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How Apple Came To Control the Component Market

Unknown Lamer posted more than 3 years ago | from the one-i-ring-to-rule-them-all dept.

Apple 350

An anonymous reader writes "Phillip Elmer-Dewitt draws on several sources to argue that 'Apple has become not a monopoly (a single seller), but a monopsony — the one buyer that can control an entire market.' According to Dewitt, Apple uses its $70 billion cash hoard to 'pay for the construction cost (or a significant fraction of it) of [tech factories] in exchange for exclusive rights to the output production of the factory for a set period of time...' This gives Apple 'access to new component technology months or years before its rivals and allows it to release groundbreaking products that are actually impossible to duplicate.'"

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Monopsony (2, Funny)

Anonymous Coward | more than 3 years ago | (#36671618)

It would make sense that a term with somewhat dubious connotations would contain the word "Sony."

Re:Monopsony (1)

TheRecklessWanderer (929556) | more than 3 years ago | (#36672080)

Sounds more like an advertisement than an article.

Re:Monopsony (0)

Anonymous Coward | more than 3 years ago | (#36672122)

*sigh* Well, you know those Appleheads. Any possible desperate excuse they can use to deny that Apple is becoming a monopoly while evangelizing the One True Way Of The LORD Almighty Steve Jobs. Now they're inventing wacky new words to do it!

Re:Monopsony (-1)

Anonymous Coward | more than 3 years ago | (#36672226)

Plus Apple wouldn't control jack shit if Steve Jobs was forced to let all of his component making slaves go.

I kinda hate that I seem to be the only person that has not only made the Jobs connection, but truly solved the underpants gnome meme:

Step 1) Make slow, clunky, hombrewed computer, and/or obscure OS.
Step 2) Sell out.
Step 3) Become CEO of previously sold out company.
Step 4) Buy human slaves.
Step 5) PROFIT!

I really wish the North had actually won the Civil War, and that citizens of the USA actually weren't allowed to own other human beings. The reality is that we Americans can become overnight billionaires if we owned 3rd world slaves and used them to build (then staff) factories to produce chic gadgets. Steve Jobs is living proof that all you need is a marginal amount of innovation, and 10,000 plus enslaved humans.

Wow, they're the best company ever. (-1)

Anonymous Coward | more than 3 years ago | (#36671622)

Let's all go buy their great products!

Not to be too big of a troll... (0)

Anonymous Coward | more than 3 years ago | (#36671644)

...but can someone name one product for me that Apple has made which is "groundbreaking products that are actually impossible to duplicate"?

Re:Not to be too big of a troll... (2)

Anonymous Coward | more than 3 years ago | (#36671708)

... and which are groundbreaking for YEARS to come ...... they do have a ground breaking marketing department and followers who are ground breakingly gullible.

I think Apple critics are hilarious (4, Insightful)

Brannon (221550) | more than 3 years ago | (#36672156)

They have to walk a very fine line where they claim that Apple doesn't actually produce products with any intrinsic value, but instead they trick billions of people into thinking that they do with "marketing". Oh and Apple is evil for locking down their devices eventhough the overwhelming majority of their customers are perfectly happy to have them locked down.

What a sad, pathetic little tribe.

Run along back to your Ruby coding.

Re:Not to be too big of a troll... (2, Insightful)

Anonymous Coward | more than 3 years ago | (#36671800)

...but can someone name one product for me that Apple has made which is "groundbreaking products that are actually impossible to duplicate"?

Sure but only if we include patents in the discussion. If we are just talking tech parts then no, there aren't any that are both groundbreaking and impossible to duplicate.

Re:Not to be too big of a troll... (1)

swalve (1980968) | more than 3 years ago | (#36671850)

Yeah, the "proof" is in the, uh, commodity hardware they spraypaint white and hawk to hipsters? They've got computers that are allegedly well-built versions of every other computer out there, and phones and iPods and tablets that are simply LCD panels with memory and some kind of ARM processor.

Re:Not to be too big of a troll... (1)

Lumpy (12016) | more than 3 years ago | (#36671970)

Name one product made by ANYONE that is "groundbreaking and impossible to duplicate"

and no the evil "we patented it to hell and back" is not a reason to make it impossible to duplicate.

Re:Not to be too big of a troll... (1)

Anonymous Coward | more than 3 years ago | (#36672074)

But the point is that there's nothing in the iPod/iPhone/iPad/etc that uses "future technology". Most of it is off the shelf components (except where patent means they own the rights, but there's usually an off the shelf equivalent). I won't deny they have the edge in design and marketing, but rarely are their devices even at the bleeding edge of existing tech, let alone contain technology other devices won't have access to for months/years. Author comes across as a star cross'd fanboy.

Re:Not to be too big of a troll... (1)

omnichad (1198475) | more than 3 years ago | (#36672182)

Some of the little things like their patented magsafe connectors on their laptops really are light years ahead. I can't wait until that patent expires.

Unique != groundbreaking (4, Insightful)

damn_registrars (1103043) | more than 3 years ago | (#36671646)

allows it to release groundbreaking products that are actually impossible to duplicate

Just because the design of an Apple product is distinctive doesn't mean that the product is automatically groundbreaking.

Re:Unique != groundbreaking (4, Funny)

SniperJoe (1984152) | more than 3 years ago | (#36671688)

Based on the article summary, if Apple is fronting the cash to BUILD factories in exchange for exclusive rights on the items the factory produces, I think it's fair to say that a lot of groundbreaking is going on.

