I lost my passion for Apple

BetaNews ^ | 08/27/2011 | Joe Wilcox

[dennisw]

MORAL OF THE STORY: There is always a need for outsourcing. Even if Dell built their own cases, they would still need to buy screws, as screws have no value add and Dell does not consume enough screws to be even in the top 100 consumers of screws. However, when it comes to Motherboards, Dell engineers CAN engineer a world class motherboard that COULD have provided an edge. Notice the new Macbook Air. It kicks ass and takes names because of its motherboard. Yes! Dont get fooled by the slimline etc. THe first MBA was a DOG! But Apple designed the new motherboard with built in flash memory and now MBA can be had with a built in 256 GB SSD and 4 GB Memory all built into the motherboard!!!!

My question--  How much of Apple's motherboard R&D is done by actual Apple employees in Cupertino and how much is done in Taiwan by partners kept on a very short leash? The Taiwanese design just about all the world's computer motherboards so Apple must be in collaboration w them on the motherboards you mention with built in SSD and built in 4GB memory. 

[Hodar]

I worked for Dell in Austin about 5 yrs ago; and you are 100% correct. I saw this in action, and lost more than a few friends when Dell shipped the entire Desktop support and manufacturing overseas.

IMHO, Dell richly deserves every bad thing they have coming.

[Hodar]

How much of Apple's motherboard R&D is done by actual Apple employees in Cupertino and how much is done in Taiwan by partners kept on a very short leash?

Very little design, if any, is done outside the USA. Notice the SSD on the laptops are exclusively Apple - they are not commodity SSD drives. The iPad, for example, has 4 motherboards, one in each corner for symmetrical weight distribution. The iPad is perfectly balanced, up/down as well as each corner. This wasn't an accident.

[Hodar]

I say we're seeing that now with the iPhone and Apple; they're starting to lose marketshare in smartphones, and are starting to compete on price already (witness the emergence of free iPhone 3GS units and bigger discounts on the iPhone 4).

Bear in mind, Apple is losing marketshare with 1.5 and 2 yr old products - but they are estimating 50 Million iPhone 5's by the end of the year.

[dennisw]

Apple motherboards are Intel (reference) motherboards that are rejiggered to Apple specifications. Plus a few interesting chips may be added. Intel has FoxConn do the actual manufacturing of Intel mobos and Apple likely would do the same for its Intel mobos.
http://www.atomicmpc.com.au/News/148502,intelfoxconn-alliance-could-cripple-asus.aspx

[Fire_on_High]

No, you’re wrong there. I’ve used Asus components in various builds and they definitely have one thing there’s no way they got from Dell.

Quality.

[FromTheSidelines]

So, your post in many ways goes to my point about margins.

Yes, with commodity product that has a low bar to entry, it becomes all about thin margins. In fact, talking with a person who was rather high-placed at Dell for a long time, he claimed Dell made 0% on their hardware sales - just covered costs. But they did have 180-270 day terms on product, meaning they made a good amount of cash on the float of $15 billion...

So, in a commodity business, what can then help you? Certainly the answer is NOT buying every SINGLE part of your product from a bulk commodity manufacturer.

You can offer better service, more choices in packaging (colors), features, customization, warranties. NONE of the US brands makes their own stuff - Dell, HP, or Apple. They ALL buy commodity products from Asian sources. It's the packaging and branding around them that is different.

Really, Apple isn't any different than Dell or HP; they all do a certain amount of design in-house (mainly industrial design and system-level specifications), most of the design is handled at the CM. And almost all the production is also handled at CMs.

How does Apple charge so much more? Brand, loyalty, perceived value. Ten years ago they weren't making the margins and sales on their laptops like they are now. Of course, 10 years ago having an Apple laptop wasn't so trendy, either...

In an era where a PC sells for $500, $100 is life and death.

