a year ago, will fall further.
To show how much Apple stands to lose, operators pay a roughly $400 subsidy for each iPhone they sell in comparison with subsidies of $250 to $300 for other smartphones.
If subsidies are removed and payment plans widely adopted, then consumers will just head for cheaper gear. AT&T for one would love to get itself weaned off of paying such great subsidies to Apple.