Re:Unique != groundbreaking (1)

damn_registrars (1103043) | more than 3 years ago | (#36671740)

Based on the article summary, if Apple is fronting the cash to BUILD factories in exchange for exclusive rights on the items the factory produces, I think it's fair to say that a lot of groundbreaking is going on.

I guess an Apple-branded jackhammer or steamshovel would be pretty groundbreaking then, woudln't it?

Re:Unique != groundbreaking (0)

Anonymous Coward | more than 3 years ago | (#36671844)

Congratulations, you got the joke.

Re:Unique != groundbreaking (2)

Noughmad (1044096) | more than 3 years ago | (#36671892)

I guess an Apple-branded jackhammer or steamshovel would be pretty groundbreaking then, woudln't it?

About as much as a Microsoft-branded vacuum cleaner would suck.

Re:Unique != groundbreaking (1)

Anonymous Coward | more than 3 years ago | (#36671962)

The problem is that the MS vacuum cleaner would be the first MS product not to suck!

Drum roll.

Thanks, I'll be here all night.

Re:Unique != groundbreaking (1)

swalve (1980968) | more than 3 years ago | (#36671878)

That is standard vertical integration, which is as old as the industrial revolution. The only difference is that they don't *own* the factories, they just invest in them and extract the usefulness out of them, and then leave someone else to clean it up when it is no longer useful.

Re:Unique != groundbreaking (1, Troll)

the_humeister (922869) | more than 3 years ago | (#36671712)

Anything Apple touches is groundbreaking. How dare you sully their reputation in the year 56 ASJ*. There was nothing groundbreaking prior to the year 1 ASJ. In fact we hardly know anything that happened in those dark times.

* ASJ = After Steve Jobs. BSJ = Before Steve Jobs, when the dark ages were upon us.

Re:Unique != groundbreaking (1)

DanTheStone (1212500) | more than 3 years ago | (#36671762)

Actually, ASJ is "In the year of Steve Jobs" (Anno Steve Jobs). Sorry to be pedantic.

Re:Unique != groundbreaking (1)

camperdave (969942) | more than 3 years ago | (#36671932)

We PC folk (Politically Correct) prefer the terms BAE (Before Apple Era) and AE (Apple Era) in order to avoid the religious connotations surrounding Steve Jobs.

Re:Unique != groundbreaking (1)

bluefoxlucid (723572) | more than 3 years ago | (#36672102)

Oh please. What is with you hippies trying to call a thing what it isn't? Look, we all know the Steve was the son of a carpenter, and in fact Jobs was the Steve. Now, what's up for debate is whether or not Jobs actually had reality-warping powers enough to have risen from death not once, but twice; and, indeed, even if the concept of the Steve as given is a load of dingos' kidneys in the first place. But we all know that your "Apple Era" just means "yeah, we don't want to say that the world revolves around the life of one man, but it does;" let's call it what it is, huh?

Re:Unique != groundbreaking (1)

Chris Mattern (191822) | more than 3 years ago | (#36672200)

in fact Jobs was the Steve.

Blasphemy! Wozniak is the One True Steve!

Re:Unique != groundbreaking (1)

fragfoo (2018548) | more than 3 years ago | (#36671716)

allows it to release groundbreaking products that are actually impossible to duplicate

Just because the design of an Apple product is distinctive doesn't mean that the product is automatically groundbreaking.

I dropped my iphone once and it kind of breaked the floor.

Joking, i have never had an iphone :|

Re:Unique != groundbreaking (0)

cultiv8 (1660093) | more than 3 years ago | (#36671770)

allows it to release groundbreaking products that are actually impossible to duplicate

Just because the design of an Apple product is distinctive doesn't mean that the product is automatically groundbreaking.

Their patent portfolio wants you to think otherwise.

Re:Unique != groundbreaking (1)

mooglez (795643) | more than 3 years ago | (#36671856)

Their patent portfolio wants you to think otherwise.

"Wants", being the keyword.

Allow me to laugh in the face of a software patent portfolio

Re:Unique != groundbreaking (0)

Anonymous Coward | more than 3 years ago | (#36672094)

Their patent portfolio wants you to think otherwise.

"Wants", being the keyword.

Allow me to laugh in the face of a software patent portfolio

Allow me to laugh in the face of someone who can't even google "apple patents"...

Re:Unique != groundbreaking (1)

Penguinisto (415985) | more than 3 years ago | (#36672154)

Allow me to laugh in the face of a software patent portfolio

Actually, a large percentage (if not the majority) of Apple's patents are hardware.

Re:Unique != groundbreaking (1, Insightful)

johnlcallaway (165670) | more than 3 years ago | (#36671862)

Thank you. I have yet to see any Apple product that is groundbreaking. Pretty, yes. Groundbreaking ... no. Everything they have come out with had already been made by someone else, Apple just put a pretty face on it. Or bundled already available concepts together a little differently.

I would classify Apple more as innovative. For instance, they control their Apple computer market through egregious licenses. Today's Apple is no more than a PC, yet where are the clones?? Apple simply created a license that makes it illegal to run the Apple OS on anything without an Apple sticker. MP3 market?? Yawn .. they put on a clever jog wheel that people either loved or hated, and was quickly duplicated. iPhone?? Competition was out within months, which means other manufacturers were already working on it. Windows had a similar phone years earlier, but due to tech limitations (and that it ran on Windows), it never took off.

