My first example is iPhone displays. Samsung makes most of Apple’s displays and the Korean conglomerate is known for hoarding the best for its own premium smartphones. What’s the problem with Apple?
Apple’s success as one of the largest smartphone makers on earth, and the largest premium smartphone maker is obvious. Apple has about 85-percent of the smartphone industry’s profits, and around 60-percent of total revenue. Apple’s iPhone is a huge product.
Success is stymied by success. Let me explain.
Let’s say Samsung comes out with a radical new smartphone display but can only make 50-million of the components each year. Apple sells somewhere around 220-million iPhones, but not all of those are the latest and greatest. Apple won’t say, but guesstimators think iPhone X accounted for about 80-million since its launch.
See? Samsung made the displays for iPhone X and makes the displays for new iPhones, too. Similar display technology goes into Samsung’s premium Galaxy class smartphones so there isn’t much leftover for other premium smartphone makers.
Google is another example. The Pixel 2 won rave reviews from technology critics, but from customers, not so much. Google’s manufacturer would not have sufficient components to make 220-million Pixels in a year. Apple’s supply chain and manufacturing is not sufficient to make nothing but iPhone X models.
Look at the current product line.
- iPhone Xs – best of class OLED display
- iPhone Xs Max – best of class OLED display
- iPhone XR – best of class LCD display
- iPhone 8 and 8 Plus – excellent but older LCD display
- iPhone 7 and 7 Plus – very good but older LCD display
Assumed that each of those models will sell tens of millions each year and you can see why Apple does not put the latest and greatest technology into every new device, so the iPhone maker needs to broaden the product line, each with a different set of internal components.
Also obvious to market analysts and Apple observers is the company’s penchant for moving new iPhone models down the line; hence iPhone 8 and iPhone 7 at far lower prices than when they were originally sold.
Why? Price matters.
Because Apple designs its own chips and hardware, the company’s older models still perform very well against competitors and benchmarks. Plus, iOS gets upgraded every year but also works on older devices; that improves lifespan, but also increases the value of older model iPhones.
Apple couldn’t put classy new OLED displays in all iPhones even if it could afford it. Samsung can’t make enough of the displays at a price that makes it attractive for older devices.
Again, Apple’s success is stymied by its success.
The same probably holds true with A-Series chips designed by Apple but manufactured by TSMC, Samsung, and others. iPhones require manufacturers who can make the latest components in the tens of millions each year, but also tens of millions each year for older models still in the product line.
For anyone who argues that Apple’s iPhones are same old same old each year, then I argue they do not understand that nearly every component in each new iPhone is new, therefore, improved. That happens every year, year after year.
My biggest concern with Apple’s future has to do with the customer base which, increasingly, holds onto iPhones longer; one year, then two years, perhaps now 2.5-years on average. Yet, the company manages to sell a similar number of iPhones each year, and the Services group is Apple’s fastest growing revenue and profit group.
Apple’s success is stymied by its success.