However, if Apple wants 60 million units and the supply chain can only provide 40 million units, you better believe that Apple will say, "We'll take them all. Here's the contract. We brought cash. You're okay with that, right?" And the supplier will probably reply, "Where do we sign?"
The cry-babies are going to spin this issue to try to put Apple in a bad light. RIM announced the playbook what six or seven months ago? They haven't quit bragging about it ever since despite not even being anywhere close to a shipping product. RIM are responsible for making their prospective customers wait. If they moved on to another device because RIM wasn't ready-to-ship that is RIM's fault not Apple's.
I doubt that Apple is the least bit worried about RIM and the Playbook, they are just securing the parts needed to meet the demand of an actual shipping product.
On a side note:
I'm curious as to why on RIM's website Playbook spec page and in the spec PDF, they oddly leave out battery life. That's probably the first time in history that the battery-life spec has been totally ignored for a mobile device... You, 'cause THATS not important. My money is on it's because the battery life STILL sucks.
...because they know in advance where they are intending to take their product lines, and can advance purchase and build these agreements before any given device or update actually hits the market. Since most of their competitors are forced to react to what Apple produces, they are constantly caught short for components when Apple plans out and executes on their purchasing intentions. Any of these competitors can do the same thing if they can get out in front of Apple's development plan. So far none have that could capture mindshare or marketshare.
It's a lack of vision from Apple's competitors. It took a couple of years for the competition to market anything remotely close to the original iPhone. We are seeing a similar scenario with the iPad.
Sales of the original iPad took off and many of Apple's competitors sent their prototype designs to the scrap heap, starting anew. When an improved, slimmer iPad 2 released, again competitors looked hard at what they had produced. Samsung sent their porky 10" Galaxy Tab to the fat farm.
At this point, the competition is probably scared sh*tless every time Apple sends out media invitations for an upcoming product announcement.
Quote:
Originally Posted by Bilbo63
I'm curious as to why on RIM's website Playbook spec page and in the spec PDF, they oddly leave out battery life. That's probably the first time in history that the battery-life spec has been totally ignored for a mobile device... You, 'cause THATS not important. My money is on it's because the battery life STILL sucks.
Apple and its suppliers have probably secured all the key materials to make high-performance polymers for better Li-ion batteries.
This supply situation is a good example of why Tim Cook is probably the best operations guy in high tech. Apple's supply chain management has done a total 180 degree turn compared to where they were in 1997 when Steve returned as interim CEO.
Prepaying is good for the supplier too, if the supplier needs to make any infrastructure investments, the prepayment can help them expand production without having to secure outside financing. I recall Apple's investments in LG helped them build a new LCD plant.
Many parts for Apple's iDevices are custom to said product that I'm sure there are alternative suppliers to most of the parts.
Quote:
Originally Posted by Wil
Considering that some of the parts are being made by their competitors vying the same markets, the phrase " blocking out competitors" makes no sense. Will Samsung say they are being harmed considering that Apple is buying the same parts they are making for their own products at cost??
Do you have any evidence of this happening, or are you just assuming it is happening? Buying parts at cost from other divisions isn't generally how it's done. Each division needs to pull its own weight, selling at cost to another division is bad when they can sell at a profit to a competitor to another division.
1 Apple offering upfront cash payments to secure components, block out competitors
Quote:
Originally Posted by cvaldes1831
...if Apple wants 60 million units and the supply chain can only provide 40 million units, you better believe that Apple will say, "We'll take them all. Here's the contract. We brought cash. You're okay with that, right?" And the supplier will probably reply, "Where do we sign?"
Quote:
Originally Posted by AjitMD
Sounds like a line from the movie "Blow"!
The headline alone brings up images of tense late night meets in warehouses. Everybody's armed. The Apple guys (all dressed in black turlenecks, natch) are there with a briefcase full of cash while an unmarked semi-truck led by an armored limo rolls into the cavernous empty building.... ....the truck doors are opened to show the crates of components... ...the briefcase is opened to show the cash....
In the company's last quarterly earnings call, Apple Chief Operating Officer Tim Cook revealed that Apple had invested $3.9 billion of its nearly $60 billion in cash reserves in long-term supply contracts. He declined to reveal what components Apple had put its money toward, citing competitive concerns, but said that it was a strategic move that would position the company well in the future.
So, Tim Cook knew there was going to be an earthquake and tsunami before it happened?!?
1 Apple offering upfront cash payments to secure components, block out competitors
The headline alone brings up images of tense late night meets in warehouses. Everybody's armed. The Apple guys (all dressed in black turlenecks, natch) are there with a briefcase full of cash while an unmarked semi-truck led by an armored limo rolls into the cavernous empty building.... ....the truck doors are opened to show the crates of components... ...the briefcase is opened to show the cash....
...when suddenly.......
The RIM bus shows up with it's 47 CEOS and 32 COOs that then proceed to stand in the corner bickering with each other and miss the fact that a deal is being made.
