Why Nobody Can Match the iPad’s Price
wired.com
wired.com
Steve Jobs and Johnny Ive are no slouches, but Tim Cook doesn't get enough credit for stuff like that.
I bet he'd be amazing at Starcraft, once he learned the ropes.
There are many ways to innovate in business and technology and design get a lot of time in the spotlight.
Operations, especially of a very large enterprise, with thousands of suppliers which also demands highly precise manufacturing and quality control, while having operations spread around the globe, and a public awareness factor that makes it vulnerable to any "Watchdog" who wants to make news... running a less-than-30-days-inventory system is playing on the Nth level.
Can anyone name anybody who has done something like that? Amazon's distribution network is a lot easier, as they control all the infrastructure. Dell doesn't have the volume or quality requirements or focused product lineup (which reduces substitution- eg: if dell is out of a particular laptop model, they have others to substitute, apple doesn't have that luxury.)
It is no wonder Apple is doing long term contracts for supplies like this.
Some have accused them of cornering the market, but this is not like cornering the market on Silver (look up Hunt Brothers) -- as anyone with reasonable technology can make a substitute for electronics components which are fungible commodities for the most part.
This is just good management of a very sophisticated manufacturing network.
Dude deserves and Oscar in Operations!
Apple are a great company for sure, but I'm extremely uneasy reading things that make any individual such an icon, let alone with Apple where it's happened before.
Tim does appear to be a strong leader and sound COO, but please can we let this personality cult dissipate and not just replace the head that is worshipped. It's weird.
Personality cults are much more important than you realise. The post-modernist approach seems to be to downplay the significance of individual visionaries in favour of diffuse accolades attributed to the group or larger corpus. It's nonsense.
Shakespeare was an individual (not a nebulous, anonymous, amorphous collective) of unique literary gifts. Jobs is a design and technological wizard who single-handedly righted the ship. Tim Cook is a process engineering and business operations mastermind of the like that has never been seen since Carnegie. Ives' industrial design methodologies will blaze the path for decades to come.
You've fallen for it. Ives is the designer, not Jobs. Woz was the technological wizard, not Jobs. Jobs is a leader, a salesman and a marketer. Granted, he's a wizard (in the Oz sense of the word) but pull back the curtain and you'll find other incredibly talented people doing their jobs, if you'll pardon the unintentional pun.
He is able to coax the best out of design and technology folk and direct it towards a valuable end.
I don't think I've fallen for anything (in fact, I made strong mention of Ives with respect to industrial design). Being able to conceive good design and being able to guide good design are both signs of design competence; being able to conceive good technology and being able to guide its development are signs of technical proficiency. Jobs in his role as guide (or leader) is an exemplar.
I never claimed (and I don't think anyone else did) that there are no "other talented people doing their jobs".
Your rejoinder, rather than actually arguing against personality cults, is more a reminder that "a witty remark proves nothing."
From your earlier comment:
> Jobs is a design and technological wizard who single-handedly righted the ship.
Thats you falling for the personality cult right there. That's also you claiming that Jobs somehow managed to fix Apple singlehandedly, which of course is wrong. Your comment about Ives trailblazing for years to come is quite amusing, given that Ive freely admits that he's heavily influenced by Dieter Ram's work (if you look at Ive's designs you'll see that he's following Ram's principles).
> Your rejoinder, rather than actually arguing against personality cults, is more a reminder that "a witty remark proves nothing."
That sentence appears to be a prime example of your quoted phrase.
So If I'm "falling for the personality cult right there", I'm more than happy to and I encourage more people to.
ps. The debate on whether Apple would be what Apple is today without Jobs' Great Return is long and storied. I won't wade any further into those murky waters (As per the personality cult ethos, I'd wager that Jobs saved Apple and that without him it would have sunk).
Shakespeare was an individual (not a nebulous, anonymous,
amorphous collective)
[1] http://en.wikipedia.org/wiki/Shakespeare_authorship_question
The latter approach has become prevalent in recent decades (in my opinion). Now, it is fashionable to question the legitimacy of an individual's greatness, to downplay it and instead award yellow stars to everyone who participated, no matter how tangential their contribution.
The new idea is that no one man could be so smart, so gifted or so diligent as to produce all that Shakespeare did; no one man could be so clairvoyant and visionary as to define the face of technology for a decade; no on man could have all that innate power.
I reject that view.
They're simply really, really good at it.
And not only do you credit this one factor with decisive victory, you're attributing it not to Apple as a corporation, but to one individual. In other words, this is all about fanboy-ism. Indeed, like the face of Jesus appearing in a grilled cheese sandwich, the only interesting aspect of this story is the way the believers react to it. The underlying reality is suspect, but no-one seems to care as long as it fits their narrative.
> And yet if you ask a hundred Apple fans why their
> competition is struggling you'll get a hundred different
> reasons.
