CUPERTINO, CA -- Is Apple underwriting Foxconn's wage increases?

Ater reviewing changes in gross margins at the respective companies, one analyst thinks the world's largest company is paying for its leading supplier's much-publicized pay hikes in Shenzhen and Zhengzhou.

Hon Hai's (Foxconn's parent company) gross margins rose in its most recent quarters, while Apple's have fallen from 47% in the March period to 42.8% this quarter. Moreover, the iPad maker guided for September quarter gross margins of just 38.5%.

The changes have led Berenberg Bank analyst Adnaan Ahmad to write in an investor's note that Apple is probably behind the move, adding that Hon Hai chairman Terry Gou had noted the company was seeking better terms from some customers.

Ahmad added that he is "fairly sure" HP and Sony, a pair of financially struggling Foxconn customers, were not behind the increase.

Apple is known to pay Foxconn a reported $6.50 per finished working assembly at its Shenzhen campus. It is not clear whether that arrangement has changed.

• Prev
• Next