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Apple's profitability with its iPhone business is partly a function of its vertical integration and its industry power. Consider that Apple controls the key inp

by mjfern 16y ago

Apple's profitability with its iPhone business is partly a function of its vertical integration and its industry power. Consider that Apple controls the key inputs for the iPhone (e.g., the A4 system on a chip and iOS), owns important distribution channels (e.g., the Apple Stores), and exercises substantial power over complements (e.g., AT&T and apps via the App Store). In short, Apple creates substantial customer value with the iPhone, and due to its vertical integration and industry power is able to appropriate much of the value that is created (in the form of profits). A second key reason for its profitability is Apple's low cost structure. With economies of scale and scope (consider that many components are shared across the iPod, iPhone, iPad, etc), learning curve advantages, relationships with key suppliers (Samsung) and contractors (Foxconn), and so on, Apple is able to drive down the unit costs of the iPhone and thus drive up its margins.

sbaqai 16y ago
I think this is a great example of Apple's "design strategy" being completely end-to-end. They don't just focus on the tiniest details of industrial design; the aluminum chassis, the battery layout, the screws, friction coefficients on the trackpad, etc.. they have also designed their entire supply chain with the same attention to detail. There was a post on HN a while ago about Apple's patent on a new headphone jack design - they redesigned what is pretty much a commoditized component (and never seen by the customer), to unlock more value in the form of greater maneuverability and internal space. I imagine the supply chain is also very commoditized, and Apple is the kind of company to take that process apart and refine it in the same way, to unlock value in the form of greater margins. EDIT: Another area where their attention to detail is apparent is their manufacturing tolerances. They've pretty much perfected the art of physically manufacturing precision components. I've not been able to find another product, luxury or otherwise, that comes close to the fit and finish of Apple's devices - and thats including things like rolexes, ferraris, etc.
- lotusleaf1987 16y ago
  To add another example of Apple's details of industrial design, Apple makes two keyboards from the space they stamp out for the iMac's screen. Apple is very efficient.
ZeroGravitas 16y ago
Apple doesn't "control" the A4 in any way they didn't "control" all the other Samsung chips they've bought and put Apple logos on. They've now bought the design team that worked with Samsung on it, so we might see something interesting come out of that, but it's not the A4. The rest of your post is entirely reasonable so it's a shame to lead off with a regularly debunked misconception. It is however fun to speculate about why Apple puts so much effort into misleading people about the provenance of this fairly standard chip. It's clearly worked on some people, but what have they gained from this deception?
- YooLi 16y ago
  Apple has said barely anything about A4. All the 'misleading' and 'deception' you mention comes from people speculating about what A4 is and isn't.
  - ZeroGravitas 16y ago
    Apple feature the A4 regularly in keynotes, product introduction videos and websites. They used Samsung ARM chips in every previous iPhone and were happy to leave it at that. Since the iPad they have been presenting the A4 as "custom-designed by Apple engineers to be extremely powerful yet extremely power efficient." This could be considered flat out lies, at the very least it gives the wrong impression. If you want to be charitable then they could mean "engineers employed by a company later bought by Apple" when they say Apple engineers, custom-designed could mean simply "designed to achieve certain goals" rather than "specifically for Apple" or it could just mean that someone at Apple picked certain features from a Samsung catalog. With that background it is understandable (though still faintly ridiculous) for people to take the hints that Apple is dropping and go off on flights of fancy about the A4.
    - YooLi 16y ago
      You are reaching, though not sure why. "...custom-designed by Apple engineers to be extremely powerful yet extremely power efficient." is 100% valid. Picking certain features from a Samsung catalog is what the general consensus is they did, and that doesn't contradict their statement at all. I can get on a website right now and make a custom designed t-shirt or even a custom designed candy bar by picking the ingredients I want. If I tell someone I then made a custom-designed candy bar, will they call me a liar because I didn't make the chocolate and all the ingredients from scratch or because someone else cooked them and put them together to make the candy bar? Of course not. Apple engineers picked the features of the SoC they wanted, ones they felt would give them the best efficiency for how they were using them, and that is their A4. No more, no less, and exactly what they say it is. Featuring the A4 doesn't mean they are giving any details about it. No one is telling 'flat out lies'.

by mjfern 16y ago

sbaqai 16y ago

I think this is a great example of Apple's "design strategy" being completely end-to-end. They don't just focus on the tiniest details of industrial design; the aluminum chassis, the battery layout, the screws, friction coefficients on the trackpad, etc.. they have also designed their entire supply chain with the same attention to detail. There was a post on HN a while ago about Apple's patent on a new headphone jack design - they redesigned what is pretty much a commoditized component (and never seen by the customer), to unlock more value in the form of greater maneuverability and internal space. I imagine the supply chain is also very commoditized, and Apple is the kind of company to take that process apart and refine it in the same way, to unlock value in the form of greater margins. EDIT: Another area where their attention to detail is apparent is their manufacturing tolerances. They've pretty much perfected the art of physically manufacturing precision components. I've not been able to find another product, luxury or otherwise, that comes close to the fit and finish of Apple's devices - and thats including things like rolexes, ferraris, etc.

lotusleaf1987 16y ago
To add another example of Apple's details of industrial design, Apple makes two keyboards from the space they stamp out for the iMac's screen. Apple is very efficient.

ZeroGravitas 16y ago

Apple doesn't "control" the A4 in any way they didn't "control" all the other Samsung chips they've bought and put Apple logos on. They've now bought the design team that worked with Samsung on it, so we might see something interesting come out of that, but it's not the A4. The rest of your post is entirely reasonable so it's a shame to lead off with a regularly debunked misconception. It is however fun to speculate about why Apple puts so much effort into misleading people about the provenance of this fairly standard chip. It's clearly worked on some people, but what have they gained from this deception?

YooLi 16y ago
Apple has said barely anything about A4. All the 'misleading' and 'deception' you mention comes from people speculating about what A4 is and isn't.
- ZeroGravitas 16y ago
  Apple feature the A4 regularly in keynotes, product introduction videos and websites. They used Samsung ARM chips in every previous iPhone and were happy to leave it at that. Since the iPad they have been presenting the A4 as "custom-designed by Apple engineers to be extremely powerful yet extremely power efficient." This could be considered flat out lies, at the very least it gives the wrong impression. If you want to be charitable then they could mean "engineers employed by a company later bought by Apple" when they say Apple engineers, custom-designed could mean simply "designed to achieve certain goals" rather than "specifically for Apple" or it could just mean that someone at Apple picked certain features from a Samsung catalog. With that background it is understandable (though still faintly ridiculous) for people to take the hints that Apple is dropping and go off on flights of fancy about the A4.
  - YooLi 16y ago
    You are reaching, though not sure why. "...custom-designed by Apple engineers to be extremely powerful yet extremely power efficient." is 100% valid. Picking certain features from a Samsung catalog is what the general consensus is they did, and that doesn't contradict their statement at all. I can get on a website right now and make a custom designed t-shirt or even a custom designed candy bar by picking the ingredients I want. If I tell someone I then made a custom-designed candy bar, will they call me a liar because I didn't make the chocolate and all the ingredients from scratch or because someone else cooked them and put them together to make the candy bar? Of course not. Apple engineers picked the features of the SoC they wanted, ones they felt would give them the best efficiency for how they were using them, and that is their A4. No more, no less, and exactly what they say it is. Featuring the A4 doesn't mean they are giving any details about it. No one is telling 'flat out lies'.