
No, You Can’t Manufacture That Like Apple Does - brk
https://medium.com/@bolt/no-you-cant-manufacture-that-like-apple-does-93bea02a3bbf
======
mgkimsal
It's pretty much the same in software too. I often get requests for
functionality and when I say "no, we can't do that", I get "Why not? Amazon
does it".

Hrmm... Amazon has dozens of people working and supporting just that one
feature. You're trying to engage me to do an entire project. On a fixed
budget. With a fixed time frame. And you've changed your mind 3 times in the
last 3 weeks on key points.

Of course, yes, there are amazing things you can do with software that weren't
remotely feasible even just 5 years ago. But there's always a moving target -
the market leaders (Apple, Google, Amazon, etc) are constantly pushing the
boundaries of what's considered 'normal', and most people have _0_ idea of the
real cost and effort involved in having the functionality come across as
polished and error free as the big boys.

~~~
_RPM
> Of course, yes, there are amazing things you can do with software that
> weren't remotely feasible even just 5 years ago

Can you provide an example to back up your claim?

~~~
yincrash
Software defined radio[1]

[1] [http://en.wikipedia.org/wiki/Software-
defined_radio](http://en.wikipedia.org/wiki/Software-defined_radio)

~~~
teraflop
Bad example; SDR existed in prototype form as early as the 80s, and the USRP
has been commercially available since 2005.

~~~
theshrike79
Yes, but today you can order a USB SDR radio for under $10 and you have a
crapton of FOSS software to use with it.

------
josefresco
Forget fancy techniques, just scale alone is enough to shock you when looking
into manufacturing. We got quotes from various providers at $4-$12/part.
Meanwhile, in grocery stores, department stores, even dollar stores we would
see similar products (using the same materials) being _sold_ for $1-2.

The difference is mostly related to the number of parts being ordered. For a
startup, ordering 100,000+ parts just to get pricing reasonable is a no-go
unless you (or your backers) take a major risk.

Makes you feel like getting off the ground is almost impossible, when you
can't even get your wholesale cost below the retail cost of similar products.

~~~
lkrubner
It's important to note that 20 years ago the surprising thing would be the
surprise that you express here:

"The difference is mostly related to the number of parts being ordered. For a
startup, ordering 100,000+ parts just to get pricing reasonable is a no-go
unless you (or your backers) take a major risk. Makes you feel like getting
off the ground is almost impossible, when you can't even get your wholesale
cost below the retail cost of similar products."

We just had 150 years where this was so normal that most people didn't think
much of it, and very few people ever thought about starting their own
business, exactly because it was understood that you could not compete with
the economies of scale enjoyed by John Davison Rockefeller, Andrew Carnegie
and Andrew W. Mellon.

What's interesting is that this attitude has recently been changing. The
economist Larry Summers has made this point about WhatsApp, using WhatsApp as
an example of the falling need for capital:

[http://www.businessinsider.com/larry-summers-on-
whatsapp-201...](http://www.businessinsider.com/larry-summers-on-
whatsapp-2014-2)

"Ponder for example that the leading technological companies of this age, I
think for example of Apple and Google, find themselves swimming in cash and
facing the challenge of what to do with a very large cash hoard. Ponder the
fact that WhatsApp has a greater market value than Sony with next to no
capital investment required to achieve it. Ponder the fact that it used to
require tens of millions of dollars to start a significant new venture.
Significance new ventures today are seeded with hundreds of thousands of
dollars in the information technology era. All of this means reduced demand
for investment with consequences for the flow of - with consequences for
equilibrium levels of interest rates."

He suggests a negative consequence, that it is difficult to get real interest
rates above 0% in a world where people can start a business with little
capital, and he suggests that this might contribute to secular stagnation.

Of course, things don't need to be as grim as he suggests. Ideally, the low
costs would lead to a flood of research, but that hasn't happened so far, in
part because VCs are scornful of what they refer to as "science projects" and
the financial community continues to look for returns within 10 years, which
is almost certainly the wrong timeframe for 0% interest rates (the low rate
suggests a low discount rate which suggests that investors should think long
term).

~~~
smacktoward
The surprise is a consequence of the "software is eating the world" mentality.
Software is a very unusual kind of business, in that it effectively costs as
much to make and distribute one copy of a software product as it does a
million, or a billion. (Even more so today than 20 years ago, now that even
marginal costs like boxes and plastic disks have fallen away.)

The problem is that people are increasingly applying software-business logic
to businesses that aren't software businesses, where it falls down horribly
because suddenly costs scale with output and economies of scale are a real and
powerful thing.