> You seem to be claiming that planning ahead and buying
> in bulk to produce a cheap, boring looking, plastic
> tablet with a half-finished, linux-based phone OS and
> stylus interface would be enough to destroy the
> competition. Others would disagree.
The combination might destroy competition, including Apple, yes, but would definitely require sophisticated supply chain management. Right now, all relevant components are limited resources. What's so controversial about that?
> And not only do you credit this one factor with decisive victory
> you're attributing it not to Apple as a corporation, but to one individual.
Nothing fanboy-ish about that.
> Indeed, like the face of Jesus appearing in a grilled
> cheese sandwich, the only interesting aspect of this
> story is the way the believers react to it. The
> underlying reality is suspect, but no-one seems to care
> as long as it fits their narrative.
It's a chip designed and built and sold by Samsung, Apple's chief rival in smartphones (and soon, tablets) and yet the storyline around it is that Apple's competitors can't compete with it because it is Apple's special sauce. That's bonkers. Even more so when you realise that even the Samsung built chip is just a commodity. Samsung's own Galaxy S II phone will replace the next generation A4 with Nvidia's Tegra2 in some territories, that's how interchangeable a commodity it is. (Some speculation why they don't have enough of their own chip, either manufacturing teething troubles, or Apple's already put in a big order).
Yet Apple can put a logo on it, give it a cool codename and stand up and sell a commodity and have people believe it is something special. I'd love to know if this is something Apple marketing understands and intentionally manipulates, or if Apple just reflexively takes credit for the work of others (which by the way is the original meaning of the Reality Distortion Field if you look it up on folklore.org).
Given that the A4 story can thrive in the face of objective reality, you can understand why I'm amused and intrigued that the average time between people finding out what a COO does and deciding that Tim Cook is the best at it in the world is about 2 seconds. After all, even commodities are better when Apple uses them.
"Designing in-house means Apple doesn’t have to pay licensing fees to third parties to use their intellectual property. For instance, the A4 chip"
This is silly. Software development, retail, chip design etc. all cost money. Apple isn't just taking Bets Buy's cut, it's taking its risk and its costs. Same for chips, software, etc. Actually it's more risky and costly in many ways. If the chip turned out to be good but not ideal for iPads they're not going to go find a different market for it. Apple stores aren't free to cash in on whatever popular high margin non-Apple widget people are buying this season.
Vertically integrating obviously works well for Apple, but saying that Apple is able to sell iPads @ $500 because of it is missing the point. You now just have to explain what makes apple good at retail, software, chip design, etc.
And the App store and iTunes are a benefit, not a cost.
However I agree, there are other reasons - their outsourcing of components has a very good reputation.
Why not? Outsourcing isn't always good or always bad.
Economically, Apple should do the things it can do well (software, design, retail) and outsource the things it can't do any better than anyone else (component production, assembly).
I struggle to see how that statement could be true for a company that outsources all of its manufacturing.
Just because they don't own the tools doesn't mean that they aren't telling people exactly how to use them.
Do you have any more vertically integrated player in the market that has yet to be discussed? The rest of the companies use off-the-shelf parts and an OS they haven't designed. They all are far less vertically integrated.
Certainly Apple is not completely integrated vertically, but that doesn't mean they aren't more so than any of their competitors.
Architecturally wise they are vertically integreated with all their in house hardware and software but I dont think anyone can argue that their manufacturing practices dont help that statement.
Equally so, unpleasant as Chinese factories may look to a Westerner, they are an improvement over the past. Have people actually asked those workers if they were willing to quit or had better prospects elsewhere?
Everyone tends to view history from an angle that supports their preconceptions. You don't seem to be any exception.
> Terrible as the worker conditions might have been at the dawn of the Industrial Age, they were a vast improvement compared to the past.
How are you defining worker conditions?
A family with a small plot in the countryside could not occupy their full time with cultivating the land. If you travel throughout the deep countryside of countries like Cambodia, Vietnam, China and the poorer parts of Thailand like Isaan, you still see much evidence of this today.
People moved to the cities because they could make more money. It's that simple. In no way were working conditions an improvement if you care about hours, health and safety. The ready availability of jobs for unskilled labor also created perverse incentives for parents to send their children to work at the factories. That was true in late 18th and early 19th century Europe, and it is still true today in the poorer emerging economies.
You could argue they ended up better off anyway, but it wasn't as if millions of people sat down and voluntarily decided, "well, I could stay and farm, but I'd rather go to the city and work in a factory". The collapse of family farming as a viable occupation sort of made the choice for them.
An alternative way to look at things was that industrialism saved Europe (and later the rest of the world) from waves of famine. It allowed, for the first time since centuries, the possibility for ordinary people to travel to work and to move up in society. Conditions were not agreeable to a modern eye, but compared to the past were a great improvement.
