Apple spending billions on new, exclusive technology to produce unique products for new markets

“Apple Inc. is putting a record $10.5 billion to work in new technology — from assembly robots to milling machines — that consumers will never see,” Adam Satariano reports for Bloomberg News. “To get a jump on rivals like Samsung Electronics Co. and lay the groundwork for new products, Apple is spending more on the machines that do the behind-the-scenes work of mass producing iPhones, iPads and other gadgets. That includes equipment to polish the new iPhone 5c’s colorful plastic, laser and milling machines to carve the MacBook’s aluminum body, and testing gear for the iPhone and iPad camera lens, said people with knowledge of the company’s manufacturing methods, who asked not to be identified because the process is private.”

Satariano reports, “Apple is increasingly striking exclusive machinery deals, said the people familiar with the work, outspending peers on the tools that it then places in the factories of its suppliers, many of which are in Asia. ‘Their designs are so unique that you have to have a very unique manufacturing process to make it,’ said Muthuraman Ramasamy, an analyst with consulting firm Frost & Sullivan, who has studied the use of the machinery. ‘“Apple has so much cash that they can invest in cutting-edge, world-class machinery that is typically used for aerospace and defense.'”

“While designing a manufacturing process has long been part of Apple’s product creation, the task has taken on heightened urgency: The company’s fiscal 2014 capital expenditures excluding retail spending are up 61 percent from 2013 and almost 10-fold since 2008,” Satariano reports. “With the spending, Apple also is laying the foundation for new products. Cook said last month the company is preparing devices in technology areas where it doesn’t currently compete. The company has been exploring building a wristwatch-like wearable-computing device as well as new television products, people familiar with the plans have said. Apple also is working on new iPhone designs with bigger screens and sensors that distinguish heavy or light touches, a person with knowledge of the plans said earlier this week.”

Read more in the full article here.

MacDailyNews Take: Friction-stir welding. Sapphire. Liquidmetal. Apple is using exotic materials and unique manufacturing methods to create amazing products that competitors, especially those consumed by running a race to the bottom, simply cannot replicate.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]


  1. This is exactly why Apple needs to keep its money instead of listening to Icahn. To keep funding innovative new ways for growth that their competitors just can’t stomach. Apple is so far ahead of the curve that they define it. Others slowly follow and play catch-up once the expensive groundwork has been laid out years ago. Very few companies today are on Apple’s level, even in other markets. They are mostly me-too vampiric companies feeding off the innovation train that these few amazing companies dare to tread.

    1. This is the reason Apple is some way is wasting money on these stock buy backs…

      That money should be placed to continue to build internet/data infrastructure. The main complaints i see are connected on strengths of Google…. Time to reverse that (although search, Goog will remain king for awhile).

      Stop the stock buy backs…
      Dividends are much better way to reward investors… long term.

    1. Suddenly had a thought that amazing presentation centre planned for the new Donut headquarters reminds me eerily of Asimov’s Foundation books where the 3 dimensional figure of the movements founder re-appeared at regular intervals to inform and congratulate them on following his predicted route through time, detailed what they had achieved with uncanny mathematical accuracy and detailed the future direction they should take into the future. Now that would be cool… at least until the bit where it all went wrong due to unpredictable mutations countering the technological developments. Should take a millennium before Google mutates that far mind.

  2. Apple’s ROI on keeping funds offshore and using them to fund state of the art manufacturing is a boon to shareholders. If Apple brought $1 million back to the US, they’d have only about $650,000 to spend on development. That means Apple gets a 1/3rd discount on all equipment bought overseas, vs the alternative.

    Apple continues making Class A products at prices copiers spend for their Class B&C products.

    The quantity of significant innovations in an iPhone are in the many dozens at least. Carl Icahn ought to be happy his portion of the Apple capital base is being so well used.

    What other manufacturers are just starting to realize (too late) is that if Apple targets a product they make, Apple is going to take much or most of their market share.

    This is going to or has caused a shift in the Board Rooms all across the US as they realize they need to move to a 21st century modernization strategy.

    1. >What other manufacturers are just starting to realize (too late) is >that if Apple targets a product they make, Apple is going to take >much or most of their market share.

      Apple has never led nor cared about marketshare. Apple does take the majority of the profit share.

    1. “Vaporware” quickly becomes real hardware and software at Apple, especially measured in tech years. They have only just begun pulling out way ahead and will soon be at a point competitors just won’t be able to follow. The distinctions become even more pronounced. Freetards and cheapskates need not apply. Don’t need you or want you.

    2. Vaporware are ANNOUNCED products that do not materialize at the release date specified. Please, let us know what products Apple has recently announced that they never released?

      What we normally see with unreleased or soon-to-be-released products from Apple are nothing more than rumors or speculation.

