Apple’s Little Known Secret to Success

One of the things that most consumers do not know about Apple is their supply chain and manufacturing is one of the best in the world. Tim Cook, when he was in charge of the chain, created one of the most efficient supply and manufacturing systems in the market. Cook managed this side of Apple’s business for over 10 years before he was elevated to the role of CEO. Even today he has an eagle eye on this part of their business and understands the supply chain better than any other CEO in the tech world today.

But what really makes Cook and Apple stand out is that, when they design hardware, they only marginally look at what type of equipment they will use to make this product. Creating a product that is great, easy to use, and extremely well designed is the first priority.

Once that is in place, they get serious about how they can manufacture the product in mass quantities and in the most cost-effective way. However, Apple stands above most in this area because, if they can’t find the right equipment to make a product, they actually invent and/or create the equipment, either with the help of a partner or they do it themselves.

This extension of their technical prowess is critical to Apple’s success. In 2013, Apple worked with a key supplier to customize robots to manufacture new iPhones and iPads and spent about $10.5 billion to create these special tools.

Over the years, I have talked with various ODM and manufacturing equipment makers and many have told me Apple’s real secret to success is how deep they go into the overall manufacturing process.

Very few companies go to that level of detail when it comes to their supply chain. Besides Intel, Apple is one of the only other major tech companies I know of that will actually invent the manufacturing equipment needed to bring a new product to market. Most others accept the limitations of the equipment and instead design the product around the things these machines can do with as little customization as possible.

Horace Deidu of Asymco has created a great chart that looks at Apple’s equipment spending from 2011-2016.
Screen Shot 2016-08-28 at 10.44.10 PM

As you can see from this chart, Apple constantly pours investment dollars into their machine and equipment spending and sees this area as an important differentiator that helps make them one of the most profitable companies in the world.

But this type of thinking also underscores Apple’s overall attention to detail when it comes to creating a product critical to their ecosystem. Apple’s designers are at the heart of their products but I see their counterparts who manage the supply chain and the manufacturing of their products as equal stars in Apple’s success. No matter what tiny design adjustment Jony Ive and his team ask the supply chain and manufacturing teams to give them, they somehow are able to accommodate the design teams.

In many other companies, it is the other way around. A design team will come up with a product idea and, most of the time, they are forced to create that product around what existing materials and equipment are available. These types of limitations impact innovation. That is one of the reasons we have so many me-too products on the market today.

We all know Apple marches to the beat of their own drums. This is just another example of Apple’s formula for success.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

37 thoughts on “Apple’s Little Known Secret to Success”

  1. Which parts of the phones are we talking about ? The casings and assembly ? The famously flaky Home button ? It seems everything that goes inside (SoC, RAM, Flash, screen, camera) is made on bog standard machines, and can be found on other devices.

    General opinion seems to be that iDevices’ quality/craftsmanship has been equaled by even cheap OEMs (Xiaomi etc…), and overtaken by Samsung and possibly Huawei. Also, Apple’s optimizing for margin leads it to use some decidedly substandard parts (iPhone se screen…)

    Looking forward, it seems suppliers are taking a harder stance towards Apple. Apple used to be almost a monopsony, with huge bargaining power. Nowadays Apple represents only about 15% (and falling) of the parts & assembly business, making it harder for them to pressure suppliers: https://verdictforu.com/2016/08/20/suppliers-resist-price-drops-is-apple-losing-its-mojo/ . Also, working conditions issues still persist at Apple’s suppliers ( http://nymag.com/selectall/2016/02/report-apple-labor-practices-still-fall-short.html , http://www.theverge.com/2016/1/18/10786714/apple-samsung-child-labor-cobalt-congo-amnesty ), which is weird if Apple is that invested in its supply chain. Unless it’s a feature, not bug ?

    Finally, wasn’t there a supply chain misfire with sapphire screens ?

    1. “…Finally, wasn’t there a supply chain misfire with sapphire screens ?”

      And isn’t the subject of your knee-jerk commentary really a just another perfect example of Apple partnering with a supplier and Apple heavily investing in specialized equipment and processes to implement their design goals?

