Tuesday, Feb 9, 2021 [Tweets] [Favorites]

Apple’s Supply Chain

Austin Carr and Mark Gurman (tweet, via Josh Centers, MacRumors):

Biden’s question put Cook, who’d become Apple’s CEO the previous August, in an awkward position. He was the architect of the strategy to outsource Apple’s production to China, a trend of increasing concern for the Obama administration. But Cook was also, as it turned out, extremely effective at deflecting political pressure. He was certainly more diplomatic than his old boss. Obama once asked Jobs the same question, and Jobs’s characteristically blunt reply landed on the front page of the New York Times: “Those jobs aren’t coming back.” Cook, though, was smooth and noncombative—so much so, in fact, that Riccitiello can’t recall exactly what he said to Biden. By the end of that year, Cook announced a small yet politically significant shift. Apple, he said, would start making some Macs in the U.S.

[…]

Foxconn eventually moved on to other PC parts, which it produced in sprawling factories around Shenzhen, near component suppliers. By the time Cook joined Apple, these centralized factory hubs were far more efficient than anything in the U.S. Apple sold off a huge Colorado plant in 1996, and after Cook arrived, he temporarily cut its Ireland-based manufacturing workforce, closed what was then its only remaining American production line, in Elk Grove, Calif., and outsourced more and more production to China, starting with laptops and webcams. (The Elk Grove facility is now used for refurbishing and repairs.)

[…]

Jobs’s death two years later caused skeptics to predict Apple would stagnate without a steady stream of his inventions; in fact, the real challenge was keeping supply up in China. Operations managers were scrambling to buy enough computer-controlled milling machines and laser cutters. Every millimeter was scrutinized for savings—as were even the seemingly least consequential parts. Three people familiar with the company’s supply chain say there was an Apple employee whose job consisted of negotiating the cost of glue.

17 Comments

Tim Cook is without doubt the finest oil you could ever hope to apply to the wheels of your clock. John Harrison, however, he is not.

Wake me up when he breaks a new market. (Or even fixes the [non-supply] faults in the ones that he’s got.)

“I always found him exceptionally boring.”

Ballmer XR.

One of these days Apple’s gonna get Jobsed. Sooner would be good, as eternally polishing laurels is not really healthy for anyone.

@has Isn’t all the wearables stuff new with Cook? That’s a big new market.

Apple Watch and iPods exist only as an adjunct to iPhone. The day iPhone stops selling, so do they. That’s not a new market; it’s just the upsell: the deluxe metallic finish and alloy hubs and anti-corrosion undercoat.

It is in keeping with Cook’s bias to insipid rent seeking over inspirational risk-taking though. Brilliant nuts-and-bolts man, but can only build the same old truck.

Christina Warren

I disagree with that a bit @has. While it’s true that the Watch and AirPods are an “upsell” to the iPhone, they are a full ecosystem play too. They upsell but they also reinforce and add value to that core component.

You buy AirPods because they are some of the best wireless earbuds you can get at their price point (and this is true for everything but the AirPods Max), but the way they integrate with your phone/watch/Mac make make them even more valuable. They have value on their own but also grow in value and add additional value to the other products in the ecosystem.

The Apple Watch requires an iPhone, sure. But it’s also the best-in-class smart watch and is by extension, giving the iPhone more value/uplift. It becomes symbiotic; without the Apple Watch or AirPods, the iPhone is less valuable. The whole is greater than the sum of its parts.

And not that Cook needs my defending (and I think everyone agrees he isn’t the product visionary that Jobs was and never will be), but Apple has ALWAYS been a one ecosystem/product company. For three decades it was the Mac and everything Apple created was in service to the Mac (or I guess Apple II from ‘76-‘84 and then then the Mac). Then it shifted to the iPhone. The iPod was a bit of an anomaly because it truly did exist/thrive outside of the full Apple system — which is to say, the Mac (far more iPod owners were Windows users, and that’s almost certainly equally true of the iPhone), and that’s why that was what transitioned Apple into a post-PC era. The iPod, which became the iPhone, became the central product thesis and center of gravity that everything else feeds off of.

But Apple has always had one center of gravity. It’s just that the last 14 years it has been about the phone, whereas the preceding 30 it was the personal computer.

