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Apple ditches controversial Foxconn to scale up Pegatron partnership

Apple has switched from controversial Taiwanese company Foxconn to little-known Pegatron as its primary supplier, an end of an era for the iPhone and iPad maker.

Foxconn, otherwise known as Hon Hai Precision Industry, previously enjoyed a monopoly on assembly of Apple's popular devices, but the more affordable rival Pegatron is set to take its place.

Pegatron has worked with Apple for more than a decade, but only became a viable contender to Foxconn last year when Apple contracted it to assemble iPad Minis. It has also helped produce iPhones and is expected to become the main producer of the low-cost iPhone rumoured to be launching later this year.

Pegatron has agreed to lower profits than Foxconn, according to analysts cited by the Wall Street Journal, though exact pricing has not been revealed. This was likely the primary motivator to get Apple to switch from its long-time ally, especially as demand for Apple products weakens.

It was not the only factor in the move, however. Sources close to the companies suggest Apple wanted to diversify to avoid a repeat of inferior quality devices, in addition to a decision to expand product lines to increase competition.

Apple will also likely be happy to abandon the negative publicity surrounding Foxconn, where a number of employees committed suicide. The Taiwanese firm was forced to improve working conditions and increase wages as the media spotlight prompted intense criticism and investigation. However, Pegatron may face similar labour scrutiny as its popularity among top technology firms increases.

At the time of writing, Foxconn's shares are down 1.10 New Taiwan Dollars (NT$) (£0.03), or 1.4 per cent, to NT$77.20 (£1.70). Pegatron's shares are up NT$0.50 (£0.01), or 0.93 per cent, to NT$54 (£1.20).