------
foofoo55
The main point is that manufacturing, especially high-volume, consumer, apple-
quality products, is very hard and requires serious expertise. Such startups
should bring in such mechanical & production engineering expertise, because
the hardware becomes as important as the software & electronics.

The irony is that many software startup wizards brush off mechanical design
the same way that naive managers treat software development. "It's just a
[box/case/app/website], how hard can it be?"

~~~
digitailor
You have summarized the perfect take-away from this article. Disclosure for
bias: I am the 4th generation of an American manufacturer, that has survived
for 100 years in New York City.

Of the hundreds of retail startups I have seen that are going to contract
manufacturers, none have had a manufacturing expert or even one with any
experience. In fact, it's severely undervalued with respect to importance. If
they do have someone from manufacturing, they probably aren't being paid
relative to their market scarcity.

The best manufacturers also design what they make, their own product, and do
not make for others.

Apple has manufacturing experts and manufactures themselves, hence they
control what they make. <startup-person class="random inexperienced" /> does
not, so they cannot have their quality level, by definition. Hence, they pay
more because they didn't capture the margin, and because they have to get in
line to pay a contractor who knows how. But they cannot bring a serious order
unless they are funded by deep pockets.

Here in America, we have lost most of our manufacturers, leaving three
generations missing manufacturing experts. This is a no-brainer, obvious to
all. However, the connection is rarely made that we have lost our
manufacturing capability because /it is difficult/. It's so difficult it had
to go to a highly efficient country with cut-throat competition, abundant
labor supply, and abundant poverty. The perfect conditions for plunging down
manufacturing costs.

Manufacturing is quite different from "making." We are having a resurgence of
interest in making in this country, which is exceptional. Arduino is amazing!
It manufactures for the people, not for other companies, reducing cost and
providing access. Making doesn't scale without manufacturing expertise. I hope
manufacturing is part of the renaissance as it grows.

~~~
serge2k
> Of the thousands of retail startups have seen that are going to contract
> manufacturers, none have had a manufacturing expert or even one with any
> experience.

Wouldn't that be why they are trying to contract manufacturers?

~~~
digitailor
Not at all. Manufacturers constantly contract to other manufacturers. Hence
terms like OEM. If you haven't been involved in some part of the chain at some
point, it's non-straightforward to learn the ropes. Certainly possible, of
course; the stats are not encouraging though.

Basically I was trying to say, it really helps to have someone with some
manufacturing experience in-house if your startup involves it, even if you're
not the actual manufacturer.

------
taylodl
Thanks to follow-up research after reading this article I now know what an
ejector pin mark is, and now that I know I see them everywhere! Gah!

~~~
zuck9
I didn't understand even after minutes of googling. Can you summarize it?

~~~
amoonki
This is what I got from my googling:

Plastic parts are often made by pouring hot plastic into a mold. When the
plastic is done drying, often a robotic arm or crane needs to pull it off to
bring the plastic to the next stage of the manufacturing process. But it's
hard to get the plastic off the surface once it's dried; it needs to be
"popped" off of it. So manufacturers build ejector pins into the mold. When
the plastic is done drying, the pins pop up and push the plastic off the mold,
into the crane or whatever will take it to the next part of the operation.

~~~
Aqua_Geek
And when the pins hit the plastic part to pop it off, they often leave small,
circular marks on it.

------
serve_yay
The more you know this sort of thing the harder it becomes to believe that
Apple makes the same things everyone else does but with fancy marketing.

~~~
lotsofmangos
Their attention to detail in casings is the same as the very high end hi-fi,
jewelery, or sports-car industries. Nobody else in computing seems to come
close.

In terms of electronic components however, you can nearly always get more bang
for your buck, the exception sometimes being the screens.

~~~
tptacek
That might be true of computers, but how true is it of mobile devices? A
handheld mobile device isn't even conceptually a single computer; it's a small
network of computers.

~~~
lotsofmangos
I think it still is true in mobile, but in mobile the general computing
components just need to be good enough not to lag, build quality and interface
elements are the things to buy on with laptops, tablets and mobiles.

Doesn't matter if you have a powerful gizmo if the hinges are broken and it
overheats, however with PC's you can buy a high-end motherboard and find a
power supply in a skip and just nail them to the wall if you like. Build
quality is far more optional.

------
noir_lord
$12 for a box at scale, well damn!

Use 100% recycled cardboard and print the box in a single color water based
bio-degradable ink.

Then claim you do this to save the environment, win-win ;).