@Christina:

You buy AirPods because they are some of the best wireless earbuds you can get at their price point (and this is true for everything but the AirPods Max), but the way they integrate with your phone/watch/Mac make make them even more valuable. They have value on their own but also grow in value and add additional value to the other products in the ecosystem.

That’s still upsell. You buy the Pods to use with your phone. No phone, no pods. They don’t—cannot—stand as a standalone product.

Integration is a separate thing. Of course a vendor wants its products to synergise: it adds value for the customer and encourages them to purchase complementary products from the same vendor (soft lock-in). But live by that sword, die by that sword. If an Apple customer decides to buy an Android phone, they could well end up going all-in on Android’s ecosystem for the same reason.

Out of interest, how many people buy AirPods to use with Android phones? And how many of those convert to sales of other Apple products? If AirPods were a stealth gateway to Apple conversion then you might have a point, being what iPod did. But color me skeptical. Apple is showing slow growth in marketshare, but it’s still only 25% of a market it invented.

And, more importantly, where is the next market Apple intends to invent? The only purpose of your existing market should be to fund the development of your next one, because sooner or later the rest of the world catches up with you: cheapening, commoditizing, and making it old news.

But Apple has always had one center of gravity. It’s just that the last 14 years it has been about the phone, whereas the preceding 30 it was the personal computer.

Apple got murdered in the PC market. (Microsoft replicated its product at a better price point, sold it in bulk, and rode the resulting network effects to total domination.) And Apple would’ve died there, had a certain incredibly talented salesman not got it TF out of there and into a radical new market that it invented (and thus, at least for a while, controlled).

Everything Apple did for the 10 years leading up to 2007 was pure—if brilliant—smoke and mirrors.

iPod was clever—a fast way to build customer credibility and reliable month-on-month revenue stream (via music service buy-in) which is key for investor confidence and obtaining funds for growth—but ultimately only a transitional product; the endpoint being the pocket supercomputer with global comms built in.

Where’s Tim’s iPod? Where’s his transition to the Next Big Thing? Don’t tell me “Apple TV” or “self-driving cars”—Apple should’ve stitched In-Home and In-Car Entertainment into a closed sack 10 years ago. What are they today? A black box hidden behind your Sony Bravia, and “Hail-Mary!” promises of Real Soon Now. The tablet revolution has stalled out, precisely because Apple isn’t generating that synergism (it should’ve been front and center in unifying IH and ICE). So what are they turning it into? A laptop: a regressive product for a fully matured market it already surrendered 25 years ago.

Apple’s entire empire today is built upon a single point of failure. Even 2000s Microsoft was more divested than that, which is why it will survive by transitioning itself to the next IBM, even as it ceases control of the world overall.

This is what distinguishes a business leader from everyone else: that ability to see your own iceberg coming and thus evade it, all before the rest of the ship has realized there’s anything wrong†. Because if you dither until everyone can see it then it’s already way too late to do anything at all, and at that point you should do as Michael Dell said, and cash in your assets for scrap and hand that money back to the shareholders.

Tim is a good company captain: a steady hand who will not rock the ship. And the shareholders will love him for it, because that’s good for their income. But don’t mistake that adoration for fealty, because they owe Apple absolutely nothing—as will be clear the moment they run for the lifeboats.

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† I lost my first [self-funded] startup. Believe me, I know what it is to take that bath.

>Apple Watch and iPods exist only as an adjunct to iPhone.

Wouldn't Steve have _loved_ that kind of scenario, though? If leaving iPods Mac-exclusive could've still led to a healthy growth of iPod sales, he totally would've done that. But the Mac was (and always will be) too small for that.

Not so for the iPhone.

(That said, the iPhone was until iOS 4.x exclusive to iTunes. It was only with iOS 5 that you could trulyuse it 'independently'. So it's perfectly conceivable that we will one day see that with the Watch. Only, I don't really see the business case — Apple already has massive Watch sales as it is.

Likewise, they could bundle Apple Music for Android with better AirPods support. Automatic pairing and all that. But AirPods are already flying off the shelves, so, it doesn't really solve a business problem, and creates a logistics problem.)

>Where’s Tim’s iPod? Where’s his transition to the Next Big Thing?

