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  • Apple Continues to Upend the Tech Industry

    May 23rd, 2012

    There’s a report this week claiming that the so-called tech “supply chain,” which refers to the manufacturers who assemble all those great gadgets, mostly in Asia, would be shrinking were it not for Apple’s impact. Certainly selling tens of millions of iPhones, iPads and even iPods has had a major impact. Such contract makers as Foxconn can attribute a hefty portion of their revenue to deals with Apple for one product or another.

    The analysis comes from Citibank, and I’ll assume it is correct for the sake of argument. However, reports of this sort aren’t always nuanced in reaching a conclusion. They seem to assume that, if Apple didn’t exist, those factories wouldn’t be assembling someone else’s gear instead.

    Consider if there was no iPod. Would there still be digital music players selling tens of millions of units per year? Would the market just be stillborn without Apple around? That’s a difficult question to answer, but you can’t assume it would be zero.

    This is particularly true for smartphones. Before the iPhone, BlackBerry was the standard. While the industry chased the iPhone and its marvelous touchscreen after it came out, wouldn’t it be safe to assume that the market would have otherwise gone in a different direction? Remember that Google bought Android in 2005 to compete with Microsoft and Windows Mobile. The success of the iPhone, or even its existence, was an unknown back in 2005. If Apple never entered the smartphone market, the Android look and feel, and the prospects for success for that matter, would have been very different.

    At the same time, I wouldn’t try to predict how many of you would have bought smartphones without an iPhone in the mix. I know that I never considered a BlackBerry, and relied on a standard feature phone over the years. The iPhone has totally changed my workflow. When I’m not using my desktop Mac, I rely on my iPhone 4s to keep tabs on email and updates from a number of news-related sites. The entertainment value is hit or miss for me, since I’m not a gamer.

    On the other hand, the iPad succeeded in a market where all previous entrants had pretty much failed to capture consumers, let alone that many business customers. Today I read reports that they used 100 iPads to handle the financial details of Greece’s recent debt restructuring. Can you imagine that being done on one of those heavy, clunky Windows tablets?

    Yes, the supply chains are working overtime to keep up with demand for the new iPad. But if no such product came to be, what would they be building instead? To how many customers does the iPad represent a replacement for something else, such as a personal computer? How many people buy the iPad as an extra device, to work in concert with their regular computers?

    It’s fair to say that a decent portion of the people who bought iPads might have purchased a Mac or PC note-book instead. The supply chains would simply be churning out different products. Many of those personal computers are more expensive than the iPad, and thus worth more to the contract manufacturer on a per unit basis. The production lines wouldn’t just be idled.

    At the same time, the Citibank report does reveal Apple’s amazing impact on the industry. While some of the products they build would be replaced by other electronics gear if Apple never strayed beyond personal computers in any meaningful way, it’s very possible that the supply lines would be somewhat less busy.

    What interests me more is whether Apple can keep the gravy train speeding with the next iPhone and iPad, not to mention the expected refresh to the Mac lineup. On the short term, the signs appear to be in Apple’s favor. But there are still potential clouds on the horizon, particularly as Apple moves past products that were likely green lit by Steve Jobs. While Tim Cook has clearly done impressive work as CEO, he certainly doesn’t appear to possess Jobs’ talent for selecting the best product ideas and features. But since a lot of what went on at Apple occurred behind closed doors, we only have an inkling of the truth. We do not know, for example, how other Apple executives might assumed this all-too-critical role. Will several executives be able to replace the brilliance of the one?

    The other question is what comes next? The media seems convinced that an Apple smart TV is a given, an essential component to Apple’s drive to conquer the living room. Maybe. Or maybe there will be a souped up Apple TV set top box that will simply deliver the Apple experience in a more comprehensive way to any TV viewer with a recent set.

    Meantime, if the factories that churn out tech gear are busier because of Apple, that’s a good thing. But it would even be better for people in the U.S. if we learned how to build automated factories that could assemble the same products here at affordable rates, and give more Americans employment. But that can also be said many other countries that I am sure would love to get more business from Apple.



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