Apple is clever. Apple makes pretty toys. But groundbreaking??

Only to an iDrone....

Re:Unique != groundbreaking (-1, Troll)

Lumpy (12016) | more than 3 years ago | (#36671990)

Or made it easier to use for dimwits.

Case in point tablets and pocket mp3 devices.

You and I might be ok with simply selecting tools, wifi, settings, enable wifi, select the access point, and pressing connect.
the general public is so stupid that if it does not automagically connect or produce a pop up of "hey wifi here! want to connect to it?" they will never figure it out.
The vast majority of the population are stupid as rocks, apple is making things accessible for them.

Re:Unique != groundbreaking (5, Insightful)

object88 (568048) | more than 3 years ago | (#36672212)

The vast majority of the population are stupid as rocks, apple is making things accessible for them.

Wow, way to be a condescending prick. The whole point of computing devices is to make tasks simpler.

I wonder how you would feel if, in order to feed yourself, you had to hunt or grow your own food. Do you know how to do that? I sure don't. I wouldn't care to be catagorized as a "dimwit" by a hunter, because I don't know how to kill my own deer for dinner. But I'm sure glad that the agriculture industry has come around, and made it simpler to put food in my stomach.

As a software engineer, I'm glad to make shit easier for people to do. Your attitude can go crawl under a PDP-11.

Re:Unique != groundbreaking (2)

605dave (722736) | more than 3 years ago | (#36672214)

Just because someone isn't tech savvy doesn't make them stupid. Tech is what we are good at, other people are good at different things. I am sure there are many simple things you and I would fail at, that other find easy. Just because we can configure wifi settings doesn't make us superior.

Re:Unique != groundbreaking (1)

Penguinisto (415985) | more than 3 years ago | (#36672216)

the general public is so stupid that if it does not automagically connect or produce a pop up of "hey wifi here! want to connect to it?" they will never figure it out.

You're confusing ignorance with stupidity.

Joe Sixpack may not know much about wifi connectivity, but I'm willing to wager that you can't do cartesian math in your head, do double-entry bookkeeping, weld aluminum, or know how to convert a Ford 420 engine into a 460 (I'll save you the time: it's the timing chain). Conversely, I don't expect an auto mechanic, welder, or accountant to automatically grok wifi on a small device that can have a crap non-intuitive UI (especially back in the early days of it).

Re:Unique != groundbreaking (0)

Anonymous Coward | more than 3 years ago | (#36672126)

How was the iphone not groundbreaking?

That competition was out within months doesn't mean it wasn't. Neither you nor I have any idea how much the release of the iphone changed their eventual competitors, not that I agree the eventual arrival of decent Android phones that ape the iphone in almost every way happened within 'months'.

Your assertion that prior Windows phones were 'similar' suggests you have no idea what you are talking about.

Re:Unique != groundbreaking (1)

inKubus (199753) | more than 3 years ago | (#36671946)

Yeah, I think they overused the breathless adjectives there--far more than to my taste. This isn't news. Apple doesn't control the parts market by any means--they just don't ship that many units.

However, they could have said something like "Apple vertically integrates its part suppliers while trying to predict hardware trends by going all-in on the manufacturing side. This means when they guess right, they have an advantage over the rest of the market because they have already reserved capacity. When they guess wrong, they still have to make the devices because they've already paid for the parts" and I'd be happier. Journalists aren't supposed to add breathless adjectives. Your job is to be as neutral as possible. It seems every Apple story does it's best to give you goosepimples--c'mon guys, we know who you're working for.

Re:Unique != groundbreaking (4, Insightful)

gstoddart (321705) | more than 3 years ago | (#36672046)

Just because the design of an Apple product is distinctive doesn't mean that the product is automatically groundbreaking.

If they're based on components that nobody else has access to and won't for some time because only Apple is in the supply chain.

If nobody else had access to capacitive touchscreen, like they say in the article, nobody could come up with a product that does the exact same thing.

The article reads like it can actually give Apple several years of lead time to bring products to market using new, and ground breaking, technologies that rivals can't access because Apple paid for the initial manufacturing capacity.

Design here doesn't mean the external things that users see, but the actual design and manufacturing of the device ...

One extraordinary example of this is the aluminum machining technology used to make Apple's laptops - this remains a trade secret that Apple continues to have exclusive access to and allows them to make laptops with (for now) unsurpassed strength and lightness.

doesn't mean that Apple is making the prettiest laptop cases, it means that nobody else can make a laptop case using the same techniques as Apple does. Which implies there's more behind the scenes than people realize.

As I read this, Apple is innovating new techniques, and paying to have them brought to market exclusively by them by actually building the manufacturing capacity for the technology in the first place.

If that's not groundbreaking and innovation ... I'm not sure what qualifies.

Interesting... (1, Interesting)

Millennium (2451) | more than 3 years ago | (#36671658)

So with this, the argument is that monopsonies are as bad for free markets as monopolies are. Who'da thunk it?

Re:Interesting... (0)

Anonymous Coward | more than 3 years ago | (#36671896)

So with this, the argument is that monopsonies are as bad for free markets as monopolies are. Who'da thunk it?

