IT News on October 29th: The Wall Street Journal reported yesterday that Apple previously used "mafia-like" aggressive tactics in negotiations in an attempt to drive down memory procurement prices. These tactics included demanding that suppliers undergo extensive financial audits, deliberately appearing indifferent to procurement volume commitments, and various psychological pressures during the negotiations.
However, since the price increases in DRAM and NAND over the past two years, things have turned around. Apple's once considerable bargaining power seems to have vanished in an instant. The memory suppliers, who were previously suppressed to the point of struggling to breathe, have now become much more assertive and even want Apple to experience what it's like to be under pressure.
In the past few months, Apple has been publicly complaining about the exorbitantly high prices of memory and has significantly increased the selling prices of its products on the grounds of soaring costs for key components. However, Sumit Sardana, a senior advisor at Micron CEO, once stated that the long-term issue of insufficient production capacity in the memory industry is partly the responsibility of certain manufacturers that engage in particularly aggressive price-cutting tactics.
This executive also pointed out that a few years ago, Micron's gross profit turned negative due to some customers taking advantage of the downturn in the memory/storage industry to purchase products at extremely low prices.
The Wall Street Journal revealed that Apple requires its flash memory suppliers to provide them with the status of “top-tier preferred customers” so that the company can always obtain products at the lowest prices. To ensure that suppliers comply, Apple continuously audits their accounts, and due to the excessive number of audits, Apple was even able to negotiate a bulk audit discount with Deloitte ( Deloitte ).
This frequent auditing approach allows Apple to directly understand the business operations of its suppliers and the production output of their factories, enabling Apple's negotiators to accurately determine the size of orders required from manufacturers. Apple also successfully utilized this clause to file an arbitration regarding Micron's sale of NAND to other customers at a lower price, and subsequently obtained substantial compensation.
To make matters worse, when the price of flash memory market starts to fall, Apple sometimes refuses to accept the ordered storage chips, resulting in unsold inventory piling up in suppliers' warehouses, which ultimately forces them to sell it at low prices.
At the same time, Apple is also well-known for its "tough" negotiating tactics. For example, Tony Blivens ( Tony Blevins ), Apple's former procurement manager, would deliberately arrange meetings with different manufacturers at the same time to ensure that competitors met each other, thereby increasing the pressure on both sides.
Apple executives will also extend the intense negotiations until midnight, during which no dinner or rest time will be provided, forcing supplier representatives to rely on energy bars to sustain themselves. If Apple detects any supplier showing a non-cooperative attitude, they threaten to call in Blivens, taking advantage of his tough reputation, which is almost that of a gangster, to compel the supplier personnel to submit.
For example, in 2015, Sandisk found that other customers were willing to pay a higher price, so it refused to supply additional products to Apple. Subsequently, Blivens threatened Sandisk's sales representatives, saying he would make Sandisk's then-CEO Sanjay Mehrotra ("Sanjay Mehrotra") "crawl back on his knees" to ask Apple for a purchase order. (Note from the IT family: The original text here is Crawl On His Knees)
It should be noted that Sanjay Mehrotra currently holds the position of CEO at Micron. Therefore, it is not surprising that the two companies are now in direct opposition to each other.