I would love it if Tim doesn't chase the Next Big Thing and instead iterates on existing things. Which appears to be what they're doing on iPhone and Apple Watch, but (IMHO) haven't quite figured out yet with the Mac or the iPad.

As for what the Next Big Thing is? I think the latest Upgrade episode makes a good case that, ten to twenty years from now, it's AR goggles.

>Tim is a good company captain: a steady hand who will not rock the ship.

It's certainly possible. I'm also not sure it's preventable. It's the ciiiiiiiircle of lifeeeeee.

Wouldn't Steve have _loved_ that kind of scenario, though?

Stagnation? Rent-seeking? Total failure to break any new markets, or even to try?

Retreads. Wheel reinvention. Loss of market leadership. Loss of market belief that you are the market leader. Flat sales. Stalled growth. Uninspiring projections.

Seriously, are you actually needing an answer to that?

Look, by the time the great unwashed masses begin to notice the ship taking on water, the smart money will already be long gone over the horizon having taken all the lifeboats. It’s not personal; that’s just business.

But hey, don’t take my word for it; go ask Steve Jobs himself. Just pick up a shovel and follow the rotational vibrations to the source.

I would love it if Tim doesn't chase the Next Big Thing and instead iterates on existing things.

Don’t worry, I’m sure Tim and his shareholders feel exactly the same way as you do. Which is why, when some hungry new velociraptor does to lumbering Apple what Apple once did to that fattened behemoth Microsoft, anyone who hasn’t already moved out their investments to somewhere different has no-one to blame but themselves.

Next Big Thing is … AR goggles.

Well I’m not going to listen to a bunch of nerds rattling on to see if they actually make their case or not. However, it is telling, I think, that you define “success” in terms of “technological gizmo” and not as “what is it actually good for?”

(i.e. What problem does it solve that a billion people currently have and don’t have a solution for. Because if you don’t have that answer, you don’t have squat.)

> The only purpose of your existing market should be to fund the development of your next one

Up to a point, yes, and I'm sure we've all read the Steve Jobs quote from before his return to Apple where he advocated this approach. At the same time, this is exactly the cause of many of the problems documented on this very blog about the state of the Mac. It’s odd to argue that Tim Cook hasn’t tried to find new markets when Apple has spread themselves so thin creating other products that the Mac has been seemingly starved of the resources it needs.

(Not to mention years of news about huge numbers of people working on a headset and a car. Whether you believe in the potential of these projects or not, they're clearly devoting a lot of time, money, and people to trying to develop new opportunities.)

It's true that the iPhone dominates Apple's business. But almost every individual product in the world is dwarfed by the scale of the iPhone, so I'm not sure it's fair to fault them for not yet finding another product of that scale. Instead, they now have a set of very large (by any other measure) and successful products alongside the iPhone. I think you overestimate the single point of failure in their business. Some of these other products are dependent on the iPhone, some aren't. Some could be made to stand on their own if needed, some couldn't (App Store).

My own view is that at this point Apple risks more from underinvesting in existing products than in failing to invest in new ones. Dropping the ball on a product as critical as the Mac, or underinvesting in infrastructure like frameworks and the developer community, can cause your existing roads to crumble before you invent that flying car you think everyone will want to buy.

@Nigel:

At the same time, [funding your next market] is exactly the cause of many of the problems documented on this very blog about the state of the Mac.

Well that is objectively untrue: Apple hasn’t broken any new markets in a decade.

What Tim Cook is engaged in is rent seeking; shaking down its existing customer base for as much cash as possible while doing the least possible work to achieve that goal. Good way to jack up profits in short- to medium-term, but ultimately makes them ripe for external disruption as hungrier competitors don’t have to do very much work to offer disgruntled customers a superior value proposition, just enough to break the apath y and inertia of lock-in.

That’s where your quality control is going down the drain, because Tim doesn’t care what people think of his products, as long as they keep buying them. All he sees in money in and money out. Has ten years of Swift improved the quality of software? No. Does AppStore deliver on its guarantees of customer convenience and easy of use with safety and security assured? No.

Steve Jobs would melt underlings in rage if they got so much as a speck of dust on the Brand. Because he understood that brands are hard built and easily lost, and he wasn’t thinking about today or next quarter but five years on from now. Tim doesn’t care as long as cashflow goes on, so the rot will continue to creep through until even the great buying public notices it; and by that time Tim will most likely be retired on his own personal fortune so he won’t care.

