Key manufacturing partner Foxconn has been embroiled in an Apple-led investigation after defrauding the Cupertino tech giant of NTD 1.3 billion (USD 43M) over a three-year-long scam.
Though based in Taiwan, Foxconn’s Chinese facility at Zhengzhou had allegedly sold iPhones manufactuered from rejected parts to a Taiwanese mastermind.
According to a Taiwanese report, a whistleblower raised the alarm to Apple CEO Tim Cook, who seemingly directed the Business Assurance & Audit department to conduct an investigation.
With minimal internal manufacturing capacity, Apple’s wide-reaching supply chain network means that it is particularly vulnerable to fraud and other principal-agent problems.
Terry Gou, the former Foxconn chairman, said that “unreasonable things may happen to one or two workers”, given the company’s massive headcount – more than 1 million currently.
Earlier this year, Apple was scammed of nearly US$1M after a pair of Chinese engineering students used counterfeits to obtain replacements under warranty.
Another scam in June 2019 saw US$19M worth of iPhones stolen by a New York-based gang in a large-scale identity theft operation. The perpetrators billed instalment plans to unsuspecting victims, and made off with the brand-new devices before they were caught after seven years of operation.