I wouldn't go so far as to say "all the time". They were certainly taking Android way too lightly while holding fast to their already determined timeline for offering the iPhone to other providers. That gave Google/Android just the opening they needed to eventually wrest control of the smartphone market away from Apple. That wasn't a particularly smart move on Steve Jobs part. Fortunately for them it appears they don't intend to make that same mistake with tablets.
Apple doesn't seem to be trying to 'block out competitors', Apple is just trying to secure parts for it's own products.
Exactly. The blocking out of competitors is a consequence of their action to secure components first and on better terms to the suppliers. It likely is not the motive.
Apple : Hey Japan, we know your country is in a shambles right now but here is some cash to make sure we keep receiving our stuff.
Japan : But we need food and water not money!
Apple : So? Make my stuff, this Apple isnt meant for eatin!!!
I don't see what the problem is in your scenario. That money can be spent to rebuild, yielding construction jobs, and the buildings can be used to house equipment and workers, meaning more jobs, so those with jobs can get food and water, helping Japan recover.
I wouldn't go so far as to say "all the time". They were certainly taking Android way too lightly while holding fast to their already determined timeline for offering the iPhone to other providers. That gave Google/Android just the opening they needed to eventually wrest control of the smartphone market away from Apple. That wasn't a particularly smart move on Steve Jobs part. Fortunately for them it appears they don't intend to make that same mistake with tablets.
I do believe there was a small little thing called a "contract" involved, with AT&T, that would have had Apple in court in nothing flat if they would have tried to move faster re: Verizon phone.
Ya win some... you lose some... but Apple would have had to pay massive damages if they would have reneged on that "exclusive" to-the-date portion of that "little piece of paper".
Just wait until iPhone5, when a lot of user-contracts will be up for renewal incl. those that took a chance with Android devices of all shapes, colors, and non-updatable software. This will make the iPad2 shortage and lines look like an LA supermarket at 3:00am in the morning. (Yes I have experience in that matter
The RIM bus shows up with it's 47 CEOS and 32 COOs that then proceed to stand in the corner bickering with each other and miss the fact that a deal is being made.
Come on...don't stop there... it's getting interesting!!!
Why not simply acquire some of the key component suppliers?
Because that industry has extremly low margin and even the best of them lose money from time to time. (e.g. Foxconn). That's why Apple simple make deals with the suppliers instead of trying to step into new business lines that's not profitable.
Considering that some of the parts are being made by their competitors vying the same markets, the phrase " blocking out competitors" makes no sense. Will Samsung say they are being harmed considering that Apple is buying the same parts they are making for their own products at cost??
Exactly. And if a component supplier is finding more demand than supply, the usual response would be to increase capacity if they believe it's worth it, so under the amazing 'laws' of capitalism, there's exactly nothing here that's wrong. Welcome to the world of the big company with lots of money.
Comments
Correct.
However, if Apple wants 60 million units and the supply chain can only provide 40 million units, you better believe that Apple will say, "We'll take them all. Here's the contract. We brought cash. You're okay with that, right?" And the supplier will probably reply, "Where do we sign?"
Sounds like a line from the movie "Blow"!
I doubt that Apple is the least bit worried about RIM and the Playbook, they are just securing the parts needed to meet the demand of an actual shipping product.
On a side note:
I'm curious as to why on RIM's website Playbook spec page and in the spec PDF, they oddly leave out battery life. That's probably the first time in history that the battery-life spec has been totally ignored for a mobile device... You, 'cause THATS not important. My money is on it's because the battery life STILL sucks.
...because they know in advance where they are intending to take their product lines, and can advance purchase and build these agreements before any given device or update actually hits the market. Since most of their competitors are forced to react to what Apple produces, they are constantly caught short for components when Apple plans out and executes on their purchasing intentions. Any of these competitors can do the same thing if they can get out in front of Apple's development plan. So far none have that could capture mindshare or marketshare.
It's a lack of vision from Apple's competitors. It took a couple of years for the competition to market anything remotely close to the original iPhone. We are seeing a similar scenario with the iPad.
Sales of the original iPad took off and many of Apple's competitors sent their prototype designs to the scrap heap, starting anew. When an improved, slimmer iPad 2 released, again competitors looked hard at what they had produced. Samsung sent their porky 10" Galaxy Tab to the fat farm.
At this point, the competition is probably scared sh*tless every time Apple sends out media invitations for an upcoming product announcement.
I'm curious as to why on RIM's website Playbook spec page and in the spec PDF, they oddly leave out battery life. That's probably the first time in history that the battery-life spec has been totally ignored for a mobile device... You, 'cause THATS not important. My money is on it's because the battery life STILL sucks.
Apple and its suppliers have probably secured all the key materials to make high-performance polymers for better Li-ion batteries.
This supply situation is a good example of why Tim Cook is probably the best operations guy in high tech. Apple's supply chain management has done a total 180 degree turn compared to where they were in 1997 when Steve returned as interim CEO.
