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Mobile Communications

Apple makes more hardware to put destiny in its own hands

Bloomberg this week reported that Apple has a Taiwan lab for making screens. The story generated lots of interest but it was hardly surprising: Apple has long been intent on creating its own intellectual property that will relax its dependency on third-party designs and products.

Some examples.

Apple has for several years now developed more microprocessor technology to wean it off its former dependency on chip makers like Intel, Samsung, IBM and Motorola. Recently, various reports suggested Apple is working on its own GPU design. Apple also makes its own Apple Watch charging dock, can make its own iBeacon hardware and might have plans to make its own camera and cellular modem.

Why? Partly this is making sure that it is not at the behest of a partner so that, for example, an earthquake in Asia would hurt Apple’s ability to make systems because key components weren’t available. But it’s also about the Apple ethos that only its products are elegant and precisely matched with software to deliver an overall experience that delights the user. Or, as Steve Jobs and Alan Kay famously said, “People who are serious about software make their own hardware.”

The IBM-compatible personal computer, by contrast, is an amalgam of off-the shelf components designed to run Windows and other operating systems. The licensing of the PC design created a huge industry of “clone” makers like Compaq and Dell but also makers of CPUs like Intel and AMD, hard drive makers like Seagate and Western Digital and many, many others who made the motherboards, keyboards, mice, monitors and so on.

A couple of caveats at this point:

The term “making” has to be treated with caution. Apple will design products and often subcontract manufacturing for cost efficiencies that help perpetuate the company’s extraordinary profit margins. This has led to some notoriety over conditions at Foxconn’s plant, for example.

Secondly, Apple will always need some partners, such is the pace and complexity of the technology sector. The Apple designed A7 processor uses an ARM core, for example, and there are hosts of small parts in Apple devices that are made by others. This teardown of the iPhone 6 shows just how many third-party sensors and radios are recruited.

In the 1990s, when Apple was in the doldrums, it was thought that the company had made a critical mistake in not licensing its computer designs. Apple was often contrasted with Dell, a Wall Street darling that was a master of supply-chain control and managing costs, and the Wintel (Windows/Intel) model of the PC industry was lauded for delivering superior value and choice. Today, Apple is safely ensconced as the world’s most valuable company and can even look at other markets, including automotive, to satisfy demands for growth. The assumption that pick-and-mix was right was, well, wrong and Apple’s strategy of keeping tight control over its products is reaping seemingly unlimited dividends.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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