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"when Apple commands such a large portion of the global market for a key component it creates enormous barriers to entry for potential competitors. " This is t
by nika 16y ago
"when Apple commands such a large portion of the global market for a key component it creates enormous barriers to entry for potential competitors. "
This is true, but it also creates enormous opportunity for potential suppliers of the component that apple has secured.
Apple's operating here to ensure they are able to meet their own internal demand. They have a lot of difficulty doing this, as was acknowledged in the last conference call. This means that they lose out on sales they would have otherwise made.
Over time, the component industry grows capacity to support Apple and everyone else. This does take time and is a competitive advantage for apple in the short term. But it is not sustainable. Meanwhile the long term pricing contracts on critical components is a financial (rather than supply) advantage.
But note that the barriers to entry are only for competitors creating a derivative product.
If HP or any of these other companies had spent the last 10 years working on a tablet design, they would have likely made different choices than Apple and likely arranged for a different spec components. It is only because they want to quickly ship a replication of the iPad that they are going after 10 inch displays.
If they'd developed their own touch UI and their own ergonomics they would have their own specs and thus be seeking different components.
- majorlazer 16y agoI may have misunderstood your first point but one of the primary reasons Apple is purchasing so many screens is to purposefully reduce the amount of components on the market to block out competitors from reaching demand.
- sambeau 16y agoI think you may be confusing cause and effect. Apple is struggling to source enough components to satisfy it's own demand. By buying up all it can it is able to secure a supply for itself. If there was enough components for everybody it wouldn't have to do this. I fail to see how paying suppliers to build new factories equates to blocking competitors.
- nika 16y agoFirst off, the idea that apple is buying a bunch of screens is speculation. It hasn't been confirmed by anyone involved. It is imformed speculation. Apple talked about making an investment in supplier to insure adequate supplies at their last earnings call. So we have a publicly stated motivation. Now you're attributing another motivation to them, and what are you basing this motive on? The secondary effect of constrained supplies? Aren't you just simply assuming that apple is doing this to keep competition out? And isn't it obvious that actual competition-- companies that like apple saw the opportunity and spent years working on a tablet- aren't likely to need the same component? And wouldn't any reduction in availability immediately cause all the non-apple suppliers to boost output? Trying to corner the market on anything they can make more of is a foolish proposition.