How Apple Boosts Chinese Suppliers With Know-How From Foreign Companies
When Apple signs a contract with a supplier, it typically owns all of the manufacturing processes related to its products, from polishing methods to recipes for materials. That has given it a key advantage for getting new—and cheaper—suppliers up to speed.
In March at an event in China, Apple CEO Tim Cook mingled with the founders of several major Apple suppliers in the country, including Lens Technology, which makes the protective glass screens for iPhones. “It’s the partnership between Apple and Chinese companies that really makes things happen,” Cook told Chinese state media in an interview. “We make it where one plus one equals three instead of two.”
What Cook didn’t say is how Apple is able to make such miraculous math happen: To cut manufacturing costs, Apple often builds up Chinese suppliers using the manufacturing know-how it has obtained through other companies from more developed countries that charge more for the technology.
Lens is a striking illustration of that. A decade ago, an American company called GT Advanced Technologies, which Apple was working with to develop a new scratch-resistant screen material, filed for bankruptcy protection. Apple subsequently shared the recipe for that material—which it co-developed with GTAT and owned under their contract—with Lens and a Hong Kong–based glass maker, Biel Crystal, according to three former Apple employees familiar with the project. In the years since, Apple has similarly shared information about Biel’s manufacturing processes for other materials with Lens and generally played the two companies off each other to get better prices on components, say multiple former employees at Apple, Lens and Biel.
The Takeaway
• Apple frequently shares manufacturing knowledge it develops with one supplier to others
• Lens and Biel benefited from processes that originated with another Apple supplier, GTAT
• Apple’s contracts with suppliers give it ownership over all manufacturing processes related to its products
Apple’s work with Lens serves as a cautionary tale for Apple suppliers in countries such as the U.S., South Korea and Japan, who have watched their competitive edge erode as Apple has transferred the manufacturing knowledge they’ve developed together to Chinese competitors. The extent of Apple’s information sharing with Lens, details of which haven’t been previously reported, could become a politically sensitive topic for Apple.
The U.S. is becoming increasingly restrictive about the types of advanced technologies Chinese companies can obtain from American providers, and the Biden administration is also pushing to make more high-tech components, such as chips, in the U.S. to boost American manufacturing and national security.
Apple has one of the most complicated relationships with China of any big tech company. Its business in China is significantly bigger than that of its peers, accounting for 18% of its revenue from the country. Its efforts to boost Chinese suppliers could help it stay in the good graces of China’s government. In 2016, Apple signed an agreement with Chinese government officials to use more Chinese suppliers as part of an overall pledge to spend more than an estimated $55 billion a year in the country through at least 2020, The Information previously reported. The agreement called for Apple to “explore the use of high-end, specialized electronics and materials designed and manufactured by Chinese enterprises as components for its products.”
Apple’s ability to transfer knowledge from one supplier to another derives in part from how closely it sticks to its supply chain, say multiple former Apple employees involved in its supply chain. It gets so involved in the manufacturing of its products that often suppliers simply can’t hide their methods from the tech giant. Its agreements with them stipulate that Apple owns all the manufacturing processes developed for its products—which can include everything from the tools to the polishing methods.
In some cases, companies in other countries have started to fight back against Chinese competitors Apple has cultivated. Last year, Korea’s Samsung, which makes the majority of the displays on iPhones, filed a lawsuit and trade complaint in the U.S. against China’s BOE Technology Group, calling for a ban on imports of products, including iPhones, that allegedly contain proprietary Samsung display technologies. Although Apple’s role in the matter isn’t clear, multiple former Apple employees said it has spent years helping BOE produce displays for the iPhone that can match the quality of Samsung’s. In doing so, Apple hopes to pressure the Korean company to reduce its prices, the engineers said.
Similarly, Apple has sent engineers to Seeya Technology, a display maker in China, to help it compete better with Japan’s Sony—at the moment the sole supplier of the high-resolution displays in Apple’s Vision Pro headset, according to people with direct knowledge of the matter. Apple hopes that building up Seeya’s capabilities will boost production of the displays while also pressuring Sony to reduce prices and increase research and development, those people said.
Apple, Lens and Biel didn’t respond to requests for comment.
Companies Made of Glass
In addition to having an Apple relationship, Lens and Biel share another more unusual connection, according to people who have spoken to the founders of both companies: a failed marriage.
Biel’s founder is Yeung Kin-man, a Hong Kong engineer who started out with factories in China that made the glass covers for watch faces. The founder of Lens is Zhou Qunfei, a Chinese citizen who at age 16 went to work at a competing watch glass factory, owned by Yeung’s older brother. In the early 1990s, Zhou married that brother. The couple eventually divorced, the people said, and in 2003 Zhou founded Lens to make watch glass, competing with Biel and her ex-husband.
Eventually, both Lens and Biel began catering to a new market: cellphones. In 2004, Motorola signed a deal with both companies to make cover glass for screens on the Razr, a flip phone that was popular at the time, according to people who worked with the companies. That got the attention of Apple, which signed a deal in 2006 with both companies to make cover glass for the first iPhone.