Monopsonies and monopolies are part of the free market and they are a natural consequence of the free market. That's where government comes in to put some restrictions on the free markets to keep the inevitable monopoly from abusing its customers.

When we had laissez-faire capitalism in the 19th century and early twentieth, monopolies were a fact of life and hence the subsequent regulation.

Re:Interesting... (0)

countertrolling (1585477) | more than 3 years ago | (#36672020)

The only place where you'll find laissez-faire capitalism is in contraband, and the graveyards are full of its practitioners... Everything else has always been regulated

Re:Interesting... (0)

Anonymous Coward | more than 3 years ago | (#36672116)

The only place where you'll find laissez-faire capitalism is in contraband, and the graveyards are full of its practitioners...

And also full of communists, christians, socialists, fascists etc etc...The reaper is gonna come knockin' eventually...

Maybe (1)

alexander_686 (957440) | more than 3 years ago | (#36672138)

The example the author gives is not an example of a monopsony. Yes, Apple is a 600 pound gorilla, but they are nowhere near a monopsony when it comes to manufacturing components. Just because Foxcom builds factory A for Apple does not mean they [or anybody else for that matter] can’t build another factory.

Labor Unions are [or were] the classic example of a monopsony. If you wanted to buy labor you had to hire Union workers – they were the only supplier.

I suppose that an argument could be made for the ITunes store and IPhone/IPod, etc. [If you have developed an app only Apply will “buy” it – and then resell it] but I don’t think this is a good example because there are a lot of close substitutes.

So – 600 pound gorilla – Yes. Monopsony - No

I knew it! (2)

gubers33 (1302099) | more than 3 years ago | (#36671666)

That's why Apple's stuff looks so futuristic, they buy it before it exists.

Re:I knew it! (0)

countertrolling (1585477) | more than 3 years ago | (#36672042)

That's one of the advantages of being a subscriber

Hardware is useless without good software (-1, Offtopic)

h4rr4r (612664) | more than 3 years ago | (#36671672)

This gives Apple 'access to new component technology months or years before its rivals and allows it to release groundbreaking products that are actually impossible to duplicate.'"

Even if the above is true, with the IOS software I won't buy their crap. I am not paying rent to run my own software and own my device. I know Apple does not want users like me, and I will abide by their wishes and not buy any of their products. An Air would make a nice linux laptop, but with this kind of hostility towards me I won't buy anything they make.

Re:Hardware is useless without good software (2, Insightful)

Anonymous Coward | more than 3 years ago | (#36671720)

Yes, h4rr4r we know you hate Apple. Is your life so devoid of meaning that you have to remind us countless times a day about this? Seriously, you need to go see a psychiatrist to work out this unhealthy obsession you have with Apple and Steve Jobs.

Re:Hardware is useless without good software (-1)

h4rr4r (612664) | more than 3 years ago | (#36671738)

I don't hate apple. I loved the IIe, the iMac of yore and even OSX when they launched it. I hate what they have become.

Re:Hardware is useless without good software (1)

CastrTroy (595695) | more than 3 years ago | (#36671874)

Yeah, I hate them, you hate them, but you really have to think about everybody else in the world. They (the computer industry) have been trying to sell industrial and commercial level computers to home consumers since the advent of the computer. Apple is the first company to focus exclusively on the home user. This makes their products very attractive for a lot of people. While you may not like, and have no use for their products, there are many who like Apple products simple because they are designed from the ground up to be easy for the average person to use at home.

Re:Hardware is useless without good software (0)

gubers33 (1302099) | more than 3 years ago | (#36671742)

Hey you could always try to win one at Pwn2Own. You need to be able to hack it in less than a minute tho, they usually don't last much longer than that.

Re:Hardware is useless without good software (0, Troll)

gubers33 (1302099) | more than 3 years ago | (#36671872)

Someone is a Apple cultist. Mod me down because of the fact that Mac's lose first in Pwn2own??? YES THAT IS A FACT GO LOOK IT UP. And read my sig while you are at it.

Re:Hardware is useless without good software (1)

sakdoctor (1087155) | more than 3 years ago | (#36671792)

You just have to laugh when the "Apple is being monopolistic", or "Apple is being evil" stories roll.

They are the antithesis of FOSS, and geeks shouldn't give them the time of day.

Hording Cash (1)

geoffrobinson (109879) | more than 3 years ago | (#36671680)

At least they put their cast to good use for the business, getting access to the best components, as opposed to just hording it to swim around in like Scrooge McDuck.

Re:Hording Cash (1)

xenocide2 (231786) | more than 3 years ago | (#36671836)

Well, when you're talking about a company that earns 6 billion a quarter, a 3 billion of investment annually still leaves plenty of room for swimming.

I wonder... (5, Interesting)

fafaforza (248976) | more than 3 years ago | (#36671714)

how much other manufacturers are really being stopped from using said components. My inclination from past experience is that most non-Apple companies would choose to use lesser quality components to keep prices down. LCD displays for example, have for the most part been a lot worse on laptops, music players, etc.

Re:I wonder... (1)

MacGyver2210 (1053110) | more than 3 years ago | (#36672158)

All those other companies have to do is build their own private-output factories and hope their factory comes up with the components before the Apple factory.

Somehow I think Apple would probably still sue and say "Our factories came up with it first!" while their factories secretly steal/produce whatever they are contesting. They have become the evil giant. They are no longer innovative, but are now just blanket-grabbing anything in the tech field to try to profit from patent whoring.