      Ya know – like the article was discussing?

      Oh that’s right. I forgot the source of this predictable word pile.

      You can’t even distinguish the difference between ownership and investment and seem to believe that Apple bears ALL responsibility for working conditions at facilities Apple doesn’t own and are contracted by all your Android OEMs, too.

      Just stop already.

      1. Well, the article is extremely laudatory, with not a word on misfires and ongoing issues.

        I thought maybe just a tad of balance was warranted. You’re free to disregard my comment.

    2. If you think Apple’s build quality and craftsmanship has been “equaled” by Xiaomi or even Samsung, then you don’t have the slightest clue about what “craftsmanship” actually is.

      No, craftsmanship is not just the material a product is made out of. As someone who works in sheetmetal and machine shops every single day, true quality and craftsmanship goes far deeper than that. The only thing that competitors have managed to copy from Apple is the use of higher quality materials and CNC machining. Any schmuck can program a 5 axis machine and create a precision part. That’s not even close to being a craftsman.

      1. Well, Apple’s devices
        1- look no better than many others, and worse than the best
        2- are rather less durable and resilient than a lot of others, and worse than the best
        3- don’t do anything that others don’t do, and less than the best

        I’m sure they take some craftsmanship. Not sure it’s that worth of hype.

          1. And I’ll guess we’ll discuss this if ever there is a similar panegyric about Samsung’s devices or supply chain. They do manage to make and sell over 2x more phones than Apple, with a lot more in-house components, so that would probably be warranted… But I won’t hold my breath…

        1. How do you measure durability? Companies like SquareTrade are in an excellent position to evaluate that quality, and consistently rank iPhones at the top of the heap.

          If you have any data that says otherwise, cite your source! (But remember that “anecdote” is not the singular form of “data.”)

          1. ever heard of IP67/68 ?

            Apple market their phones as “water-resistant” but won’t even cover them under warranty for water damage….

          2. So your only measure of durability is whether or not the warranty covers water damage?

            BTW, Samsung also markets the S7 as IP68 compliant, but:

            • Doesn’t cover water damage (see #1, below), and,
            • It failed Consumer Reports’ IP68 compliance test! (see #2, below)

            #1: http://www.zdnet.com/article/samsung-galaxy-s7-its-water-resistant-but-if-it-springs-a-leak-youre-on-your-own/_
            #2: http://www.consumerreports.org/smartphones/samsung-galaxy-s7-active-fails-consumer-reports-water-resistance-test/

          3. 1- No actually, first line of my posts is about durability/resistance certification, not about warranty covering water damage. That’s what the IPxx things are. Are you actually not understanding, or pretending to ?

            2- Wrong again I’m not sure if ignorance or willful deception on your part:
            http://www.pocket-lint.com/news/138330-samsung-fixes-galaxy-s7-active-s-waterproof-flaw-will-replace-phones

            3- yes, in many ways Samsung is as bad as Apple. Do two wrongs make a right ? Or would you be trying to deflect ? How does what Samsung does justify what Apple does ?

          4. I asked, “How do you measure durability?” and your response only mentioned IP67/68 and other issues relating to water-resistance and warranty coverage for water damage.

            Perhaps you didn’t understand my question, but I don’t know if I can make it any simpler. Let me try again: You wrote that “are rather less durable and resilient than a lot of others…” Given that statement, you apparently have some method(s) to measure durability and resiliency. What is that method?

          5. I’m familiar with the IP code. That still doesn’t answer the question of how you measure durability. Do you consider a phone reliable simply because the manufacturer claims IP67/68 compliance?

            Let me remind you that you claimed (without any substantiation) that Apple devices are “rather less durable and resilient than a lot of others…”

            I’ve now asked the question three times. I’m guessing you don’t have an answer.