~~~
jkestner
Packaging is a product to be designed unto itself, especially as what you're
usually ultimately selling is an experience. I think I've seen people rave
about packaging I've designed as much as the products. And just like the
product itself, manufacturing experience helps you hit a better
price/performance note, all the way down to making boxes that fit in a certain
USPS weight class which you can slap a mailing label on.

~~~
alistairSH
I find packaging to be a very mixed bag, emotionally speaking.

While I like the higher-end treatment from Apple and similar companies, I
can't help but think of the waste involved in producing that fancy box that
I'm just going to throw away in a few days.

And Apple doesn't need the fancy packaging to sell to me - I'd but their stuff
regardless. I wonder if they could/would consider generic cardboard for online
orders, and save the fancy stuff for retail?

~~~
jkestner
They do that for refurbs. It's just another design challenge. For a great
experience, you don't need to spend a lot of money on packaging - just have an
element of surprise and thoughtfulness. That can be done in cardboard and
smart graphic design, or even off-the-shelf packaging used in a different
context (see: T-shirt in a can).

------
zwieback
Not mentioned is the challenge of managing a good CM in China or Malaysia. If
you're small you get what everyone else does, at higher prices. If you're huge
you can groom your CM and make sure you get what nobody else does, at a lower
cost. Of course sooner or later the manufacturing knowledge leaks out so it's
a rat race even for someone like Apple.

------
at-fates-hands
When did Apple go from manufacturing ordinary hardware to making that leap
where they had the financial resources to truly make something incredibly
unique and beautiful? Was it one product one year, or did happen over a span
of years where they had smaller increments of change?

I'm curious to know how a company can get to a point and say, "Ok, we can do
something really cool, on a massive scale and make it successful." Is a slower
transition, or more of an abrupt change that takes place?

~~~
wtallis
It was definitely a gradual thing. As early as the "Snow White" design
language introduced in 1984, Apple was pushing the limits of conventional
computer manufacturing techniques. And they didn't go from beige boxes to
unibody aluminum slabs in one step.

------
eitally
This is why -- for example -- Flextronics opened their Lab IX [1] in SV last
year. In cases where hardware ideas are good ones, it makes a lot of sense for
the guys with the manufacturing expertise to get in the loop early on. They
can incubate, invest, and indulge in some of the wild stuff innovators want
but can only be executed with $mm of equipment.

[1] [http://www.labix.io/](http://www.labix.io/)

------
psychometry
There are so many acronyms in this article that aren't defined. Maybe I'm not
the intended audience for this article, but it's pretty hard to understand
when you don't know what CM, CNC, or BOM mean. Is it really so hard to use the
<abbr> tag?

~~~
mcooley
CM = Contract Manufacturer CNC = Computer Numerical Control (an automated
mill) BOM = Bill of Materials (a parts list)

It is jargon, but it's jargon that someone who would be concerned about "not
showing ejector pin marks" would probably know.

------
qwerta
Article does not mention capacitive touch screens. Apple basically build its
own factories (and subsequently entire industry) to manufacture for iphone 1.

~~~
sedachv
> Apple basically build its own factories (and subsequently entire industry)
> to manufacture for iphone 1.

Are there any articles or book sections about this? Seems very interesting.

------
lazylizard
but apple is not the only large luxury goods manufacturer, right? how does
louis vuitton do their thing? or leica? or rolex? if anything, aren't lv and
rolex the orginals at mass producing/marketing luxury goods?

separately, i imagine not just leica, but the entire optics industry has
answered the question of precision/quality at scale before?

and finally, there're more , right? like mercedes-benz, bmw, lexus, porsche,
medical instruments, the aerospace industry... don't all of them have to solve
'quality at scale' problems?

and at smaller scales..parker pens? zippo lighters? swiss army knives?

and then..something like
[http://www.muji.us/store/](http://www.muji.us/store/) could be good enough as
far as the perception of quality goes?

~~~
frankchn
I think the idea is that most of those companies are large (compared to a 10
person startup) and have manufacturing expertise, which most start-ups may not
have.

Even companies like Parker Pens are part of large companies -- (e.g. Parker is
part of Newell Rubbermaid with 19,000 employees and almost $6 billion in
revenue).

~~~
lazylizard
actually parker was founded in 1888 and was independent until 1993 when
gillette bought it. i imagine they didn't need gillette's help to scale their
manufacturing..

i think there're plenty of small firms, from furniture makers to knive makers
to bicycle makers to audio equipment makers, that do quality at low volumes.
i'd imagine a startup is exactly that - low volume. and they could probably
figure out how to scale when they need to? its a good problem to have, right?

i'm thinking of a car analogy.. its like.. i can't imagine that porsche, when
they first launched the 911, were thinking about how to make 100000 of them a
year.. or for that matter, a more recent example like koenigsegg or even
tesla..they didn't exactly start with a 100000/year plant either..

------
ashish01
Then how did Nest do it?