To use the shipping metaphor again: Apple is the world’s largest supertanker, and the time and distance it takes to steer that monster is vast. By the time the bridge can see the tip of an iceberg over the horizon, it is already far too late to turn.

By the time its B-grade management starts to distress shareholders (who were perfectly happy as long as it was generating them mountains of cash), the damage to the company itself will already be systemic and quite possibly unfixable.

Jobs understood that if you look after your Brand, the profit will look after itself. It’s what made him a superlative salesman and strategist.

Tim knows how to look after money and the machinery for churning it out. It’s all he knows how.

Dropping the ball on a product as critical as the Mac

ROTFLOL. The Mac is nothing. They only reason it still exists at all is because Apple has to keep control of the entire means of production for its iPhone ecosystem. The moment they offload App development to a third-party is the moment they no longer own their own destiny but are merely the hand-puppet worked by somebody else.

That’s it. That’s the ONLY reason. Else it would’ve already killed the Mac, because the resources it sinks into that market dead-end could be far better invested making loads more profit elsewhere.

And what it certainly isn’t is because they need—or want—the fawning adoration of fanboy nerd egos. If they could, they would happily dump all your whiny, needy asses to be Microsoft’s problem. But they can’t, so they have to suffer your whines, though thankfully for them most of you are equally ineffectual at that. Epic is typical of the exception, because Epic is big enough that it plays the same hardball real business game as FAANG. (But don’t flatter yourself that you’re any closer to Epic than you are to Apple, because you’re not. Not even the same universe, never mind planet.)

So, please, take all that “Senpai noticed me!” crap and toss it in the dumpster, because y’all aren’t even important enough to warrant crushing deliberately; and the only reason that they sometimes roll over you is because they have some place else to go and don’t even notice—or care—you are there.

I’ve been squashed by better businesses than you, and they were bottom of the pile crap.

This certainly turned aggressive.

>Stagnation? Rent-seeking? Total failure to break any new markets, or even to try?
>
>Retreads. Wheel reinvention. Loss of market leadership. Loss of market belief that you are the market leader. Flat sales. Stalled growth. Uninspiring projections.

No. Making the Mac even more of a "digital hub", and having more Apple products that serve as satellites to it.

Why would Steve not have been into that?

>Don’t worry, I’m sure Tim and his shareholders feel exactly the same way as you do. Which is why, when some hungry new velociraptor does to lumbering Apple what Apple once did to that fattened behemoth Microsoft, anyone who hasn’t already moved out their investments to somewhere different has no-one to blame but themselves.
>
>Well I’m not going to listen to a bunch of nerds rattling on to see if they actually make their case or not. However, it is telling, I think, that you define “success” in terms of “technological gizmo” and not as “what is it actually good for?”
>
>(i.e. What problem does it solve that a billion people currently have and don’t have a solution for. Because if you don’t have that answer, you don’t have squat.)

Uh. Are you simultaneously arguing that Apple should chase the Next Big Thing but also that they should not? Or that Steve would've miraculously figured out what exactly that thing should be? I think you're putting him on quite a pedestal there.

As for what a mythical great pair of AR googles could solve? Lots of things. It would have a much bigger screen than your smartphone, so it might for many use cases replace not only the smartphone and the tablet, but also possibly the TV and desktop. It would be always on without you having to hold it. A hands-free heads-up display while you're trying to navigate an unfamiliar city. It would blend into the environment. Etc.

Obviously, there are huge questions about the technology involved, concerns about privacy, etc. But just like "what if we could unfold a phone to make a bigger phone; would you still need a tablet, then?" attempts at folding phones, AR googles are a possible solution to phones both being a bit on the large side these days, and yet their screens not being large *enough*.

Necks will be thankful, too.

>Well that is objectively untrue: Apple hasn’t broken any new markets in a decade.

OK, if you want to go down _that_ road, Apple has _never_ broken a new market. Being the first to something isn't their forte. Being particularly good (sometimes) is.

>because Tim doesn’t care what people think of his products

I know this is a convenient narrative, but it doesn't appear to be true.