Yep. Which is why they squeeze those CMs to get their terms; it's not so much an extra $5 in profit on the hardware, as it is 270 day payment terms. You can now leverage and float that full $500 for 270 days; turn a 6% annual return on it and you make $22 over that 270 days. More than you'd squeeze your CM for.

Secondly, they could then start building exclusive features to their MB (like on board flash memory) that do NOT have to be shared with other competitors.

For counter-proof, I give you: Apple. They have nothing that is not available to all other vendors. Most of their design is done on contract, and at the CM. They build at CMs, who also build for Dell and HP and Sony.

What Apple has is commodity product - nothing in an Apple laptop is exclusive to Apple. The concepts aren't new, either. What Apple has done with things like soldered-on SSD drives is eliminate configurability and choice from the consumer in a drive towards fewer SKUs and simpler pricing and sourcing. And then they dump a lot more money into the raw parts to build even more expensive systems.

The result are high end laptops that sell well, and give them 3% of the worldwide market. But when Sony, Toshiba, Dell, or HP push to the same high end, the costs are about the same, as are the margins.

They all do the same stuff - it's how it's marketed and branded and supported that becomes the differentiator.

Consider that PCs are, by virtue of being commodity products, the same as groceries. Why do you go to the grocery store that you use? Is it brand loyalty, mix of products, pricing, convenience? There's something that drives you to your main store over and over. It's not the fact that they have canned corn or brisket - everyone has that. It's something else.

That's Dell, that's HP, and that is Apple. Dell and HP are the Safeway and Albertson of the computer market. Apple is the Whole Foods. Smaller selection, higher prices, better marketing/environment. And they charge you for it.

It really is similar to the grocery market... In some ways, Apple will maintain their position as long as they maintain their mystique of their brand; when they start to grow bigger - meaning addressing and selling to the cast bulk of the market at the lower end of the pricing structure - they'll lose their mystique and fall into the same issue as Dell and HP.

Mark my words, Dell will get out of the PC business in less than 3 years. They have no other choice.

Marked in my Google calendar...;)

[FromTheSidelines]

Bear in mind, Apple is losing marketshare with 1.5 and 2 yr old products

Even the bump when the iPhone 4 was released didn't stop the ascent of Android. Android is now over half the market in the US, and about the same worldwide. Apple simply cannot compete against the slew of options from other manufacturers.

Want a physical keyboard? No Apple. Want a screen larger than 3.5"? No Apple. Want 4G? No Apple. Want an SD card? No Apple. Want widgets? No Apple. Want to play WMVs or WMA media? No Apple. Want 3D? No Apple. Want a smaller than 3.5" screen? No Apple. Want a world phone? No Apple.

And on and on... You can find all those options with other brands. For example, I want a world phone (Verizon in the US/CDMA here, GSM for overseas). There is ZERO Apple option for me. And I'm not willing to sacrifice because at my house in the US, Verizon is the ONLY carrier that has good coverage (literally - friends with Sprint and AT&T phones get zero coverage here, I get great Verizon coverage). And when I travel internationally, I like to pop in one of my SIM cards I have, so I can activate my "local" number that is cheaper.

There is NO Apple option for me - I cannot even consider it.

Apple's strength is its slavish devotion to getting a small set of features perfectly right on one single hardware platform. That necessarily restricts choice and options, and makes it hard to maintain any kind of significant marketshare.

The only reason Apple is seeing quarter-over-quarter growth of iPhone sales is because the market as a whole is growing faster than their slide of marketshare; once the US and EU markets start to saturate, and the growth moves to Asia (where Apple is simply too expensive for most of the market - SE Asia and India and most of China), you'll see Apple's sales start to slide down as well, with their marketshare.

The aberration is that a single phone with a fixed set of functionality managed to burst on the scene and grab so much marketshare; long-term, it'll slide to the 7-10% of overall marketshare where one would expect such a phone to really exist.

but they are estimating 50 Million iPhone 5's by the end of the year.

