Photo: Associated Press
One of the underdiscussed things that makes Apple such a successful (and profitable) company is its extremely efficient supply chain operations. It goes into long term agreements with suppliers and plays hardball. And because it makes so few models of its various devices, it can order components in larger batches.This has implications for the young tablet market. As 9to5 Mac points out, Apple is spending billions of dollars to go into long term agreements to get components for iPads and iPhones. This makes it much harder for other tablet manufacturers (and would-be manufacturers) to secure supplies of the logic boards, screens, etc. needed to make their own tablets, especially at prices where they would be competitive with Apple. They did the same thing to iPod competitors in the 2000s, only this time it’s bigger.
Apple can expect to sell 30 million iPads next year, but even if all the stars align Samsung (or anyone else) can’t expect to sell 30 million Android tablets, because there are many Android manufacturers. So even if one day there are as many Android tablets as there are iPads, individual manufacturers still won’t have the economies of scale that Apple has.
Already it’s an open secret that the reason why competing tablets have 7″ screens and not 10″ screens like the iPad isn’t because they think the form factor is better, but because they can’t make 10″ tablets that are price competitive with the iPad.
This is fiendishly clever from Apple. By using their heft that way they’re basically kneecapping competing tablet manufacturers.
With Steve Jobs on a medical leave of absence, it’s worth pointing out that this supply chain management is exactly the kind of stuff that acting CEO Tim Cook excels at. While the strategic value of long term agreements for parts can’t be lost on Steve Jobs, this is Cook’s domain.
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