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Apple reportedly taps Pegatron to make new low-cost iPhone

Move is part of Apple's desire to achieve greater balance in its supply chain, according to The Wall Street Journal.

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Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
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Pegatron -- the home of the new iPhone? Jay Greene/CNET

Apple is reportedly reducing its dependence on electronics manufacturer Foxconn by throwing more business to Foxconn competitor and Apple partner Pegatron.

Pegatron, which already makes some iPhones and iPad Minis, has been chosen to be the primary assembler of a low-cost iPhone expected to be unveiled later this year, according to a Wall Street Journal report. Despite Apple's longtime business relationship with Foxconn, CEO Tim Cook wants to achieve greater balance in the company's supply chain by shifting more work to Pegatron, the Journal reported.

The shift is also reportedly due in part to Foxconn's production troubles with the iPhone 5, which is thinner and taller than its immediate predecessor, the iPhone 4S. One unidentified Foxconn executive told the Journal last year that producing the iPhone 5 is "very complicated," causing supply issues. The official went on to say that the handset is "the most difficult device that Foxconn has ever assembled."

CNET has contacted Apple and Foxconn for comment and will update this report when we learn more.

Pegatron is reportedly going on a hiring spree, with plans to beef up its workforce in China by up to 40 percent during the second half of the year, leading to suspicion that the company is equipping its factories to produce the much-rumored low-cost iPhone.

Charles Lin, Pegatron's chief financial officer, declined to comment to Reuters earlier this month as to whether the company would produce a low-cost iPhone this year. But Lin did say that 60 percent of Pegatron's 2013 revenue is expected to come during the second half of 2013.

Analyst Gene Munster is eyeing a September release of a $300 nonsubsidized iPhone, which could bring in unit sales of 75 million next year. The cheaper iPhone is reportedly expected to go into trial production as soon as next month, but some sources speculate it won't come out until the fourth quarter.