Yeah, I don't buy it. Less than 3 months of sales (announcement in October is the rumor), 50 million phones? That's 20+ million a month. That would triple the peak sales of phones that Apple ever had. Wishful thinking - I don't think they could even make that many.

[EternalVigilance]

This guy makes no sense to me. Why would anyone care who heads up a company? Does the equipment work the way you want it to work or not? Does it do the job better than others, or not?

[dennisw]

What is a CM. Asian designer and manufacturers? How about Jonathon Ives and his designers at Apple? You are saying most of Apple’s research and design is done by its Asian (Taiwanese) partners?

[FromTheSidelines]

A CM is a Contract Manufacturer. Many times they also offer value-add capability like PCB layout, component selection, subsystem design, etc.

Jonathon Ivey and team handle mainly industrial design - the look and feel of the product. Actual PCB layout, mechanical engineering to make those industrial designs a reality? Much is done at the CM.

It’s not so much the research that’s leveraged, but the design. Likewise with HP, Dell, and other brands. About the only ones who really DO everything themselves are Asus, Acer, and Toshiba; everyone else pretty much uses CMs to build and do a good amount of the design of the product, especially the inside guts.

Now, Apple - like many companies - has final approval of the design that the CM does, but I can guarantee you that if the CM recommends a flex trace run a certain way, or a screw be added in a specific location that Apple - like all other PC brands - would do exactly what the CM recommends. The CM is the expert in actual manufacturing.

And that’s the dirty little secret - Apple, HP, Dell are not manufacturers. They’re concept development and marketing brand companies. They really don’t build anything - they outsource the manufacturing.

It would be like you coming up with a great idea for a new sports car, putting all your thoughts down on paper, then going to Ford to actually do the design of where and how the strut towers actually mount to the chassis, optimize the engine mounts and exhaust routing, heat shield placement, and production. You conceived the product, and you marketed it - but did you actually do the nuts-and-bolts of design (programming the CNC welders, the sheet metal stamps, choose the glues for securing parts) and manufacturing? Nope.

[dennisw]

You have a more sophisticated knowledge of the situation but I have been saying exactly that about Apple and posting it to the Apple fan boys here. What you have laid out is what I strongly suspected. The fan boys exaggerate how much Apple does in house. I told them the Taiwanese are the geniuses of the laptop, the cell phone and the motherboard. And that Apple had some serious Taiwanese partners who are are doing the bulk of the R&D and do 100% the manufacturing in their mianland Chinese factories

What does Apple in Cupertino do? They come up with concepts, marketing and distribution. They maintain the mystique that gets people to fork out gobs of cash for overpriced products. Cupertino is the hype machine. Sure there is some R&D and engineering in Cupertino but most goes on in Taiwan by the CM partners

[ReignOfError]

A prosumer mini-tower desktop, for instance. ;-)

I see an opportunity for an entrepeneurial engineer. Since Thunderbolt is basically an external PCI bus, someone could build an mini-tower chassis with 2-3 PCI Express slots, a few drive bays (including an optical drive), and a spot for a Mac Mini. Design it in aluminum to look like a midget version of the Mac Pro.

[Hodar]

Want a screen larger than 3.5"? No Apple. Want 4G? No Apple. Want an SD card? No Apple. Want widgets? No Apple. Want to play WMVs or WMA media? No Apple. Want 3D? No Apple. Want a smaller than 3.5" screen? No Apple. Want a world phone? No Apple.

Rumor mill - based on parts collected at various suppliers. iPhone 5 WILL be a World phone. It's being released for AT&T, T-Mobile, Sprint, Verizon as the iPhone 5; and a CHEAP ($99) Version is also being released (without contract) - which is rumored to be an 8 Gig iPhone 4.