All-in-all one of the worst tech companies on the planet. Even for the $65k/year they offered I would never work for them. Ever.

scary, but relavant to everyone yet. (0)

Ryunosuke (576755) | more than 3 years ago | (#36671726)

and yet they make nothing i want. so i guess we're ok then?

Who did the R&D work? (4, Interesting)

RogueWarrior65 (678876) | more than 3 years ago | (#36671748)

Lots of people are crying anti-trust but the question I have is who did the R&D for the components in question? Did Apple do the development and contract with the fabricator or did the component company have something cool and Apple said "Okay, we'll back you in exchange for the first production runs."? If Apple did the development work, I see no grounds for anti-trust. Even if it's the latter, so what? It's not like other companies can't do the same thing with other fabricators.

Re:Who did the R&D work? (2)

Wandering Fire (2214566) | more than 3 years ago | (#36671854)

Even if they are paying for the right to get tech first, the reason that tech would exist is because Apple is paying to get it first. Everyone wins except Apple's competitors. :)

Re:Who did the R&D work? (5, Insightful)

Relayman (1068986) | more than 3 years ago | (#36671942)

And Apple allows the fabricator to sell to anyone after the exclusive period (six months, a year?) is over. So Apple is benefiting but also doing the whole industry a favor. Just because Apple wins doesn't mean everyone else loses. Android isn't losing much, is it?

Re:Who did the R&D work? (1)

MacGyver2210 (1053110) | more than 3 years ago | (#36672164)

Due to the modern-day patent nonsense we all must tolerate, they CAN'T just do the same thing with other fabricators. Then Apple whines and sues.

Its no fair! (0)

140Mandak262Jamuna (970587) | more than 3 years ago | (#36671758)

None of the competitors of Apple have any kind of cash hoard. Not even those who have a monopoly on some kind of OS+document+presentation software due to vendor lock up. They hardly get 15 billion dollars per quarter, as I said, chicken feed. Even if it is something, such competitors play by such strict rules they say, "It is not cricket" and refuse to take any kind of unfair advantage.

It is only the diabolically perverse Steve Jobs and Apple who would dream of sinking 70 b dollars to electronic parts manufacturing. You know the profit margins on that industry. Huge! So huge every year the price of what they make drop by 25%. Just sink in 70 b dollars, sit back, down a pina colada and count the profits year after year.

Cash hoards (1)

sjbe (173966) | more than 3 years ago | (#36672012)

None of the competitors of Apple have any kind of cash hoard.

Bullshit

Google is sitting on $36B in cash, Microsoft has $50B, Nokia has $11.5B, HP has $12B, Dell has $14.4B.

Apple's doing well but they are hardly the only one sitting on a big pile of cash.

Whoooosh (nt) (1)

Brannon (221550) | more than 3 years ago | (#36672050)

Whooosh

Groundbreaking? Only if they innovate... (0)

Anonymous Coward | more than 3 years ago | (#36671760)

Could someone point out to me what 'groundbreaking' tech they put out recently besides new form-factors for phones and PCs?

What tech? (1)

Anonymous Coward | more than 3 years ago | (#36671768)

What technology has apple gotten ahead of everyone else? They've combined some things, sure, but I don't know of anything single component that was exclusively theirs (their own ARM cores don't really count as they don't do anything uniquely innovative even though they're an exclusive part).

Re:What tech? (1)

Anonymous Coward | more than 3 years ago | (#36672100)

The only Apple exclusive I can think of is the very high-res "Retina" LCD panel in the iPhone4. None of the other phone manufacturers have matched it for pixel size yet. But a) it's only a matter of time the others catch up, and b) if Apple wants to front the research and development costs, plus the manufacturing plant, to build such a thing I don't see it as a massively big issue. If hoardes of people hadn't bought the iPhone4 then Apple would've taken a bath on the startup costs so it's just a matter of how big a risk they're willing to take. And there's nothing stopping other manufacturers from developing their own high-res LCD panels.

Re:What tech? (3, Insightful)

tlhIngan (30335) | more than 3 years ago | (#36672194)

What technology has apple gotten ahead of everyone else? They've combined some things, sure, but I don't know of anything single component that was exclusively theirs (their own ARM cores don't really count as they don't do anything uniquely innovative even though they're an exclusive part).

Not really exclusive tech, but more like "we can get them and you can't".

Which makes sense. Let's say you make NAND flash, or hard drives. Would you want to sell to Apple who wants to buy several million of them a month, or 100 different customers who want 10,000 each? You can bet Apple with it's order in the tens of millions of parts will get the best pricing and first delivery over smaller customers.

And competitors are complaining because Apple can soak up so much production that they're paying through the nose for parts. The price of NAND flash goes up during the summer and fall seasons as Apple gears up the holiday season and suppliers are simply too busy fulfilling Apple's order to fill in anyone else's.

Apple buys chips in such huge quantities that it's no wonder vendors give them exclusivity and all that. Apple will buy up entire production lines (original iPod - Apple bought Toshiba's entire production for 3 years), and vendors will open up Apple-exclusive production lines just to fulfill Apple's orders.

