Since Apple started collecting and storing more money than many developed nations, every few months we read about a company Apple just bought, and we read about companies that Apple should buy. Yes, I have a list, too, but it’s not a list of the standard fare for Apple.
Sony? Apple makes hardware. Sony makes hardware and content. Apple makes content and a profit. Sony struggles to exist. Match made in heaven? Nope. How about Disney? Let’s go through the list again. Disney makes content. Apple needs content. Buying Disney buys problems.
Just The Parts
Like it or loath it, love it or leave it, Apple is in the content business. Most content is redistributed. That means it was created by someone else and Apple sells it; distributes it to Apple’s customers. That’s a time honored method, of course, but a number of high tech companies are in the content generation business in a big way. I’m thinking Amazon, Netflix, Google, et al. Despite for calls to do just that, I don’t think Apple needs to buy a content company like Disney or Sony.
Apple is a hardware company. Hardware is made up of many components; screens, batteries, CPUs, GPUs, keyboards, RAM, memory, cases, sensors, and various and sundry pieces and parts which make up a total that is greater than the sum of the parts.
What hardware does Apple design and build? It designs much but builds little. Apple designs the ARM-based A11 Bionic CPU and GPU but those are manufactured by third party companies. For example, Samsung makes Apple’s new OLED displays. TMSC, based in Taiwan, makes the A11 Bionic CPU. Other components are manufactured elsewhere.
Steve Jobs once described a dream where silicon entered a factory at one end and finished computers exited at the other end. Naive and wishful thinking? Perhaps. But Apple is stymied at every turn by relying on manufacturing of components often designed by others and sold to the company’s competitors. Everyone buys bullets from the same sources so they can shoot at each other.
What’s wrong with that picture?
Samsung, perhaps Apple’s largest and most influential iPhone competitor, also provides some of iPhone’s most critical components. Apple literally gives money to a competitor. Why? Samsung makes smartphones that compete with iPhone and Samsung makes the components iPhones need.
Generally speaking, Apple does not manufacture squat but relies on third party manufacturers for components and assembly. Whatever component another manufacturer makes for Apple can be manufactured for Apple’s competitors.
Is it not obvious where Apple should spend money and what it should buy?
Apple bought a chip design company a few years ago and now designs its own custom silicon that powers iPhone, iPad, Watch, Apple TV, and even AirPods. Custom chip design is a critical element in Apple’s differentiation, but the company could do more by buying other critical components– manufacturing for screens, memory, RAM, CPU, and other elements which make up the hardware Apple sells.
It won’t be sand at one end of a factory and an pallet of iPhones coming out the other end, but Apple can afford and should buy some of the manufactured components to ensure the supply it requires. Apple buys what Apple should buy but there is more Apple needs to buy.