            I think iPhones are very reliable, based on published studies like this:

            Fixya Head to Head Reliability Score: http://www.fixya.com/reports/phone-manufacturers

            PC Mag Readers Choice Awards (“Apple had the highest ratings for overall satisfaction (8.7), satisfaction with reliability (8.9) and likelihood to recommend (8.8).”
            )http://www.pcmag.com/article/342878/readers-choice-awards-2016-smartphones-and-carriers

            JD Power Smartphone Satisfaction Survey:
            http://www.jdpower.com/ratings/study/U.S.-Wireless-Smartphone-Satisfaction-Study-Vol.-1/1001ENG/T-Mobile/1575

            So, now I’ve explained the basis for my conclusion that iPhones are more reliable than average.

            Can you offer any evidence whatsoever to support your claim? (If you’re having trouble understanding the question, please ask for clarification.)

          6. well, of course if when I write “durable and resilient” you understand “reliable”, you’re just seeing things.

            If you’re having trouble understanding the difference, please ask for clarifications.

          7. Sorry if I confused you.

            How about this:
            Apple’s iPhone 6 is more DURABLE, less breakable than iPhone 5S, Galaxy S5, One M8: ttp://www.extremetech.com/computing/190698-apples-iphone-6-is-more-durable-less-breakable-than-galaxy-s5-and-one-m8

            iPhone 7 bests iPhone 6s in DURABILITY drop test: https://9to5mac.com/2016/09/17/iphone-7-bests-iphone-6s-in-durability-drop-test-survives-ten-foot-face-down-drop/

            Apple’s new iPhones score big in DURABILITY: http://www.usatoday.com/story/tech/2014/09/21/ap-study-apples-new-iphones-score-big-in-durability/16012485/

            And best of all:

            “iPhone 6 Plus scored a 5, more than a full point better than the Samsung Galaxy S5, making it the MOST DURABLE PHONE with a screen larger than five inches.”
            That quote is from SquareTrade, which has a significant financial incentive to steer users to more durable products: https://www.squaretrade.com/press/iphone-6-earns-best-score-ever-iphone-6-plus-not-far-behind

            Now you can see why I think Apple devices are very durable — perhaps (as SquareTrade claims) the MOST durable.

            Now, can you please explain what is the basis for your claim that Apple devices are “rather less durable and resilient than a lot of others…”

            What sources supporting that claim?

          8. Again, the sources that grant IP certification to water/drop/dust resistant phones. If you don’t believe in certifications, I can’t help you.

          9. Thank you for clarifying that the entire basis for your statement that Apple devices are “less durable and resilient” is based purely on the standard for water and dust exclusion, and not on testing relating to accidental damage, or actual damage and repair rates, or anything else.

            BTW, just so everybody understands what you’re saying: The first digit in an IP rating relates to dust resistance; the second digit is for water resistance.

            The iPhone 7 is rated IP67; the Galaxy S7 is rated IP68.

            That means they carry identical certifications for dust resistance. iPhone’s rating of 7 for water resistance indicates it is certified to withstand submersion in 1 meter of water for up to 30 minutes.

            The rating of 8 indicates protection from a manufacturer-specified depth for up to 30 minutes. Samsung has specified a depth of 1.5 meters.

            I wanted to spell this out, just so everybody knows that you made this grand generalization (Apple devices are less durable) based on a single data point which is trivially different.

            Source for info about IP ratings: https://www.cnet.com/how-to/water-dust-resistance-ratings-in-gadgets-explained/

          10. Indeed, but you’re the one fixating on IP67 and 68. There are
            other IP ratings, for mechanical resistance.

            My saying Apple’s devices are less resistant than others is indeed due to others having IP ratings for reistance to water, dust, and mechanical actions (drops), which is confirmed by their IP ratings in each of those 3 categories.

            You seem to have a very hard time dealing with that. Sorry, I guess ?

          11. I only addressed IP67 and IP68 because you brought them up (“ever heard of IP67/68”).

            I asked you over and over what was the basis for your statement, and only now have you answered that it’s IP ratings for mechanical actions.

            If that’s the case, why did you introduce IP67/68 to the discussion?

          12. because resistance to water and dust also factor in durability maybe ?

            Surprised I have to explain that ?