Ditto everything else - and hell, if you make something cutting edge, Apple will even pay you to make a new factory or R&D or whatever, in return for some exclusivity (which doesn't matter too much since your production will be 100% going to Apple to fulfill their orders anyhow). Apple's done this with NAND flash manufacturers (wasn't it like $6B?) and LCD (Sharp reportedly got a huge investment for a new LCD factory from Apple).

Suppliers will also take margin cuts if it means a big run of continuous business - a year of guaranteed output for Apple versus having to deal with all the smaller customers who come and go like the wind?

As for competitors, the Blackberry Playbook was delayed simply because the touchscreen manufacturer was busy making iPad/iPad2 touchscreens (by the millions) that it really didn't have time to deal with dinky customers wanting just 100,000 or less per production run.

And hell, Apple's now Samsung's #1 customer, ousting out Sony.

Other customers may buy more of a product (e.g., Dell with Intel processors), but Apple tends to buy a very limited range of product so runs are huge. Dell may make 10 times more PCs than Apple, but I'm sure Apple only orders maybe 20 different CPUs at most from Intel, while Dell orders whatever's cheapest at the time (probably Apple leftovers), so for any one processor model, Apple probably outbuys Dell, even though as an aggregate, Dell buys more.

Hell, on the retail side, we see this as Wal-mart, Sam's Club, Costco and others - buy a huge quantitiy, get a discount. They buy so much suppliers give them all sorts of discounts and concessions.

Monopoly through monopsony? (0)

chub_mackerel (911522) | more than 3 years ago | (#36671778)

If you have "innovative" agreements with your upstream suppliers that make it impossible for your competitors to bring products like yours to market, then aren't you still a "monopolist" as far as downstream consumers are concerned? Whether you are abusing your monopoly power may be another question, but it still sounds like monopoly to me.

Re:Monopoly through monopsony? (1)

the_humeister (922869) | more than 3 years ago | (#36671924)

This is a little similar to what Standard Oil could do: get much lower shipping rates on oil because of how much volume they produce. The difference being that Standard Oil had nearly 95% of the oil market whereas Apple isn't anywhere close to that.

Re:Monopoly through monopsony? (1)

bluefoxlucid (723572) | more than 3 years ago | (#36672132)

Standard Oil also owned railroads, and would shift box cars in front of pipelines and disallow running pipelines under the railroad. This meant that other oil companies had to put the oil in barrels and carry it across the tracks... which of course is why they put box cars there.

Ok, I'll bite (0)

Anonymous Coward | more than 3 years ago | (#36671786)

When is apple going to release something "groundbreaking"?

Re:Ok, I'll bite (1)

Ross R. Smith (2225686) | more than 3 years ago | (#36671816)

When they release the iPneumaticDrill next year.

Intel already does this (0)

Anonymous Coward | more than 3 years ago | (#36671822)

But unlike Apple, Intel does this the old-fashioned way: by doing the R&D and later the actual manufacturing themselves. They have some serious vertical integration chops. Apple's approach is rather exploitative: they monopolize component tech, milk it for all it's worth, and by the the time their monopoly investment is over they've got another factory and another tech to exploit. How long until they run out of new ideas?

Is that is why it is begging Samsung for Amoled? (4, Insightful)

SmallFurryCreature (593017) | more than 3 years ago | (#36671832)

This is well known, the reason the iPod got so big is because Apple dared to buy in such huge amounts they not only got the output of entire factories, they managed to drive the unit price they payed down so that nobody else could compete. This is why you there is no such thing as a 64GB mp3 player from Cowon and why Archos tends to go to HD, they just can't buy flash at the price that allows them to compete with apple and its 64gb offerings.

BUT Apple ain't got it all their way, they misjudged Amoled and for now it seems they can't just buy their way in. Samsung needs all the displays it can produce for itself. Small players like Cowon can get their displays but if Apple wants to use them, it better make some friends. Why should Samsung help Apple with the iPad3? They got their own tablets to sell.

Is amoled that hot? Well, I compared a nexus S with a iPhone and the nexus can easily be read in broad daylight, the iPhone not so much. As for all angle viewing, I can't always hold the screen steady or at an optimal angle. Enegery usage is claimed to be lower as well (can't verify this myself), they are thinner and lighter and resolutions might be higher for a lower cost.

So, Apple gets flash nobody else can afford at the same price but they don't get it all. It has always been the tradeoff for a company relying on parts from others. You can buy what you want, but will always be depended on others for what you can buy. The cutting edge will always be held ultimately by those who develop in house but at the huge risk that you bet on the wrong horse and end up with something nobody wants. Remember minitiature HD's? Not the ones that were in the first iPod's, even smaller ones, destined for the smartphones of the future... I seen them in some MP3 players but the risk those companies took didn't pay off, the world turned to flash instead.

And for all its market power, where is the real innovation with the iPod? What did it, does it do, nobody else did before them AND does it better?

In many ways the iPod is the wallmart player, it shows the power of bulk purchasing and putting it in a saleable package but little else.

Or maybe I am just defending my order for a Cowon d3.

Re:Is that is why it is begging Samsung for Amoled (2)

mevets (322601) | more than 3 years ago | (#36671956)

| Why should Samsung help Apple with the iPad3? They got their own tablets to sell.

Maybe to recoup the losses they accumulate attempting to sell their own tablets?

Re:Is that is why it is begging Samsung for Amoled (1)

Wovel (964431) | more than 3 years ago | (#36672230)

Samsung would make a lot more money helping Apple then they ever would selling their own. I don't think Samsung is equipped to mk 50 million+ Amoled iPad displays anyway.