Many parts for Apple's iDevices are custom to said product that I'm sure there are alternative suppliers to most of the parts.
Considering that some of the parts are being made by their competitors vying the same markets, the phrase " blocking out competitors" makes no sense. Will Samsung say they are being harmed considering that Apple is buying the same parts they are making for their own products at cost??
Do you have any evidence of this happening, or are you just assuming it is happening? Buying parts at cost from other divisions isn't generally how it's done. Each division needs to pull its own weight, selling at cost to another division is bad when they can sell at a profit to a competitor to another division.
Japan : But we need food and water not money!
Apple : So? Make my stuff, this Apple isnt meant for eatin!!!
...if Apple wants 60 million units and the supply chain can only provide 40 million units, you better believe that Apple will say, "We'll take them all. Here's the contract. We brought cash. You're okay with that, right?" And the supplier will probably reply, "Where do we sign?"
Sounds like a line from the movie "Blow"!
The headline alone brings up images of tense late night meets in warehouses. Everybody's armed. The Apple guys (all dressed in black turlenecks, natch) are there with a briefcase full of cash while an unmarked semi-truck led by an armored limo rolls into the cavernous empty building.... ....the truck doors are opened to show the crates of components... ...the briefcase is opened to show the cash....
...when suddenly.......
In the company's last quarterly earnings call, Apple Chief Operating Officer Tim Cook revealed that Apple had invested $3.9 billion of its nearly $60 billion in cash reserves in long-term supply contracts. He declined to reveal what components Apple had put its money toward, citing competitive concerns, but said that it was a strategic move that would position the company well in the future.
So, Tim Cook knew there was going to be an earthquake and tsunami before it happened?!?
Call it anything. The fact is, Apple plans ahead, way ahead of others all the time.
1 Apple offering upfront cash payments to secure components, block out competitors
The headline alone brings up images of tense late night meets in warehouses. Everybody's armed. The Apple guys (all dressed in black turlenecks, natch) are there with a briefcase full of cash while an unmarked semi-truck led by an armored limo rolls into the cavernous empty building.... ....the truck doors are opened to show the crates of components... ...the briefcase is opened to show the cash....
...when suddenly.......
The RIM bus shows up with it's 47 CEOS and 32 COOs that then proceed to stand in the corner bickering with each other and miss the fact that a deal is being made.
Apple doesn't seem to be trying to 'block out competitors', Apple is just trying to secure parts for it's own products.
Exactly. The blocking out of competitors is a consequence of their action to secure components first and on better terms to the suppliers. It likely is not the motive.
Apple : Hey Japan, we know your country is in a shambles right now but here is some cash to make sure we keep receiving our stuff.
Japan : But we need food and water not money!
Apple : So? Make my stuff, this Apple isnt meant for eatin!!!
I don't see what the problem is in your scenario. That money can be spent to rebuild, yielding construction jobs, and the buildings can be used to house equipment and workers, meaning more jobs, so those with jobs can get food and water, helping Japan recover.
Apple : Hey Japan, we know your country is in a shambles right now but here is some cash to make sure we keep receiving our stuff.
Japan : But we need food and water not money!
Apple : So? Make my stuff, this Apple isnt meant for eatin!!!
This is COLD.
I wouldn't go so far as to say "all the time". They were certainly taking Android way too lightly while holding fast to their already determined timeline for offering the iPhone to other providers. That gave Google/Android just the opening they needed to eventually wrest control of the smartphone market away from Apple. That wasn't a particularly smart move on Steve Jobs part. Fortunately for them it appears they don't intend to make that same mistake with tablets.
I do believe there was a small little thing called a "contract" involved, with AT&T, that would have had Apple in court in nothing flat if they would have tried to move faster re: Verizon phone.
Ya win some... you lose some... but Apple would have had to pay massive damages if they would have reneged on that "exclusive" to-the-date portion of that "little piece of paper".
Just wait until iPhone5, when a lot of user-contracts will be up for renewal incl. those that took a chance with Android devices of all shapes, colors, and non-updatable software. This will make the iPad2 shortage and lines look like an LA supermarket at 3:00am in the morning. (Yes I have experience in that matter
The RIM bus shows up with it's 47 CEOS and 32 COOs that then proceed to stand in the corner bickering with each other and miss the fact that a deal is being made.
Come on...don't stop there... it's getting interesting!!!
Why not simply acquire some of the key component suppliers?
Because that industry has extremly low margin and even the best of them lose money from time to time. (e.g. Foxconn). That's why Apple simple make deals with the suppliers instead of trying to step into new business lines that's not profitable.
Considering that some of the parts are being made by their competitors vying the same markets, the phrase " blocking out competitors" makes no sense. Will Samsung say they are being harmed considering that Apple is buying the same parts they are making for their own products at cost??
Exactly. And if a component supplier is finding more demand than supply, the usual response would be to increase capacity if they believe it's worth it, so under the amazing 'laws' of capitalism, there's exactly nothing here that's wrong. Welcome to the world of the big company with lots of money.