IOS 5 will be released at the same time as launch, and will take everything to the cloud - backing up your last 1,000 pictures, your complete iTunes library - all free; plus another 5 Gig of non-iTunes apps or music for personal use - again, free of charge. This will make the 8 Gig iPhone 4 useful, as it can then stream music, video and download apps on an as-needed basis.

With the data backed up to the cloud - your need for the SD card goes away. But, if you GOT to have it, you can buy a $29 set of Apple Camera adapters that attach to both USB and SD Cards - and they will upload the pictures (only)to the Apple device - and from there to the cloud.

The iPhone5 will support the 4 inch Retina screen. They are doing this by extending the existing screen to the sides to he edge, and either removing the home button, or incorporating it into the screen.

The slide of marketshare of iOS devices you are mentioning - just isn't there. I suggest you re-examine your sources. Just a little digging into the iPhone 5, and iOS 5 - I think you'll understand why they are estimating 50 Million phones. And this is a typical Apple conservative guess. Apple doesn't over-build the number of devices they are hoping to sell - they will put up with a 2-4 wait time (as in the iPad 2) until manufacturing comes up to speed - but they do'nt overbuild. You'll get the final word on or about Sept 7th. I think you'll be pleased.

Oh, as for why not supporting WMV - not now, and likely not ever. Why not? Because .mp4 and H.264 are both rendered in hardware (not software) to save energy. To render in WMV means shuffling bits around - this gobbles power. The video portion of the A4/A5 chip is designed to do this rendering (and ONLY this rendering) - so all it can ever do is .mp4 and H.264 - but it does this burning a fraction of the power your Android phone would use doing the same thing. In mobile space - this is a critical thing.

[PreciousLiberty]

“I see an opportunity for an entrepeneurial engineer. Since Thunderbolt is basically an external PCI bus, someone could build an mini-tower chassis with 2-3 PCI Express slots, a few drive bays (including an optical drive), and a spot for a Mac Mini. Design it in aluminum to look like a midget version of the Mac Pro.”

That sounds OK in its own right, but misses the mark for what I have in mind. That being at least a Core i7 quad core CPU, and a high-end AMD/ATI graphics card (6870/6970 1-2GB), and memory expansion to 32 GB. That is still less capability than a full-blown Mac Pro, and would have fewer drive bays etc.

In addition to being more powerful than the iMacs, it would allow for sane repairs (replace modular parts), and would not be a throwaway if the screen dies. Three drive bays + Thunderbolt would be plenty of expansion.

These days this could be done for $1500 with entry level memory, and still give nice profit margins. That’s a cool $1000 less than the entry-level Mac Pro.

[FromTheSidelines]

Rumor mill ... iPhone 5 WILL be a World phone.

Rumors, yep. The iPhone 4 is also released for all those carriers, but it's not a world phone. You can release one phone in two flavors for CDMA and GSM. Adding the extra radio increases the power consumption and size of the phone - will Apple do that? It does run against their mantra of long-battery-life and small size...

and a CHEAP ($99) Version is also being released (without contract)

Yep. They're starting down the commodity path because they have to - they sell in a commodity market, and while you can offer premium product as well, if you want to play in the commodity market you have to have commodity product. This is Apple moving down in price, trying to hold some meaningful market share.

IOS 5 will be released at the same time as launch, and will take everything to the cloud - backing up your last 1,000 pictures, your complete iTunes library - all free; plus another 5 Gig of non-iTunes apps or music for personal use - again, free of charge. This will make the 8 Gig iPhone 4 useful, as it can then stream music, video and download apps on an as-needed basis.

So, basically what Android and Windows Phone 7 can do today? They're coming late to the party again. Replication across platforms is old-hat to Google and Microsoft.

With the data backed up to the cloud - your need for the SD card goes away.

How does that cloud work for me on a transpacific flight? Not too well...;) And how about taking pictures from a friend's camera and swapping them over to my phone? I can do that with a microSD card - can't do that very easily any other way.