      1. What’s the difference between an official declaration of an unreleased product and an unofficial post of some unsubstantiated and speculative opinion? Nothing. It it ain’t on the shelf it don’t exist. If you can’t buy it, you can’t own it. Simple enough for even you to understand or maybe not.

  3. If Apple is truly building devices that nobody else can build, then why is it that copycats can replicate its products almost to the detail in a year or less?

    I don’t think the word “exclusive” applies here. In general, Apple simply has no effective lock on these materials or processes — especially when suppliers or assemblers are located in overseas markets that do not respect western nations’ Intellectual Property laws. Hell, one of Apple’s primary suppliers is Samsung — much of the innovation that Apple thinks it had was handed to its future competition on Cook’s watch.

    Moreover, not all of these “exotic” materials and processes have proven themselves worth the risk for high-volume manufacturing. The 2012 iMac fubar proves that Apple sets ridiculous design goals far ahead of value proposition, which in turn undermines much of the commercial advantage that new technologies can offer.

    It should be obvious that Apple CANNOT be commercially successful with mass-produced electronics if it takes too many design and manufacturing risks. Like every other gadget maker, Apple employs incremental improvements to mature technologies than can offer profitable high-volume manufacturing yields. Truly “cutting edge” technology simply is not offered to consumers, and never into high-volume manufacturing — it goes into aircraft, military hardware, university labs, hardon colliders, nuclear plants, etc. Those products are multiple orders of magnitude more expensive than anything Apple makes, and technological investment, “exotic” materials, and truly innovative production processes are a large part of the reason.

    It would be wise for Apple fans — and yes, that does include me — to stow the excess hubris and be happy to count Apple amongst the leaders in CONSUMER technology. Overstating Apple’s R&D success is simply not accurate and continues to build the perception that Apple users are arrogant condesending pricks. Let’s not perpetuate the stereotype, shall we?

      1. No, I will not. I have set foot in a Walmart less than 5 times in my entire life, every time disappointed, and won’t be returning anytime in the future.

        Errantly stereotype much, rogi?

      1. Not particularly. But when I do write, I have a point. That is a clear difference between us. Moreover, my point is objective and I just don’t have the need to use underhanded personal attacks. Why are you so shallow?

    1. But it is obvious that Apple has been successful. They practically print money every time they bring a product to market. Yes, they have had their “fubars” but let’s face it, they’ve had FAR fewer than all other comers combined. Steve said it himself- it is a privelege to bring one direction changing product to market. Apple have brought at least (I would argue) 4 disruptive products to market with a relatively very low level of missteps, all things considered. I don’t think I would call that commercially unsuccessful…

      1. Having fewer fubars than “all other comers combined” doesn’t take a lot of effort. While i realize Cook steps into a tough act to follow, he has not shown the product vision, radical innovation, financial astuteness, nor dedication to Mac users that many of us hoped he would. With notable exceptions, changes made in the last 3 years have been fundamentally intended to drive users to the iCloud, or superficial stylistic GUI downgrades, or long-overdue incremental upgrades. There’s no doubt that Apple continues to do good work inside and out, as evidenced by the iPhone 5S, but there have been way too many misses, especially embarrassing because many of them were supply chain screw-ups occurring under the nose of a “supply chain genius”. And there’s absolutely no excuse to release beta hardware with a crippled feature set as if it was ready for prime time. Apple is not living up to its potential, and articles like this only expose the Apple fanboys for who they are. Apple needs to double-down on execution and stop wasting time and resources on financial games, $5 billion Aerobie offices, and “exotic” technology that prevents it from delivering high-value, cost-effective hardware in new categories and to new customers at more price points in all markets around the world. The current Apple leadership and most fans here on MDN seen way too complacent in the face of serious worldwide competition.

  4. A great point in the article was how other companies do their design. They basically farm out the work, and let the end manufactures fix the problems. In the short term they can mass produce cheeper products, but they are still playing catch up. Apple and Samsung are dominating the market because they have invested for the future and control a large part of the supply chain. Although in different ways, for different markets.

    The A7 chip is a big deal, and shows how Apple’s forethought really pays off. They had the 64 bit software ready for the 64 bit chip. This included software that keeps the chip from eating up battery life. They left space in the chip to help the fingerprint scanner be more secure. Then they put this in their top three products. They brought the iPad mini from being a year behind to being on par with its larger sibling. Android fans can deny all they want, but they are way behind. They won’t even say the mini has the A7 or is 64 bit so they claim it’s overpriced. Now the Android world will be scrambling to get something out by next year while Apple is working on 2015 products.

  5. The iPhone and iPad can already tell the differences between light and hard touches. As an example, all the instruments in Garage Band have velocity sence, as in the harder you play the instrument the louder it sounds.

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