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I think it would be wise, as this article does, to not think about the phone market in terms of platforms (iOS, Android, RIM & WebOS) but in terms of manufactur
by nika 16y ago
I think it would be wise, as this article does, to not think about the phone market in terms of platforms (iOS, Android, RIM & WebOS) but in terms of manufacturers (Apple, HTC, Nokia, Samsung, etc.)
If you look at it in those terms, there are two manufacturers that are vertically integrated- Apple and Samsung.
Samsung is weak on software, and software is the critical component of this age (more important than flash, RAM or SoCs). Meanwhile, Apple is a design house, and doesn't have manufacturing capability of its own.
So, one question is whether owning your own plants will be critical or not.
Consider this possibility- it is like the Windows market, only instead of it being a licensed OS, it is Apple, and Apple devices, but HTC et. al. become contract manufacturers for Apple. The margins may not be any better than competing in the commodity phone market, but the R&D and marketing costs are a lot less, and so they may be more profitable.
I'm sure this goes against their DNA, but unless FoxConn can expand enough to cover the demand (for Apple and for everybody else) I can see the commoditization happening at the manufacturing level, rather than the device level, as it did in the PC market.
Samsung has had a decade to replicate the iPod, or to build a video game system. I don't know if they will be able to build the expertise or find the mojo that Apple has on software.
I don't think Apple is going to start building plants nor will they build expertise in lithography, etc.
But I think that while software is easy to commoditize (eg: Android) a quality software experience is much harder. Meanwhile, it is cheaper to be a contract manufacturer for a %5 margin than it is to try and compete with your own products.
So, Apple could be the new Microsoft, and Samsung could be the new Apple-- if software is what matters. The reverse could occur if lithography expertise is what ends up mattering.
- nl 16y agoApple isn't vertically integrated at all. As you note, they don't own any production facilities, and outsource all production. Almost the total opposite of Samsung, who so almost everything themselves. I guess I'm a bit confused what you think vertically integrated means?
- nika 16y agoApple designs the software, the hardware industrial design, the circuit boards, the processor and even the screens. Samsung merely manufactures things, and does not design the software (for android phones) or the CPU etc. But of course what matters on this site is bashing apple and pretending like they suck, even if you have to redefine terms like "Vertically integrated" and be snide about it.
- nl 16y agoActually, Samsung does all that (including as much CPU design as Apple does: http://hothardware.com/News/Analysts-Confirm-Apples-A4-Similar-to-Samsung-CPU/ http://hothardware.com/News/Analysts-Confirm-Apples-A4-Simil... ) except for the core Android software. However, they do have Badu, which is their own custom OS. I was genuinely puzzled what you meant by "vertically integrated". Now at least I understand what you are talking about - I still don't think that's a conventional definition of vertical integration - but my response wasn't trying to be snide.
- rdouble 16y agoApple is "forward" vertical integration.