Of course it isn't evil. If you're starving then making money is not only not evil but a necessity. Beyond meeting your immediate needs, working endless hours at a repetitive, unhealthy job to support your family or further your children's future is commendable.
That does not mean worker conditions improved with industrialization as compared to working on your own farm or as a day laborer.
Guess how you get there.
It's always hilarious to see rich white people talking about how the poor asian people need to be living their lives.
Isn't the A4 an ARM + PowerVR and doesn't Apple pay design licenses on both those?
That's a pretty long shot. Intrinsity clearly improved the A4, but overall A4 is a very standard Cortex A8 SoC.
> Apple also owns P.A. Semi, which contributed to the A4 SoC.
I have not seen any analysis or information pointing to actual PA Semi input in A4. Where Intrinsity is well known for improvements to existing designs (power-wise, mostly), PA Semi is generally credited with brand new and unique design, which the A4 isn't. I also understand most of PA Semi left after its acquisition.
Agreed. According to the Times, Intrinsity only made the Cortex A8 perform at a higher frequency [0]. An another Times article suggests PA Semi worked on the A4 [1], but no details are given.
[0] http://www.nytimes.com/2010/04/28/technology/28apple.html
[1] http://www.nytimes.com/2010/02/02/technology/business-comput...
The display unit at WalMart is behind plexiglass. If you want to touch it, someone with a key has to open the cover. I'm glad to see current Apple products at WalMart, but the actual sales experience is significantly less than going to an Apple store, or to BB.
IMHO, the real secret behind the iPad's price is supply chain management and very astute inventory control. Idle inventory can really wreck your bottom line.
Apple doesn't/didn't pay licensing fees to ARM or PowerVR for the A4 components?
What exactly do you have to pay to Google to "license" Android?
It seems like the author doesn't quite know what he's talking about.
For one thing, all of Google's core applications - Gmail, Maps, Search, Google Voice, Googles, etc. Same thing with the Marketplace too. All the handset manufacturers have to pay Google to include those apps on their handsets.
http://arstechnica.com/gadgets/news/2011/02/motorola-xoom-ta...
And by the way there are perfectly good android tablets already available for around half the price of the cheapest ipad. You can already run android 3.0 on a $249 nook color.
Nook color full specs:
Processor: ARM Cortex A8-based Ti OMAP 3621 @ 800 MHz (same processor as Droid 2 and Droid X) GPU Processor: PowerVR SGX530 Graphics Rendering: Open GLES1.1/2.0 Hardware Scaling: 854x480 scaled to 1024x600 Video Formats: .3GP, .MP4, .3G2 Video Codecs: H.263, H.264, MPEG-4, ON2 VP7 Image Formats: JPEG, GIF, PNG, BMP (same GPU as Droid 2 and Droid X) RAM: 512MB Hynix H8MBX00U0MER-0EM MCM (Stacked Chips 2x256MB each die mDDR) Internal Flash: 8GB Sandisk SDIN4C1-8g Removable Flash: 32GB via microSDHC Connectivity: 802.11b/g/n Security: WEP/WPA/WPA2/802.1x Mode: Infrastructure Display: 7" 1024x600 IPS Display w\VividView Cypress Semiconductor TTSP Gen 3 (TMA340) Touchscreen , kernel driver , reference LG Display LD070WS1 (SL)(02) LED Backlight Pixels per Inch: 169 Aspect Ratio: 16:9 Colors: 16 Million Viewing Angle: 178° (same as HTC 7 Surround and HTC 7 Mozart) battery Battery Life: ~8 hours Micro-B USB 2.0 High-Speed Accelerometer
So B&N is able to deliver a device with matching specs minus smaller display for $250 less than iPad. I am not counting magic or experience anywhere - we are talking about concrete stuff like hardware components here - with Honeycomb we could argue that it is possible to ship a iPad alternative with better hardware and equal or better software for $499.
But there's a larger point to be made in that I think your comments reflect a common attitude among many nerds - this obsession with specs. Most consumers don't make purchasing decisions based on a giant list of specs. Maybe you feel they should and they're stupid for not doing so, but that just isn't the reality of the market. And many manufactures, as well as Google, are starting to realize they simple can't put a faster processor and more memory in their products and expect to compete with Apple. Google in particular is putting a lot more effort in to the "polish" and overall "experience" of using Android devices. I know these are dirty words for some, but they reflect the market realities of how consumers make purchasing decisions. And I think it's a good move that will help Android increase it's market share even further.
What I am pointing out is that it is possible to produce and sell a device that can compete with the iPad on specs and experience - the original article said nobody else could sell a device matching the specs of the iPad at $500. It clearly is possible and with Honeycomb improving the experience the software part is also covered - mostly for free to Android tablet device makers.
Disclaimer: I have one on order.
