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Apple Exposed for Abuse of Power. Now Memory Suppliers Are Getting Their Revenge. iPhone Duo · eSIM STUDIOS Podcast - Tech News + Reviews

• 0:00
  There's an age -old saying, karma is a bitch,
• 0:02
  and this new explosive report has it coming in
• 0:06
  full circle for Apple. Let's go back around five
• 0:10
  to seven years before the memory shortage crisis,
• 0:13
  right around the time when the iPhone X was being
• 0:17
  set to release. Gas was cheap, milk was cheap,
• 0:21
  memory was cheap, and Apple had leverage over
• 0:25
  its memory suppliers. An all new publication
• 0:29
  takes us behind the scenes and allows us to take
• 0:32
  a look at how Apple used mafia like methods to
• 0:36
  secure rock bottom prices for itself by insisting
• 0:41
  on expansive financial audits, deliberately rejecting
• 0:46
  supply commitments, as well as employing a variety
• 0:50
  of psychological and strong arm tactics during
• 0:54
  these negotiations. Wait until you hear how and
• 0:58
  why Apple is being screwed in every way possible
• 1:03
  today with that sweet thing called revenge. So
• 1:09
  a few weeks ago, we reported on how Apple has
• 1:13
  been loudly and forcefully complaining about
• 1:16
  the sky high memory prices for the past few months
• 1:20
  using its soaring cost of key components. as
• 1:25
  the sole reason to implement sweeping price hikes
• 1:29
  across all of their products. Now they have nobody
• 1:33
  to blame but themselves because this new Wall
• 1:37
  Street Journal article illustrates the insane
• 1:41
  heights that Apple scaled to humiliate its memory
• 1:46
  vendors when it enjoyed an uncontested supremacy
• 1:50
  in what was largely a buyer's market. This article
• 1:55
  highlights how Apple required its NAND memory
• 1:59
  suppliers to designate them as, quote, most favored
• 2:04
  customer, unquote. Now, that's a special and
• 2:08
  hard to acquire clause that guaranteed Apple
• 2:11
  always received the lowest price in the industry.
• 2:16
  And to enforce this clause, Apple relentlessly
• 2:20
  audited its suppliers books. going so far as
• 2:26
  to negotiate a volume discount with Deloitte
• 2:30
  for the crazy number of audits it conducted.
• 2:34
  Those audits gave Apple first -hand knowledge
• 2:38
  of its suppliers' internal business operations
• 2:42
  and factory output, allowing Apple to sabotage
• 2:47
  competitors' NAND flash storage orders. would
• 2:53
  draw out install contract talks, then pinpoint
• 2:58
  exactly how financially desperate a supplier
• 3:02
  would be for a big order, and then strike a deal.
• 3:08
  Apple also successfully used this clause to win
• 3:12
  a massive arbitration settlement against Micron
• 3:16
  for selling NAND storage at a cheaper price to
• 3:19
  another customer to add insult to injury. Apple
• 3:23
  would refuse to accept deliveries of storage
• 3:27
  chips if the broader market price of NAND began
• 3:31
  to fall, leaving its suppliers with massive piles
• 3:34
  of unsold inventory, including chips custom manufactured
• 3:40
  specifically for Apple iPhones, which ultimately
• 3:45
  forced the suppliers to cut their prices even
• 3:48
  further and would eventually sell to Apple. for
• 3:53
  pennies on the dollar just to get rid of the
• 3:55
  stock. But it didn't stop there. It was Apple's
• 4:01
  hardball negotiation tactics that really dialed
• 4:05
  up the volume on an obsession with wringing its
• 4:09
  suppliers dry. Apple's former head of supply
• 4:14
  chain, Tony Blevins, deliberately scheduled back
• 4:18
  -to -back meetings with rival chip suppliers,
• 4:22
  Making sure they would run into each other while
• 4:25
  walking to and from the meeting offices to strike
• 4:29
  up competitive tension and to lower Apple's bottom
• 4:34
  dollar. Essentially having these companies fighting
• 4:37
  for Apple's business. Now, check this out. This
• 4:41
  is crazy. One memory supplier in this article
• 4:45
  said Apple executives would push intense negotiating
• 4:49
  sessions. past midnight without offering dinner
• 4:55
  breaks, forcing supplier representatives to go
• 4:59
  hungry for hours, hoping they would get so anxious
• 5:03
  to get out of the meeting, they would just give
• 5:06
  in and give in to Apple's demands just to get
• 5:08
  out of the building. When Apple executives found
• 5:12
  a supplier just a little uncooperative, they
• 5:17
  would threaten to call in Blevins, relying on
• 5:20
  his mafioso -like reputation to bludgeon those
• 5:24
  representatives into submission and get a cheaper
• 5:27
  price on these chips. Let's hear directly from
• 5:33
  Apple head of procurement, Tony Blevins, on his
• 5:38
  negotiating game plan. And a term I sometimes
• 5:42
  use in negotiations is verbal jujitsu. That to
• 5:47
  take a person's own words and their own phrases
• 5:49
  and turn it around slightly and repeat it to
• 5:54
  them and get them agreeing that this is your
• 5:56
  idea. Right. And so that's been a very effective
• 6:00
  tool to bringing people to a consensus to your
• 6:04
  final objective. Sometimes, quite honestly, a
• 6:07
  lot of people don't want to hear this. Sometimes
• 6:09
  the pie is only so big and there's a win loss.
