It’s strange. Really strange. Apple sits at the top of the tech industry with a market cap ahead of all other companies. Over one billion of its products have been activated, and it’s hard not to find a person using an iPhone, iPad, or even a Mac. All right, the Apple Watch isn’t on everyone’s wrist yet, but give it some time.
No, I’m not saying the Apple Watch is destined to lose its accessory status, but it’s certainly not going away.
To build hundreds of millions of units, Apple had to create a very sophisticated supply chain, with many interlocking parts, in order to speed products from design, to production, to the dealer, and finally to the customer. Indeed, Tim Cook’s expertise is the supply chain, and he is credited with doing wonders over the years to make Apple’s production lines as efficient as possible.
Unlike other companies that use mostly off-the-shelf parts to build products, Apple designs custom chips that make it difficult for the competition to match. On occasion, Apple buys the technology it uses, such as the purchase of AuthenTec in 2012, which resulted in the Touch ID fingerprint sensor. Apple’s 2013 purchase of PrimeSense, a 3D sensor firm from Israel, brought in-house technology reportedly incorporated as part of the Face ID feature that will debut in the iPhone X.
These acquisitions each cost Apple in the neighborhood of $350 million, which is small change compared to the billions Google and Microsoft have wasted buying mobile handset manufacturers.
Now we know that Apple’s supply chain expertise isn’t perfect. Demand for a product can only be estimated, and last year, the iPhone 7 Plus was backordered for weeks because Apple misjudged the product mix. Customers aren’t always predictable, and are apt to make last minute decisions before they add something to the online shopping cart, or when making a selection at an Apple Store. How can you account for an impulse purchase?
Well, there’s now a report that Apple might have “lost its supply chain mojo.”
Well, the very idea sounds provocative enough. These days, Jeff Williams, Apple’s COO, is the person who handles these chores. But one assumes Tim Cook watches the situation closely and could certainly second guess an incorrect decision. It’s not that Cook somehow lost his ability to manage the supply chain because he now has other chores that occupy his workday. He did, after all, select Williams as his successor and is quite capable of making a change if that’s necessary. Ask Scott Forstall.
So how has Apple lost its mojo?
Well, according to one published report in a publication that doesn’t deserve to be identified, the main argument appears to be based on the alleged hiccups in the supply chain over production of the iPhone X. If true, Apple has encountered serious delays in building sufficient supplies to satisfy expected demand.
Now the real question here is whether these delays exist or not. They might, but are they significant enough to seriously delay the iPhone X more than Apple expected? I wouldn’t pretend to know, since that is highly competitive information that Apple isn’t going to share with outsiders. The publication in question doesn’t know either, even though it claims to be reviewing evidence of supply chain activity.
Tim Cook has, from time to time, reminded financial analysts that you can’t make a decision about product demand or production plans based on a few supply chain metrics. No doubt the publication in question can’t either because one supplier might be running late in delivering parts. Apple often has multiple suppliers, so if one company experiences problems getting up to speed, there is an alternative. As demand for a product changes, different quantities of parts may be ordered, and how does one predict what Apple has already stockpiled?
More recently, there have been reports that Apple is getting a handle on early production glitches, and will catch up with production some time in November. If demand for the iPhone X far exceeds expectations, it will simply take Apple longer to rev up the production lines.
Remember that the 10th anniversary iPhone is using a number of components that have never before been used in any Apple product, and represent newly invented features, particularly Face ID. Apple has never before built an iPhone with an OLED display, although such a display is used on the Apple Watch.
That possibility that it might take a while to get up to speed shouldn’t be unexpected. It shouldn’t represent incompetence on Apple’s part, the loss of its “mojo.” In fact, I wonder if the publication in question even understands enough about the supply chain to make such determinations.
Remember, too, that this piece was posted before customers have even received the iPhone X. It’s not due to ship until November 3rd, as you know. While I wouldn’t be surprised to see it in short supply during the first weeks on sale, would that mean Apple is doing something wrong? Or is this the best they can do what with all the new parts and manufacturing techniques?
I do expect that, if unexpected supply chain or manufacturing troubles arise, Apple’s management is smart enough to do what’s necessary to fix what needs to be fixed. Flashy or fear-mongering headlines might generate hits and ad revenue for a publication, but that doesn’t mean the story has any resemblance to fact.
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