Edit: I'm also struggling to see how they are cornering the market by consuming all the components that are manufactured, rather I think it a combination of clever marketing & strong fanboy base.
The Galaxy feels like a clunker, and the Nook isn't versatile.
I don't believe the iPad can replace a decent netbook or macbook for working on the road, but it works great for doing what it's supposed to do.
The reason the competition can't get it right is because they're trying to compete by adding more junk that we don't need. They do the same with phones too. Loading more memory or faster processors isn't what works for me - what works for me is a lightweight device that works.
I rarely use my iPad, but I wouldn't sell it because it serves a great purpose, which is as a tweener. The competition is trying to turn their tablets into souped up netbooks with touch screens, and that's why they are failing.
The Nook is closer, but it still isn't comparable to an iPad.
It now seems like he was just mocking the competition about being unable to ship a similar price competitive tablet.
They've got good reason to stay out of this one. iOS came from Apple's phone OS (esp. in terms of UI). Until Windows Mobile starts getting some traction, MS is better off staying out of the fight. You can always commoditize your opponent later.
I can't believe people are buying this tripe. I'm willing to put down $20 that by the holidays, you'll see cheaper android tablets (same specs, not this bullshit), any takers?
What will change? First of all, the Xoom isn't spec-comparable to the iPad and second, other manufacturers will start shipping their tablets, bringing prices down.
I call shenaningans
Ironically Apple's true advantage, that it can deliver a better end-user experience per unit of hardware power, by clever holistic hardware/software/product/ecosystem design is pretty much the opposite of this new theory, and Apple increasingly finds itself in a tech arms race that it doesn't want to be in. It wouldn't surpise me if Apple conceded the high-end hardware in both tablets and phones this year to better pad its margins on devices that are expensive yet middling in raw power, instead focussing on user experience issues like battery life.
If its true that Apple is sitting on a pretty price margin on the iPad, then the Xoom, I feel, wouldent be to far off. If they had to they could lower the price to gain momentum but so far this is Motorolas first good tablet release and I dont think they will want to miss an opportunity to make a pretty penny on this.
Wired.com is right though on the ability to suck the air out of the touchscreen supply. It is an acknowledgement to the artificial gravitational field Apple exerts on the hardware components market.
Notion Ink Adam with LCD & WiFi (no 3G) - $375 USD Notion Ink Adam with LCD, WiFi & 3G - $425 USD
Notion Ink Adam with Pixel Qi display & WiFi (no 3G) - $499USD Notion Ink Adam with Pixel Qi display, WiFi & 3G - $549 USD
Other manufacturers don't have this working for them.
http://www.computerworld.com/s/article/9150045/Apple_makes_2...
The opposite is true. Apple doesn't need to make money on software, because their hardware products have healthy profit margins. The iTunes Store breaks even, and it has done so for years. The same is true for the other software Apple sells.
Compared to competing products, Apple's software products are dirt cheap. Its office suite (iWork) is priced at $60 while Microsoft Office is priced at $280. Apple's photography software (Aperture) costs $80, Adobe's Lightroom costs $300. Apple's video editing suite (Final Cut) costs $1000, Avid's Media Composer costs $2300.
Aperture requires a Mac Pro to run properly, which undermines the cost argument.
The main shock people had about the ipad was how expensive it was priced ($500-$750). They weren't 'surprised' at how low it was priced. And to Apple's credit, we now know that even at that price it would sell well, and also we know that this price is actually not so unreasonable or inflated as we thought, because other major manufacturers making comparable quality tablet products are also in that price range (except for the nook color, notion ink adam, archos 101 and 70, or several no-name tablets).
Also, the xoom is $600 compared to the old ipad's price of $500. If you want to compare the $800 xoom with 3g (and 4g), compare it with the $750 ipad with 3g. So the prices are not so different.
Also, I think you're missing the point on pricing. It really hurts Motorola that there isn't a low end model at $499, because there are a lot of non-technical users for whom 16GB is perfectly adequate. We don't have direct data AFAIK, but I'm willing to bet the low end iPad is Apple's best selling model by far.
http://www.thinq.co.uk/2010/12/7/apples-ipad-faces-pricing-c... http://www.bnet.com/blog/new-media/note-to-magazine-industry... http://www.businessinsider.com/john-squires-ipad-is-big-and-... http://darrenbeckett.com/20100129_Does_the_iPad_Cost_Too_Muc... http://tamebay.com/2010/05/is-the-ipad-too-expensive-as-a-to... Search for ipad too expensive or ipad over-priced and you'll see tons of examples. Again though, my argument was that we thought it was overpriced when it was announced a year ago. I think now we can see that it wasn't so bad or unreasonable a price.
And by the way your response below indicates you are against even a hint of criticism of the ipad, even though I'm not criticizing it at all in either of my responses. Don't know why I bother feeding trolls though.