In the early years of the iPhone’s development, Apple executives—including Jeff Williams, now Apple’s chief operating officer—spent weeks at Lens helping the Chinese company develop new manufacturing techniques that would meet Apple’s high standards for quality, according to one former Apple executive. Apple, for example, taught Lens how to use computer-controlled lasers to cut the glass more precisely and how to strengthen it by submerging it in an ion bath, the executive said.
As the iPhone’s popularity grew, so did Lens and Biel. The founders of both companies became billionaires. Lens held an initial public offering in 2015, at one point making Zhou China’s richest woman. Biel’s Yeung became one of Hong Kong’s richest men, according to estimates by Forbes. The two companies are now the world’s two largest producers of glass screens for consumer electronics, counting companies such as Samsung, Huawei, Meta, Google and Tesla among their customers.
Lens has since expanded into new business areas and now makes metal iPhone casings and touch-sensor modules, while Biel has remained mostly focused on glass for electronics. Apple accounts for more than half the sales of each company and is by far the largest customer for both, according to analysts, regulatory filings and former employees at the two companies.
Sharing Knowledge
At times, Biel and Lens have benefited from knowledge Apple developed while working with another supplier.
In 2014, Apple began working with GTAT to establish a factory in Arizona to mass-produce sapphire glass, a scratch-resistant material with a hardness akin to that of a diamond. Apple hoped sapphire glass would eventually replace the traditional glass screens on the iPhone, which Lens and Biel were making. Soon, though, GTAT began struggling to meet Apple’s production targets. As a result, Apple began withholding payments to the company, which declared bankruptcy, legal and regulatory filings show.
Apple quickly began looking for alternatives. As part of its supplier agreement with GTAT, it owned all the processes the two companies had developed together. That included the recipe they came up with for sapphire glass, along with the manufacturing process behind it, including details about the atmosphere, temperature, purity and timetable required for growing sapphire crystals, according to three former Apple employees.
Between 2014 and 2015, Apple shared that knowledge with both Lens and Biel, which built their own factories in China to make sapphire glass. Ultimately, Apple decided not to use the material for iPhone cover glass, in part because of its high cost. But it does use sapphire glass for the iPhone’s camera lens covers and to protect the displays of high-end Apple Watches.
At other times, Apple has even used Biel’s expertise in another area to help Lens. In 2016, both companies began working with ceramic, a material Apple wanted to use as a casing for a luxury version of the Apple Watch, according to former Apple employees. Biel developed its own method of making the component using a casting process, in which it poured ceramic slurry into a mold and baked it.
Lens, in contrast, used a process known as high-pressure injection molding, according to two people with direct knowledge of the matter. But its method was inferior and led to a higher rate of defective parts, said a former Apple engineer who worked on the project. As a result, Apple told its engineers to share Biel’s methods with Lens. The move frustrated some Biel employees, who had spent a year developing their process through trial and error, the people said.
In most cases, Apple engineers will simply pass information between suppliers verbally, former Apple employees say. In some instances it has shown documents or even components made by one supplier to another, they said.
Former Apple engineers say Biel is more technically capable than Lens is but is also more conservative when it comes to spending its own money to win Apple’s business. Lens has been more willing than its rival to invest in manufacturing equipment and factory capacity to meet Apple’s needs, former Apple engineers say.
In 2021, for example, Apple asked both companies to set up fully automated production lines for cover glass to reduce the number of workers needed to make it. Lens sprung into action, splurging on state-of-the-art equipment to create a demonstration production line. Biel, meanwhile, repeatedly delayed the effort over cost concerns, according to a former Apple engineer with direct knowledge of the matter.
Searching for a Third Supplier
Within Apple, there’s a view that the best way to keep its suppliers from getting complacent is to regularly introduce fresh competition to keep them on their toes. Apple’s recent efforts to break up the duopoly Lens and Biel currently hold for iPhone cover glass haven’t been successful yet.
Foxconn Technology, the largest assembler of iPhones, began making cover glass for the iPhone 12 in 2020, providing Apple with a third supplier for the material. But Foxconn didn’t continue making the glass beyond that model after it lost money on the project, according to a former Apple engineer.
Apple has had more luck finding a third supplier—a subsidiary of Chinese electric vehicle maker Byd—for the glass that protects the back of the iPhone. Last month, Byd’s founder was one of three Chinese suppliers, including Lens, who met with Cook during his visit to China.
For now, though, Apple seems to be standing by Biel and Lens. For example, both companies are expanding their cover glass manufacturing operations in Vietnam, which will help Apple’s initiative to move more of its supply chain out of China, according to former Apple engineers.
And Biel recently signed a deal with the subsidiary of an Indian conglomerate, Samvardhana Motherson, that wants to work with Apple to make iPhone cover glass in India, according to its corporate filings and a former Apple engineer who is based in the country. Biel has a financial motive to help the Indian company. As part of their arrangement, Biel will provide “technical support” to Samvardhana Motherson in exchange for the right to purchase up to 49% of the Indian unit’s shares, regulatory filings show.