Report Claims Apple Returned 5 Million Faulty iPhone 5 to Foxconn
According to China Business Journal, a Beijing-based weekly newspaper, saying that Apple had returned 5 million iPhones to Foxconn during last month. Quoted from an unnamed source in Foxconn, the Chinese press said the handsets were returned because they either were not functioning well or did not meet Apple’s standards in terms of appearance, and the number of faulty iPhones has reached up to 8 million units. Wow, five to eight million units, most smartphone makers don’t even sell this many phones. The report also said it will cost Hon Hai, Foxconn parent’s company, 1 billion to 1.6 billion Chinese yuan (US$161.8-259 million) to repair the defective iPhone. Foxocnn is now facing an issue on quality control due to poor management and the rapid development of factories. Most of the new promoted senior executives don’t have enough experience to handle the increasing orders from Apple. It’s not a full inspection on the quality process over at Foxocnn, but was obtained by a random sampling …
Last year, Apple tightened the rules for quality control, added pressure to improve its quality inspection of each iPhone 5 to the strictest standards, which resulted a workers’ strike over the tougher demands. There is a reorganizing of the production lines over at Taiyuan, Zhengzhou and Shenzhen plants early this month, and Apple has send people in to investigate the issue. The manufacturing lines have resumed last week for small-scale production, each of its assembly lines only churning out 1,000 to 2,000 units per day. The plant’s yield rate, however, is only 95 percent. We remember the factory plant in Zhengzhou can reach a daily production of 200,000 iPhones. In the mean time, Hon Hai spokesman has responded to the Taiwan media, denied the figures mentioned in the report. He said, however, that the company will look into issues of management and product yield rate mentioned in the report. Foxconn is the world’s largest original device manufacturer, and it known most famously for building iPhones and iPads for Apple. The upcoming new iPhone 5S will soon to be announced, we just hope we won’t see the previous scratches or stiffness problem.
Conflicting reports claim Apple may have returned 5 million faulty iPhone 5s, factory denies
As you might expect, right now this report is little more than deciding which side you want to believe, and we may never get the real story. There are conflicting reports coming out that say Apple may have had to return 5 million faulty, malfunctioning, or damaged iPhone 5 handsets, but the factory denies such reports.
This all started when The China Business Journal quoted an unnamed source at Foxconn (Hon Hai's trade name in China) saying that Apple had returned 5 million iPhone 5 handsets. The report said that the devices were returned because they were either faulty or didn't live up to Apple's cosmetic standards (which means the number could include the simple issue of a scuffed chamfered edge.) Oddly, the report then said that the number could have reached 8 million, citing the same source, but giving no additional information.
If accurate it will cost Foxconn 1 to 1.6 billion Chinese yuan (~$161.8 to $259 million) to repair the defective handsets. Foxconn spokesman Simon Hsing denied the figures mentioned in the report, but said that there would be an investigation into the factory's yield rate, which is said to be around 95%.
For a bit of perspective, Apple has reported selling a total of 74.7 million iPhones in the past two quarters. Even if we were to take the number as only iPhone 5 handsets, 5 million returns would be 6.7%, which is pretty close to the 95% yield rate that Foxconn claims. Of course, this number includes sales of older iPhones and not just the iPhone 5, so if the reports are true, the yield rate seems to be lower than Foxconn claims.
5 million iPhones defective – returned to Foxconn for repair
The latest news from China show that Foxconn have received 5 million iPhones back for repair, due to sub standard chassis or faulty functions. The report was filed with the China Business Journal this weekend.
The Taiwan based manufacturer have received 5 million phones back on March 15 according to the unnamed source of the report.
Foxconn will have to spend around $32.40 on each defective iPhone, resulting in extra costs of 1 billion yuan or ‘about two-thirds of the integrated Digital Product Business Group (iDPBG)’s profits in 2012′. The iDPBG is a section of Foxconn that is responsible for manufacturing the iPhone.
The Global Times attempted to contact Liu Kun, a spokesperson for the companies mainland operations, but was unable to get a response.
The unnamed source said the rejects were due to ‘outdated quality management amid a too-fast iDPBG expansion as a result of robust global demand for iPhones.’ Apple sold 47.8 million iPhones globally in the first quarter of fiscal 2013. This is a 29 percent increase year on year from 37 million.
Foxconn are continuing to grow in China, where the number of employees has doubled to 1.2 million from around 600,000 documented back in 2009.
Analysts are concerned that costs are being cut in the production of the iPhone, might may have led to the high level of returns to base. GlobalTimes CN say “But the labor-intensive Foxconn is experiencing continuous reductions in profit margins due to rising labor costs, which may lead the company to cut costs in materials, Wei Guangju, an analyst with Adfaith Management Consulting, told the Global Times Sunday.”