Hacker News Reader

Comment by phil | Hacker News Reader

Interesting post, but there's a lot that's wrong here. For example, it's really not true that Apple tends towards vertical integration.

View on HN

Really?

- Apple bought a semiconductor design company and brought that in-house.

- Apple does all software design, hardware design, industrial engineering, etc in house.

- Apple develops its own processes for manufacturing their computers (unibody).

- Apple built a chain of retail stores to sell directly to consumers.

Those are just a couple examples; the trend is very clear to me.

Well I was thinking of the major counterexample that they own essentially none of their manufacturing. They don't produce any of their components -- even the processors they design get built by (I believe) Samsung.

As far as I've been able to tell, design and engineering get hauled in because they want to control it. I guess you can add the stores, too.

But buying something like an LCD panel maker? Or a flash maker? Or Foxconn? I'd be shocked.

Well they already did buy a flash maker, Anobit. That said, Anobit is fabless just like PA Semi was.

If I am not mistaken, there were reports that Apple provided at least some of the capital for both Samsung's upcoming fab in Texas and the newly opened Foxconn factory in Brazil. I guess they have decided it doesn't (yet?) make sense to own manufacturing facilities outright, but they seem to be making actual investments in their manufacturing partners rather than just purchasing services. I would say that is indeed further evidence of a tendency toward vertical integration.

Add to that the mapping companies, lala.com, Fingerworks for multitouch, Siri, PA Semi and Intrinsity for semiconductors, and a whole lot of other tiny but massively differentiating pieces[1] to their "experience" stack.

[1]http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...

That's the only example I've heard of, not that I follow Apple news outside HN.

IMHO if a company vertically integrated, it will not have many examples of how it is vertically integrated. Right now I think the only thing missing for Apple to be 100% fully vertically integrated is to buy its own factory.

Apple buys Foxconn? Or Apple builds massive factory in CA?

Suppose Apple is able to buy Foxconn - that would work too (there are numerous problems such as politics and anti-monopoly authorities; foxconn produces devices for many companies, not just Apple). Once bought Apple can configure the factories as it sees fit.

A Chinese/Korean company can reconfigure their factories for American clients far quicker than the American factory owners next door can.

China would not allow that, at most they would be allowed to buy 49% -- though I think you were joking.

China would not allow that

Foxconn is actually a Taiwanese company.

(Technically that can still mean China depending on your definition. I interpreted your comment to mean that the (mainland) Chinese government would block a potential takeover. That isn't directly possible, although clearly they have multiple ways to put indirect pressure on Foxconn. (Not that this will happen anyway, because Apple isn't going to buy Foxconn))

Well it is a next step towards vertical integration. Maybe they'll buy a mining company to dig up rare earths also. And a recycling company to close the loop.

Really? Apple has been about vertical integration from the start (apps + OS + hw), at least compared to the Wintel and Android worlds. (the exception being iOS apps, but those were neither in Apple's original plan nor are a huge amount of revenue relatively to Apple; I suspect Safari, Mail, Calendar, iMessage still get the majority of the use of apps on iOS).

Deeper hw integration (buying chip designers was obvious; I do not think they'll buy a fab; maybe hw assembly if that is somehow non-commodity), or upstream integration (applications on mac osx, content sources, services) would make some sense to me. Buying a shipping company to ship the devices, probably not.

Maybe they could just buy Goldman Sachs.

That's an interesting perspective; I wasn't thinking about the software side at all.

Reply on news.ycombinator.com