And it's still the fastest way for me to drag-and-drop books and music to consume on my phone when traveling - plug my microSD card into my laptop, drag over what I want, and in a couple of minutes I have 16 GB of data ready to go - no use of my 3G bandwidth (which is a LOT slower than the microSD transfer rate).

The slide of marketshare of iOS devices you are mentioning - just isn't there. I suggest you re-examine your sources.

Really? You need to re-examine yours:

Source: StatCounter Global Stats - Mobile OS Market Share

Android is gaining, iOS is falling, and when it comes to new phone sales, Android is outselling iOS 2 to 1.

Oh, as for why not supporting WMV - not now, and likely not ever. Why not? Because .mp4 and H.264 are both rendered in hardware (not software) to save energy. To render in WMV means shuffling bits around - this gobbles power.

Yep. And there are thousands and thousands of WMVs out there that will not be supported by Apple - and force people to re-encode what they have. Heck, I have a few thousand CDs ripped to FLAC and iOS doesn't support them - I'd have to transcode my entire library to work on an iPhone. Or I can get an Android phone or Windows Phone 7 and they would just play.

So, for me (and lots of other people), Apple simply offers nothing that would work. No hardware keyboard (I hate on-screen keyboards, I don't want to lose half my screen when filling out a form or e-mail), no microSD card, not a world phone, and doesn't play the format that most of my media is recorded in (an open source format at that)

[chris_bdba]

http://www.google.com/search?client=safari&rls=en&q=fakes+photos+on+TMZ+of+steve+jobs&ie=UTF-8&oe=UTF-8

You may want to do a little reading because it’s proved to be a fake.

[FromTheSidelines]

Of course, everybody said the National Enquirer wasn’t reliable either, just a tabloid paper that couldn’t be trusted, especially with something so explosive and clearly false as John Edwards having a love child...;)

Sometimes the tabloids get it right.

[Hodar]

Source

The world-phone issue is really a dead one. Apple appears to be using both CDMA and GSM, as well as 'maybe' LTE in the iPhone5.Source

The Cloud is going to be a major issue, with Apple releasing IOS5, there are a couple neat features that no-one else has. Consider the songs of dubious origion. For a $20/yr fee; Apple 'legitimizes' your entire MP3 library - and the Artist/Song are listed in your iTunes personal library. DRM-Free; downloadable for up to 10 devices - indefinite storage - free. So, for people who have thousands of Napster songs from 10 years ago - for $20 - they are all 'legetimized'. No one else offers anything like this. For songs that you have, that are simply not recognizable - those will be copied into your account. The idea that this whole operation will consume about 20 minutes for the average user - not an overnight affair. From the Cloud - you can download music as you need it for up to 10 devices. Win7 and Android have nothing to compare with this, yet.Source

While on a transpacific flight, assuming you don't drop $$ for Go-Go Inflight internet; you are basically screwed if you have the $99 iPhone4. But, you are screwed with ANYONE's $99 phone. If you have a fully loaded iPhone3/3GS/4/5 - you have 16/32 Gig.

[FromTheSidelines]

So your response is data that’s over a year old, and is for the US only - like the rest of the world doesn’t matter... I’ll take the StatCounter data I posted above - it’s more recent and it’s more inclusive.

As far as the world phone, that remains to be seen - it’s still a rumor, even your source admits as much. We’ll find out in a few more weeks, supposedly.

Transpacific flights are an issue - no GoGo Internet available. And I’m not screwed with the Droid 3 that I bought for $99 - it has a microSD card, in addition to the built-in 16 GB storage. So my 32 GB card (I have 2, actually) is a 20 second swap away. No worries there. I have 48 GB on tap at all times, and another 32 GB when I want it.

And I never have to worry about using slow 3G networks overseas (they’re often much slower than what we have in the US); tethering to the cloud is great if you have wide coverage of fast 3G data, AND your carrier doesn’t limit your usage. How good will that cloud service work when you’re limited to 2 GB of data?