• 6:12
  When it comes down to something like price, the
• 6:13
  price is higher or lower. And so depending on
• 6:16
  your perspective, it's a win -loss. And if there
• 6:19
  is a win -loss, I intend to get the win. I don't
• 6:21
  leave that on the table. Another memory supplier
• 6:24
  noted Apple would go berserk if a memory vendor
• 6:28
  dared to take a stand against its aggressive
• 6:33
  tactics. For instance, when SanDisk refused to
• 6:38
  send an extra supply of memory chips in 2015
• 6:41
  because other customers were paying more. Blevins
• 6:46
  threw a fit and threatened SanDisk sales representative,
• 6:51
  declaring that their then CEO, Sanjay Mohatta,
• 6:55
  would crawl on his knees back to Apple. Let's
• 7:01
  hear from Apple's Tony Blevins again on what
• 7:04
  he describes as an emotional, yet effective negotiating
• 7:09
  tactic. Unwittingly use what I consider to be
• 7:15
  substandard behavior to get to a good outcome.
• 7:19
  And it's amazed me to a degree. And one of those
• 7:21
  being anger and emotion. And so I've watched
• 7:27
  that unfold in negotiations. No one is more calm
• 7:31
  or non emotive than I am because I'm always thinking
• 7:34
  of the next move. But as you and others may have
• 7:37
  seen in a meeting, I might come across as very
• 7:39
  angry and shout and yell only because I've learned
• 7:43
  that's a tool that perhaps will get you to the
• 7:45
  outcome in that circumstance, but only if you're
• 7:47
  controlling it. If you're truly that angry, I
• 7:50
  think you might do something dumb. But I've seen
• 7:52
  circumstances of where you can yell and shout
• 7:55
  and impress upon the other side that, you know,
• 7:58
  it's time for them to concede and it works. That's
• 8:01
  just one example. And I've seen many other tactics.
• 8:04
  And so I've tried to adapt to each circumstance.
• 8:08
  In fact, I can recall once in a meeting, I actually
• 8:11
  took my shoe off and flung it across the table
• 8:14
  and hit the wall on the other side. And they
• 8:18
  called a short break and they came back in and
• 8:20
  said, we'd like to agree to what you asked for,
• 8:23
  that we don't want to make you any more angry
• 8:25
  than you already are. Not that you do that every
• 8:27
  meeting, obviously, or I ever did it again. But
• 8:29
  that's an example of having tools in your toolkit
• 8:32
  and knowing when to use them. During a supply
• 8:36
  shortage in 2018, Western Digital asked Apple
• 8:41
  to pay a reservation fee to hold chips without
• 8:45
  a guaranteed sale. A year later, when prices
• 8:50
  fell and Apple regained leverage, Blevins demanded
• 8:55
  a full refund of that reservation fee a year
• 8:59
  earlier. That reservation fee was used to pay
• 9:03
  for those memory chips. As an added punishment,
• 9:08
  he also demanded that Western Digital pay Apple
• 9:11
  a fee for the privilege of testing its chips
• 9:15
  without any obligation for Apple to actually
• 9:18
  buy those memory chips before having the Western
• 9:23
  Digital executives escorted out of the building
• 9:27
  by security. For the first time in over two decades,
• 9:33
  Apple finds itself in an unfamiliar position
• 9:37
  where memory buyers like NVIDIA, Micron, AMD,
• 9:41
  Qualcomm, and others are able to outbid and outcompete
• 9:46
  the iPhone manufacturer on substantial volumes
• 9:49
  of LPDDR5X RAM. Do note that both the iPhone
• 9:54
  18 Pro and iPhone 18 Pro Max leverage LPDDR5X
• 10:00
  RAM instead of the newer LPDDR6 RAM. Today, with
• 10:06
  memory demand and pricing sky high, this paradigm
• 10:10
  has significantly weakened Apple's leverage and
• 10:15
  turned the tables where now the memory suppliers
• 10:19
  call the shots and have Apple crawling on its
• 10:23
  knees begging for the suppliers for cheaper prices.
• 10:27
  Now, the memory suppliers can stiff Apple and
• 10:31
  force them to repay every penny that was lost
• 10:36
  due to bad Apple deals of the past. Look, business
• 10:41
  is a cutthroat industry, so I get that. I guess
• 10:45
  I'm just slightly disappointed to hear that the
• 10:49
  lengths Apple would go to as far as how they
• 10:53
  treated their business partners. with zero respect.
• 10:58
  Look, that's a little disturbing, honestly. I'm
• 11:02
  just glad and or I guess I'm hoping at this point
• 11:05
  that they're getting a little taste of their
• 11:07
  own medicine. So I want to know, where do you
• 11:11
  stand on this? Is this just business as usual?
• 11:16
  Or do you think Apple went too far in its negotiating
• 11:21
  tactics? Please comment down below what you think
• 11:26
  of this story. And if you're interested, I'm
• 11:28
  going to put a link in the video description.
• 11:30
  It is behind a paywall. Wall Street Journal is
• 11:34
  a pay for publication. But, you know, you can
• 11:39
  pay for it if you want to. Or if not, you can
• 11:41
  just take my word for it that I read it for you.
• 11:44
  So I do appreciate your time. Let me know what
• 11:46
  you think. I'll see you on the next one. Peace.