“Apple has used its massive cash reserves and manufacturing investment to block other manufacturers from sourcing the best parts for their devices, creating frustration in its rivals like HP and widening the gap between the iPad and its competition, a source with knowledge of the matter has informed The Next Web,” Matthew Panzarino reports for TNW.
“Apple has put a ton of work into building a supply chain and technological prowess that is second to none,” Panzarino reports. “This has made competing with it an incredibly difficult proposition.”
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Panzarino reports, “For one, Apple has exclusive deals with hardware manufacturers for the best parts… This isn’t just for displays either, whether it’s glass, screens, chips or any other parts, Apple uses its cash hoard to secure exclusive rights by investing in companies and manufacturing processes… This isn’t a nebulous network effect that is only of interest to students of Apple’s process, it’s a very real roadblock to other companies looking to source the most bleeding edge technology. Apple has almost unlimited access to it for months before it becomes available to others.”
Read more in the full article here.
MacDailyNews Take: To the innovator go the spoils, for a change.
Monopsony.
I’ve been saying this for months. Apple has not only the cash and the supply chain deals but they can also plan on selling over 40 million units per year now. Any single competitor OEM will think they have a raging success if they sell 4 million units in a year. They really can’t compete on component pricing with Apple.
And this is exactly why Apple has built up its cash pile rather than pay dividends, buy back stock, etc.
Apple is NOT engaging in monopolistic practices. It is using its resources to cut exclusive deals, or to invest in technology to which it owns the rights to use, and to prevent competitors from having access to the same products. That’s not violating anti-trust laws or being a monopolist, that’s smart business sense and playing chess 5 moves ahead.
Apple’s competitors could do the same thing, except that they don’t even try to innovate or create anything. The other PC builders are just parts assemblers; the most “innovation” they do is a laptop case design.
When you come to the party late, all the best seats are gone and the food is cold and picked over.
This is the reality of any manufacturer. Shipments go to what ever company wants to either pay the quickest, pre-pay, finance your expansion, supply the resources you can’t get, … You know, the company with the money!
In the world of cash shortages, Apple is king of cash now!
Maybe this is preemptive only in terms of assuring that demand for their product is met and not so much about starving out the competition. Many of these deals were struck before the iPad even had any “competitors”.
Apple is doing some of these “competitors” a favor by locking up components. It saves the competitor from losing a buttload of money when they release the next “tablet” dud that ends up on a clearance shelf for $99 4 weeks after launch 😉
This is the typical BS you see from leftists ignorant of economics.
Apple operates both at high volume and at the cutting edge. To do that, it must secure suppliers that can offer both volume and technologically advanced products.
This doesn’t “exclude” or “block” anyone… as anyone else who wants to can go to other manufacturers and help them develop new plants and new technologies by agreeing to buy large quantities of output… or they can buy small startups with radical new technologies and take their inventions to a larger manufacturer. There are several ways to compete.
Sitting on your ass, doing nothing, and then losing in the market is not being “blocked” its being lazy and then whining after the fact.
The entire realm of anti-trust “law” is about punishing people who benefit society by providing better products at a lower cost and who, by doing so, provide competition that is too strong for the lazy and the stupid. This is why every time you see someone competing well, they are called “anti-competitive”.
“anti-trust” and “anti-competitive” and “monopoly” are words used by liars to rationalize their failure.
“The entire realm of anti-trust “law” is about punishing people who benefit society by providing better products at a lower cost and who, by doing so, provide competition that is too strong for the lazy and the stupid. This is why every time you see someone competing well, they are called “anti-competitive”.”
This is too simplistic a characterization, Engineer. Borderline stupid, even (that’s not a ad hominen attack, the quoted observation is). Agree or disagree with the application of anti-trust law in any individual case — fine, we all do it, but anti-trust law does go after illegal, anti-competitive practices.
Remove enough laws and soon you lose the rule of law. You end up with commercial 3rd-world anarchy.
I agree — leftists are quite ignorant of economics. About as much as rightists are ignorant too (much of current mess is a result of rightist policies pushed thru in the last 10 years, for example.)
Calling Engineer “borderline stupid” is an insult:
He crossed that border at birth.
A clueless engineer… Very, very rare.
There is a very clear and easy to understand reason for anti-trust laws, and the whole Microsoft case was a good example. For those born too late to have witnessed it, here is a quick digest.