I am also not sure they are that desirable. Not sure on the daylight thing, but the iPhone 4 screen looks a lot better than the s2. The S2 oes look a little better then my 3GS though.

Display on e iPad is nice, I love mine. The viewing angle is about 180 degrees, not sure how Amoled would help there.

Re:Is that is why it is begging Samsung for Amoled (0)

Anonymous Coward | more than 3 years ago | (#36672018)

"Or maybe I am just defending my order for a Cowon d3."

A what? Sorry, I had to Google it. I remember the original Creative Nomads and the Zune, and I had one of those 64 GB Nike MP3 players, but never heard of that one.

Re:Is that is why it is begging Samsung for Amoled (4, Insightful)

pherthyl (445706) | more than 3 years ago | (#36672134)

>> In many ways the iPod is the wallmart player, it shows the power of bulk purchasing and putting it in a saleable package but little else.

Usability. It's the feature that tech people don't think is a feature.

Re:Is that is why it is begging Samsung for Amoled (1)

MacGyver2210 (1053110) | more than 3 years ago | (#36672204)

In the world of High Definition, please abbreviate Hard Drive properly as HDD.

I was wondering what the hell you were talking about "Mini High Definitions"...

I thought you couldnt' duplicate their tech (1)

gubers33 (1302099) | more than 3 years ago | (#36671840)

Because Apple will sue the crap out of you if you create anything that looks remotely like their product. (Ex:http://www.usatoday.com/tech/news/2011-04-18-apple-samsung-suit.htm). They tried to sue Samsung because they too created a touchscreen tablet. They try to patent every and anything. I mean Jobs has a patent on the staircase of the Apple Store in Union Square, the iPod Nano box(yes, the box it comes in), and their power adapters.

Re:I thought you couldnt' duplicate their tech (0)

Anonymous Coward | more than 3 years ago | (#36672062)

It's a shame because magnetic power adapters are a great idea.

Re:I thought you couldnt' duplicate their tech (0)

Anonymous Coward | more than 3 years ago | (#36672084)

Because Apple will sue the crap out of you if you create anything that looks remotely like their product. ... They tried to sue Samsung because they too created a touchscreen tablet.

Remotely like? http://www.youtube.com/watch?v=d7nbqSp9T30

Economies of scale? (3)

vlm (69642) | more than 3 years ago | (#36671858)

This gives Apple 'access to new component technology months or years before its rivals and allows it to release groundbreaking products that are actually impossible to duplicate

B.S. Due to economies of scale, Apples competitors could always produce the components for cheaper than Apple, assuming they know what they're doing, which apparently they do not.

Given equal quality of management, etc, Apple will always get a lower rate of return on their cash that their competitors or a 3rd party would get.

The only reason for Apple to finance their own stuff, is because they have an extremely specific set of requirement for their individual device... Nothing stops Nokia or whoever from doing the same thing.

Re:Economies of scale? (1)

pherthyl (445706) | more than 3 years ago | (#36672146)

>> B.S. Due to economies of scale, Apples competitors could always produce the components for cheaper than Apple, assuming they know what they're doing, which apparently they do not.

Uhh.. What? Name one phone, music player, or tablet, that is produced in greater numbers than the iPhone/iPod/iPad. Economies of scale work in Apple's favour here.

Re:Economies of scale? (1)

MacGyver2210 (1053110) | more than 3 years ago | (#36672222)

B.S. Apple produces most of its shiny plastic crap in China, where intellectual property means absolutely zero. Their designs will be leaked and copied by other manufacturers they don't control before Apple even knows they've come up with it.

This actually explains a lot. (1)

pscottdv (676889) | more than 3 years ago | (#36671866)

The interesting question is how did they get this virtuous cycle started and how could another company do something similar?

A Perfect Example of Writers Wearing Blindfolds (2, Interesting)

brices21 (203870) | more than 3 years ago | (#36671870)

This writer needs to join the rest of the world for a little while. Samsung just sold 3 million Galaxy S2 devices in 55 days (without a US launch http://www.engadget.com/2011/07/03/samsungs-galaxy-s-ii-becomes-companys-quickest-selling-phone/ [slashdot.org] ">Link ). Get your head out of Steve's ass and have a look around. This type of forward buying might actually limit Apple's abilities and agility.

Whats so special about it? (4, Insightful)

drolli (522659) | more than 3 years ago | (#36671890)

Its just another: "We build the factory, you operate it" agreement. Things like this exist in Mining, Oil refining, basically all kinds of manufacturing processes where some big company decides they need more resources of a certain type and sees the possibility to use some of their cash to invest in something where they know it will make revenue.

I hope for Apple that they don't exaggerate it to the level that the ties created by this investment will hinder their design. If some competitor produces something better, switching has an added cost.

Apple takes credit for the omelet, but.... (1)

one cup of coffee (1623645) | more than 3 years ago | (#36671968)

So if Apple is fronting the money to build these factories, and gets exclusive rights to the output for several years, does that make Apple responsible for the treatment of the people who work in these factories, and who commit suicide by jumping off these factories? What about the impact these factories have on the environment?

Re:Apple takes credit for the omelet, but.... (1)

risinganger (586395) | more than 3 years ago | (#36672058)

Doubtful, aren't they simply a customer with an exclusive agreement rather than an investor with which responsibility might fall?