>Does AppStore deliver on its guarantees of customer convenience and easy of use with safety and security assured? No.

Is your contention here that, if Steve were alive, the App Store would be different? Because three years of him _being_ alive seem to suggest that's not so at all.

>This certainly turned aggressive.

How do they really feel. :-)

@Sören: “[Mac as hub] Why would Steve not have been into that?”

Because the Mac was already a DEAD END, and Steve KNEW IT.

Why d’you think the man spent a decade completely redefining what “Personal Computing” meant? He was never a fan of “computers”, but of devices that solved a particular user problem. And he wasn’t wrong.

Nerds all think they’re so goddamned special. Shape the world to suit themselves, then look down with superior scorn at the other 99% of humanity for whom that nerd-friendly model sucks balls. Y’all are martinets; and as a half-nerd by birth that’s a tendency I’ve had to pummel out of myself, so I know how it works.

All you’re doing is projecting onto the man your image of yourself; a cheap act of auto-validation and skeevy AF. He never suffered such illusions: from Wozniak on, y’all were just useful idiots for constructing the technology needed to make the Products he wanted to sell himself. Hell, dude “stiffed” Woz on payment for work that Woz thought he’d earned. LOL. That’s how naive Woz was, and he was a lot smarter and more talented that 99% of you.

As for what a mythical great pair of AR googles could solve? Lots of things. It would have a much bigger screen than your smartphone, so it might for many use cases replace not only the smartphone and the tablet, but also possibly the TV and desktop. It would be always on without you having to hold it. A hands-free heads-up display while you're trying to navigate an unfamiliar city. It would blend into the environment. Etc.

And if you had pitched that above paragraph to Steve Jobs on an elevator, your ass wouldn’t have stopped bouncing before you reached the east coast. The man did not suffer fools.

Because if the first question in business is “How much is the product worth?”†, then the second is “What real-world problem does this product solve and for who?” So the moment you said “could”, your ass was toast.

I many not know a lot about products and markets and selling, but I know enough to know how infinitely more significant those are than the geekocracy’s tiresome technology twiddle.‡ You have no idea what you’re talking about, and not even the self-awareness to know what you don’t know.

#SillyConValley indeed.

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† But never let it be said I’m unfair: tell me straight the answer to this question (no looking it up!) and I’ll happily acknowledge that perhaps you’re not a completely unsalvageable fool.

‡ My teachers here include your precious Apple and my own—thus far failed—ventures into the world of $revolutionary_technology business startup. But I’ll keep on trying, because I already know how to solve the technology bit of how to build a billion-dollar business and it’s just the business part I need to master now, much like getting to Carnegie Hall.

And if you had pitched that above paragraph to Steve Jobs on an elevator, your ass wouldn’t have stopped bouncing before you reached the east coast. The man did not suffer fools.

Because if the first question in business is “How much is the product worth?”†, then the second is “What real-world problem does this product solve and for who?” So the moment you said “could”, your ass was toast.

If your goal here is to get me to divulge a great product idea (including its execution) for free, uh, good luck with that?

tell me straight the answer to this question (no looking it up!) and I’ll happily acknowledge that perhaps you’re not a completely unsalvageable fool.

Thanks for making me realize I apparently need your validation!

“If your goal here is to get me to divulge a great product idea (including its execution) for free, uh, good luck with that?”

And if you’d said that to Steve Jobs, your ass wouldn’t have stopped bouncing till Mars.

“Thanks for making me realize I apparently need your validation!”

No, I was just curious if you knew anything about business at all. “How much is the product worth?” is a terrific question for separating those who think they know† from those that know: “As much as the market is willing to pay for it.”

But thanks for confirming to us you know even less than I do, yet still feel qualified to spout. At least I’ve helmed a company into the ground so I know how that works; have you ever run anything larger than a tap?

..

Nerds think they know everything. And the way they achieve this state of total enlightenment is simple: they simply assign an importance factor of 0 to everything they aren’t interested in and don’t care about.

This is why you can talk for hours and hours about what Apple should and shouldn’t do as a business, while I just sit and laugh at you because it’s so painfully obvious you just don’t have a clue: about business, about markets, about customers, about products, about how incredibly naive you are. And Apple fanboys are the worst.