          13. You introduced IP67/68 into the discussion, offering them as your only reason to say Apple products were less durable, and then criticized me for addressing IP67/68.

            It seems to me like you’re more interested in arguing than in focusing on facts.

            I have nothing to add to this discussion. I’ll gladly let the above record speak for itself. (If you think you “win” by making the last comment, be my guest.)

          14. My bad for being too precise, I should have just stayed vague with IP and MIL, certifications which several phones have, proving they are indeed more resilient and durable.

      1. You not understanding the difference between “bog standard” and “made on bog standard machines” says what about you ?

        1. I understand what you wrote: “It seems everything that goes inside (SoC, RAM, Flash, screen, camera) is made on bog standard machines, AND CAN BE FOUND ON OTHER DEVICES.” (Emphasis mine.)

          So you wrote that Apple’s SOC “can be found on other devices.”

          Sorry if that’s not what you meant, but not being psychic, I had only your words to go on.

  2. “Most others accept the limitations of the equipment and instead design the product around the things these machines can do with as little customization as possible.”

    And Apple doesn’t?

    Was it coincidence that (under Cook) when Unibody was introduced, the Expresscard slot was removed from 15” MBPs and was included with 17” MBPs?

    When the entire industry was using USB 3, Apple waited for Intel to include support in the chipset, thus limiting $2K machines to USB 2 or FW800?

    How about the total non-serviceability of Apple products? I chalk that up to supply chain a well.

    There are numerous other instances, where supply chain certainly made stockholders happy, there are even the instances where it was, in a very restricted way, beneficial to “most customers”, but we’ve lost capability and personal control along the way.

  3. I can vouch for this having done products in China for Apple and others. Design (Ive) drives everything Apple does, even when the engineers say it’s impossible to do. Somehow they find a solution. The other difference is Apple has thousands of US based and locally based engineers on site in the factories who really call the shots, not their OEMs.

  4. Apple focus on margins in the past led them to use subpar quality suppliers than the better ones that would work with them. On top of that, working closely with OEM manufacturers on making the parts for the machines gives them a better idea of Apple approaches and it gives an edge to these factories working with Apple competitors although the opposite also happens (Apple learning from the suppliers). Somehow making unique products in the beginning require more encapsulation and exclusivity, and worrying less about the margins.

  5. An important facet of Apple’s approach, not directly addressed in the article, is how apple uses their size to prevent other competitors from following where they go.

    Because Apple pours their energies into relatively few similarly configured products, and because Apple’s competition, whether in PCs or in devices, is divided among dozens of companies, all of whom produce hundreds of products each, Apple is one of the largest, if not the single largest buyer of components in the tech industry. This gives them huge amounts of bargaining power, and enables them to cripple the ability of their competitors to follow their lead.

    They tend to buy up a huge proportion (sometimes all) of the world’s existing capacity of whatever new tech or manufacturing process they wish to use, basically creating an impassable barrier to any competitor seeking to do the same thing.

    Examples include their reserving of nearly all the world’s NAND the first few years after bringing out the ipod nano, and how for a few years they were basically buying up all the world’s CNC aluminum milling machines as fast as they could be manufactured, to make the unibody enclosures for their computers and devices.

    So on the one hand, Apple has the money and the will to pursue new technologies and unusual manufacturing techniques. On the other hand, they operate at a scale that enables them to preclude the competition from following their lead for years at a time or longer.

    1. That was years ago though. Nowadays everyone has HTC-like aluminum unibodies and Flash is plentiful. Even TouchID took mere months to go mainstream after Apple popularized it. Are there any current instances ?

      On the other hand, if you want the best screen, the best camera, a curved screen, EyeID, dual cameras, UFS, wireless charging, quick charging, etc… you’ve got to look outside Apple’s ecosystem. Apple not only no longer has a hold on the few features they pick, but also is missing a lot of popular features. That didn’t use to be the case.

      1. Except none of those TouchID alternatives were worth anything, because no one was as good as Authentec. Everything else you have listed is a gimmick as implemented by Android manufacturers (or in general).

Leave a Reply

Your email address will not be published. Required fields are marked *