Apple marketing = groundbreaking (2)

metalmaster (1005171) | more than 3 years ago | (#36671998)

Case in point
Shortly after its release, iPod became synonymous with mp3 player. Sure, there were other mp3 players out there. However, Joe and Jane Public knew them as iPods or even worse "iPod knockoff." If im not mistake, Blackberry introduced the consumer market to the smartphone with the Curve. However, the market exploded with the release of the iPhone. In today's tablet market the iPad is king. I hate Apple products, because of their dependency on iTunes(ya, there are shitty alternatives) but im simply stating the facts.

Why are these products a staple within their respect markets? Its because they are advertised as such. People might like the fact that they are shiny. The fact that the UI remains consistent across product lines is nice too. The fact remains, if iProduct wasnt marketed so well it would be just another plain box on the retail shelf.

Re:Apple marketing = groundbreaking (1)

KreAture (105311) | more than 3 years ago | (#36672026)

Agreed!
Marketing is extreme, but I wouldn't call it groundbreaking either. They just do what every large brand does.

The main point is however, that linear extrapolating development, making stuff smaller, faster and embedding it more and more is just how development has been done the last 30 years. It is not groundbreaking.

The vaccuum tube was groundbreaking.
The transistor was groundbreaking.
The silicone chip was groundbreaking.
The ipod/ipad/iphone was a knockoff on the iPaq or to be nice, a linear extrapolation adding modern technology to a already existing idea/platform known as the PDA.

Focus on the user experience is groundbreaking (1)

Brannon (221550) | more than 3 years ago | (#36672098)

Apple designs appliances for the consumer masses--with well executed industrial design and software to go along with excellent hardware; instead of designing gadgets which non-technical people have trouble using.

The unwavering focus on the typical user experience is truley groundbreaking and that's why they are printing money.

It's okay that you don't get this, neither does HP, Dell, Google, Microsoft, Samsung, etc.

Re:Apple marketing = groundbreaking (0)

Anonymous Coward | more than 3 years ago | (#36672160)

Computing on silicone chips *would* be groundbreaking!

Duh? (2)

Jartan (219704) | more than 3 years ago | (#36672004)

I hate apple and despise them for their lockdowns. Whining about this is just bullshit though. Basically all Apple has done is shown it's not stupid to keep cash on hand.

Other companies are free to continue their blatantly retarded path of buying up shitty companies for far more than they are worth. That's apparently the "proper" use of extra cash.

This shows patents are not needed. (2)

trout007 (975317) | more than 3 years ago | (#36672044)

This is a great example of how a natural monopoly works. Patents were intended to give their owner a monopoly for a limited time to make back the R&D cost. This shows what I have always said. There are natural monopolies that exist when you do new things. First there is a time to see if the product will be successful in the market place and then more time to ramp up production to copy it. The beauty of a natural monopoly is that the time of the monopoly is proportional to the advancement of the idea. If it is something simple it gets copied quickly and easily. If it is radical it make take years. This is far better than our patent system which awards the same term to all patent classifications.

i don't see a problem (2)

DynamoJoe (879038) | more than 3 years ago | (#36672056)

It's nothing that their competitors couldn't do. Investing in production to get a discount and/or exclusive supply is simply good business. The notable differences are that Apple seems to be doing it pretty often and that every time Apple tries it it's a home run (aluminum machining process = macbook air, capacitive touchscreen = iphone/ipad, etc.). But just because a competitor can't duplicate a product or component on their own and can't purchase from Apple's supplier doesn't make it anti-competitive. Also, it's not like they're doing this to cripple supply for other competitors. They're not buying all that DRAM in order to sit on it and starve the market. They're shoveling it into products and selling them. ( a notable exception might be LiquidMetal but we haven't seen any products using it yet except for the SIM eject tool in iPhones. LiquidMetal is protected by patents so competition couldn't make it if they could).
These products do get commoditized eventually. Does that happen faster or slower due to Apple's intervention? If it's slower then maybe competition isn't as serious as it should be. If it's faster then what's the problem?
Hate on Apple all you want, but if Dell, HP, or Acer wanted to invest in custom gear for a factory in order to get exclusive output, there's nothing preventing them. I'd be surprised if they haven't already, and it's just flying under the radar. The only reason this is news is because it's Apple.

I'm confused (1)

alispguru (72689) | more than 3 years ago | (#36672082)

I've heard for years that Apple stuff isn't worth the premium price because "it's made out of the same components everyone else uses".

So, some of Apple's hardware is literally made from unobtanium?

companies used to make their own parts (3)

joeaguy (884004) | more than 3 years ago | (#36672166)

Remember back when companies actually owned their own factories, made their own parts, and assembled them? Computer companies too, had all sorts of factories making tons of their own components. That set up exactly the same situation but worse, because to make an equivalent part you would have to build it elsewhere, as no one was going to sell to their competitor.

This outsourcing of all production is a new thing which was brought on by globalization and the availability of cheap labor in places like China and South Korea. So Apple invests in building a factory, and gets a big amount of its output, but in the end it is not Apple's factory, and they can make contracts with others once their deal with Apple expires.

Not that I like Apple doing this, but they have really figured out how to get the best of both worlds. They get the cheap prices of globalization, and the competitive edge of controlling their own production.

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