During early 90’s, there were several different makers of desktop OS that can run on x86 platform (in addition to MS Windows, there was IBM’s OS/2). As MS quickly grew its market domination, it started blackmailing its hardware partners. The idea was as follows: “You get cheap Windows license ONLY if you don’t also offer others”; in other words, if Compaq wanted to sell pre-installed OS/2 to those who wanted it, it would have to pay high price for Windows, which was much more popular. IBM was practically excluded from the market. Same thing happened with web browsers: if you pre-install Netscape on your computers, our Windows license becomes much more expensive.
Abusing monopoly position by blackmailing partners in order to prevent legitimate and fair competition is anti-competitive and anti-trust laws make it also illegal.
The ignorance is strong in this one (as always).
Maybe you should go back and read a book about Standard Oil so you’ll understand what actually anti-competitive behavior is instead of pronouncing that it simply does exist.
When was the last balanced Federal Budget submitted by a Republican?
Wasn’t Bush the Idiot.
Wasn’t Bush the Elder.
Wasn’t Ronald Reagan.
Wasn’t Gerald Ford.
Wasn’t Richard Nixon.
Eisenhower, over 50 years ago.
When was the last balanced Federal Budget submitted by a Democrat?
Bill Clinton.
Had the Republican Congress & President stayed the course with the spending and taxation Clinton left, we would have no Federal Debt.
None.
Zip.
Instead, Voodoo Republican Supply Side Fantasy Economics has destroyed our finances.
Care to revise your statement.
Need I remind you that for many years, only one company was able to produce chocolate chip cookies. Now, thanks to anti-trust law, not only do innumerable companies produce this well-loved treat, but it is also made in households across the nation. All because of anti-trust law. So if it’s good enough for the venerable, and now plentiful chocolate chip cookie, why again is it not good enough for technology?
Brilliant!!! Simply brilliant!!! Best tech at best prices. That is how you protect your first mover advantage.
Mr. Tim Cook, I salute you!
First come, first served.
Apple would be abusing their dominant market position if they were to tell their chip maker who makes iPad components that if they want the $5B deal with Apple, they can’t make, nor sell, ANY chips to HTC, LG, Samsung, Toshiba, Motorola or anyone else. Such blackmail would be anti-competitive and illegal.
What Apple did is invest money, where necessary, in production facilities, pre-paid massive orders months and years in advance and essentially made sure that they are the highest priority on chip maker’s list. Any competitor is free to approach the chip maker and make a deal with them, but it is unlikely that anyone can offer such a sweet deal.
Engineer, two thumbs up for a well stated point of view. Hear hear!!
I am sorry but the Engineer had it right the first time.
Apple does not prohibit others from trading with its business partners, these just don’t have the capacity to service the whole world.
It also shows that those who because of some mental quirks refuse to buy the best products like the iPad simply bring the pain of inferior components and workmanship on themselves by their personal choice. No one else need listen to their cries of unfair.
Apple is ruthless, they don’t owe Google, Samsung or HP any slack.
Apple is just too busy taking care of their own customers and manufacturing partners to listen to these losers whining week after week.
While the article quotes some rivals who are very frustrated by Apple’s ability to buy the best components for themselves, Panzarino is pretty positive towards Apple in the article.
He writes – “Yes, Apple has exclusive access to the absolute best touch panels and crazy good machining technology for aluminum casings, but not because it was won in some sort of rigged contest. It has access because it built that access by hand, by looking to the future while everyone else was looking to the past.”
The bottom line is that if any other computer manufacturer could commit to buying tens of millions of components per year and pay up front for the development and mass production costs, component manufacturers would be delighted to oblige and even grant exclusive rights to those components and at advantageous prices too.
The biggest challenge for other manufacturers is putting those components into a product that can be sold in huge volumes and at a profit.
“a source with knowledge of the matter has informed The Next Web”
Oh THAT guy. You can trust him.
There’s a great documentary film called Objectified that has an interview with Jonathan Ive. For the first few minutes he talks about the usual stuff, the design of his products and the mass popularity, but then he starts to talk about the manufacturing of the products.
It’s clear from this interview that he has just as much passion for how something is made (production) as how well it works when it’s made(end result). He talks about the problems faced in how to actually hold the slab of aluminium as it is being machined, as all the screw bosses and goodness knows what else is being carefully and precisely machined.
Anyway, here it is. Jonathan, Steve, Tim, Phil, Bertrant, Scott, I salute you all;
[youtube http://www.youtube.com/watch?v=t0fe800C2CU&w=560&h=345%5D
The part I am referring to starts at 4:00.
Very interesting video. Thanks Mousy for putting it up.
[youtube http://www.youtube.com/watch?v=t0fe800C2CU?rel=0&w=560&h=345%5D