3 ms·

High-Tech manufacturing isn't worth much

8 points by Futurebot 10y ago

chillacy 10y ago
I think you could also see it in light of competition driving profits down. Manufacturing happens to be as much of a commodity as air travel and gas (Apple has two different manufacturers for the processor in the 6s and frequently switches suppliers for its other parts to ensure lower prices).
- dilemma 10y ago
  >Manufacturing happens to be as much of a commodity as air travel and gas For low tech manufacturing, yes. But for high tech there are not many suppliers able to meet Apple's needs - how many fabs in the world could produce the A10? Also, even for commoditized products there are many things that can set a manufacturer apart. Quality, timelines, service level (how easy are they to work with; can they help with product development), logistics. These all lead to a manufacturer being able to charge higher prices because they provide more value.
  - chillacy 10y ago
    > how many fabs in the world could produce the A10? As long as it's more than 1, there can be a bidding war. Sure, timelines and service can be factors, but I suspect there's a minimum bar that has to be met, and any additional service or convenience doesn't factor into the price. Sounds like manufacturers are catching on though: http://www.bloomberg.com/news/articles/2011-11-03/apples-supply-chain-secret-hoard-lasers http://www.bloomberg.com/news/articles/2011-11-03/apples-sup... > Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Cupertino’s products. The executive familiar with these talks, who asked not to be named because the discussions were not public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple—and didn’t want to help it deflate prices.

8 points by Futurebot 10y ago

I think you could also see it in light of competition driving profits down. Manufacturing happens to be as much of a commodity as air travel and gas (Apple has two different manufacturers for the processor in the 6s and frequently switches suppliers for its other parts to ensure lower prices).

dilemma 10y ago
>Manufacturing happens to be as much of a commodity as air travel and gas For low tech manufacturing, yes. But for high tech there are not many suppliers able to meet Apple's needs - how many fabs in the world could produce the A10? Also, even for commoditized products there are many things that can set a manufacturer apart. Quality, timelines, service level (how easy are they to work with; can they help with product development), logistics. These all lead to a manufacturer being able to charge higher prices because they provide more value.
- chillacy 10y ago
  > how many fabs in the world could produce the A10? As long as it's more than 1, there can be a bidding war. Sure, timelines and service can be factors, but I suspect there's a minimum bar that has to be met, and any additional service or convenience doesn't factor into the price. Sounds like manufacturers are catching on though: http://www.bloomberg.com/news/articles/2011-11-03/apples-supply-chain-secret-hoard-lasers http://www.bloomberg.com/news/articles/2011-11-03/apples-sup... > Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Cupertino’s products. The executive familiar with these talks, who asked not to be named because the discussions were not public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple—and didn’t want to help it deflate prices.