It’s also why I am zero surprised that Silicon Valley is such a fertile recruiting ground for authoritarians up to and including neo-Nazis. It’s helluva chip to carry, knowing that you know better and everyone above you is fools for not listening to you and doing as you tell them to. Trust me: it’s not them, it is you‡.

--

† Those who think they know will pontificate at length, adding up the various costs of materials, assembly, marketing, distribution, etc and multiply by what they think is a reasonable degree of profit margin (say, 15%), till they finally proudly announce their fabulously precise, useless, answer. This is why, for example, I’ve learned to charge small businesses and sole traders only 250/day, whereas medium-to-large clients are 500/day and no negotiation, even for the same work. Because that’s as much as each market will bear, and I’m one of the best in the world in my particular specialization so even 500 is a pretty good deal.

‡ And I say that as a semi-nerd who got the hell off that track once I saw where it led, so don’t think these criticisms ones I’ve not already fired at myself.

“How much is the product worth?”

“As much as the market is willing to pay for it.”

p.s. There is a second correct answer to this question that you could’ve used:

“I don’t know.”

That response would’ve earned you serious respect too. Because it’s one thing to recite the approved answer pat; quite another to admit you don’t have an answer to give. And the second is a lot harder to admit even to yourself†, never mind to everyone else as well.

Sadly, when lobbed the softest of softballs—a golden opportunity to rub my smug arrogant face in itself, intentionally served up to you on a platter—you completely and utterly whiffed it. Well done, Poindexter, on proving my thesis so quickly. I’m not happy about it; just disappointed, is all.

/out

--

† Nerd genes here too, remember.

Only a know-nothing could imagine that Silicon Valley is Neo-Nazi.

It doesn't pass any common sense test. A very large proportion of those contributing to US-tech are foreign born. Europeans, Chinese, Canadians, Indians. In Europe, for instance, only the most extreme of the right wing parties do not support universal healthcare. So by that standard even the Democrats are considered an extreme right wing party. Is it really sensible to believe that all these adults brought up in less right wing countries, who have to go through the very painful US legal immigration process, suddenly turn Neo-Nazi when they land in Silicon Valley?

Software and hardware development requires higher than average intelligence. Most studies correlate that with lower degrees of conservatism. Therefore, again, one would expect fewer conservatives than liberals developing software and hardware.

Finally, those techies who are right-wing constantly complain about being cancelled or losing their jobs. In Germany, during WWII, Nazis weren't losing their jobs. It was the left-wingers (in the old class struggle sense of the word) and the union leaders who lost their jobs and got sent off to concentration camps. The right-wing in the US is constantly complaining about conservative voices being deplatformed from social media. During WWII, in Germany, you were punished for listening to the BBC, not for listening to Nazi propaganda. Again, not very indicative of Silicon Valley being overrun by Neo-Nazis.

So what do the statistics say?

https://archive.fo/P2P9R

Yes, there are some conservatives, but way fewer than in most other industries, including the media.

These figures predate the Mother Jones article by 3 years. It's quite unlikely that everyone in Silicon Valley became Neo-Nazi in 3 years.

I'll note that the Mother Jones article conflates "tech-savvy" with people employed to create technology. Actually, tech-savvy includes "partial nerds" who proclaim how much they think they know, particularly about business... which reminds me of a rather loud person on this thread.

But even if one were to say, for the sake of argument, that the largest group of those labeled "alt-right" were technologists from SV, it does not imply that most technologists from SV are right-wing. It could also imply that the distribution of "alt-right" beliefs across the US is homogeneous. But it would suggest that conservatives in SV feel ostracized, and react by becoming radicalized, which is unfortunate.

That Mother Jones article does not demonstrate skill at thinking or at math. Only skill at advocacy. People who believe such articles might consider improving their critical thinking skills

Just as someone on this forum has been arguing very passionately that Apple "owes nerds nothing", I'll point out that the media no longer believes it owes you the truth... and that even fact-checking does not include determining whether the cited facts were cherry-picked to give the wrong impression.

The only thing that Mother Jones article does demonstrate is that when you go looking for uneducated bigoted people in any field, you can find some. How surprising!

Here's Tim Cook being interviewed by a young Chinese vlogger: https://radiichina.com/tim-cook-he-tongxue-interview/

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