~~~
nikcub
They hired the brilliant Bould[0] design for ID and partnered with a Tier-1
Taiwanese ODM for manufacturing[1]. This takes a bit of money, connections and
being able to demonstrate you will have volume.

What the article doesn't mention is that you can manufacture in Apple's wake.
After Apple started purchasing 4" touch panels and LCD displays for iPhones,
and then larger displays for the iPad, the capacity increased and prices went
down. Same with all the CNC machines purchased for the iPhone 4 frame - they
are no longer being used to manufacture Apple devices, but they are being used
to manufacture other devices.

Second part is that modern manufacturing tech means you can have lean hardware
startups. As much as cheap hosting, software as a service, etc. have made
software app development cheaper manufacturing tech has made hardware
manufacturing cheaper. You can now get rolling with complete custom hardware
in thousands of units (as opposed to millions) with 6-figures in capital.

The key is knowing one of the small number of people who understand design,
materials, the capabilities at the ODM's, the right people at these companies,
supply chain etc. and have them design the product to fit the current
manufacturing capacity without requiring customization. It is easy to hire an
industrial designer sitting ten thousand kilometers away from Shenzhen who can
CAD something nice, but knowing that manufacturing that fancy designed device
would cost extra millions in tooling and setup is where the real skill is.
Good ID people can design great products and in a way where they can be
manufactured easily and with a smaller investment. If you don't have one of
these people on your team, your either going to get something that is _very_
ordinary looking (think Chinese knockoff) or you'll attempt something
ambitious, run out of money and fail.

What Nest did is use clever ID to create a product that looked unique without
over-stretching the manufacturing requirements. They didn't go anywhere near
the scale Apple does.

[0] [http://www.bould.com/](http://www.bould.com/)

[1] not certain which, but it is 3-4 possible companies.

~~~
nawitus
I'm skeptical that Apple did anything to the price of CNC machining.

~~~
ghostly_s
I'd like to see some evidence that they have sunsetted any of their CNC
capacity, as well. They're still making the iPhone 5s, and as far as I'm aware
aren't the new iPhones, as well as the iPad and Mac lines, all still using CNC
milled enclosures? I think all that's been phased out is the diamond-chamfered
edges.

------
niels_olson
Aren't turbine blades also grown from crystal before machining? Even Apple
doesn't do that...

------
whizzkid
This article actually misses some key points while it is telling the truth.

Most of the things mentioned in the article is correct BUT,

If you are going to make a product and you think that your product is going to
be as revolutionary as Apple was at the beginning, then don't worry. You will
be good to go.

If you can provide a unique, mind blowing product just like Apple Lisa in
1983, you can sell it for really unrealistic prizes.

Apple Lisa was sold for US$ 9,995 at the time it was released. You could buy a
new house around $86000.

So the question is not how expensive is going to be, the real question is,

Is your product mind blowing?

~~~
wmf
Wasn't Lisa a flop?

~~~
informatimago
No.

Perhaps financially, accountants weren't able to attribute black pennies to
it.

But spiritually it was a big success. Everybody wanted one. And it was the
roots of the Macintosh.

If Apple didn't do the Lisa, I cannot see what else they could have done at
that time, and still become the biggest company of the world 30 years later.
Without it, they would probably have disappeared long ago as so many people
predicted.

~~~
philwelch
They buried almost the entire production run in Utah, didn't they?

------
DarkIye
Seriously? Most founders' ideas hinge on their hardware product looking sleek?
This is progress?

------
snowwrestler
Surprising statement that the box might be the most expensive single element
of the iPhone.

~~~
yourad_io
I don't see that anywhere. Closest thing I could find is:

> 4-color, double-walled, matte boxes + HD foam inserts > I know you’re going
> to do this anyways, but be aware that these kind of boxes will literally be
> the most expensive line item on your BOM. It’s not unusual for them to cost
> upwards of $12/unit at scale. And then they get thrown away.

...which is talking about _your_ costs, not Apple's.

Please correct me if I've missed something.

~~~
shubb
Iphone BOM can here:
[http://cdn.ihs.com/Technology/SharePointImages/PublishingIma...](http://cdn.ihs.com/Technology/SharePointImages/PublishingImages/Press%20Releases/2012-09-25_iPhone5.jpg)

$12 is a lot of money for a box, and would be one of the most expensive things
you buy, unless you want the latest communications chipset or next years
display technology. I guess apple do. But it's still a lot of money for a box.
News to me.

~~~
drone
The double-wall material seems to be the primary driver of that price, and
also not necessary for most products.

I've designed and purchased a lot of retail boxes for my needs. If you can get
away with a heavy-duty paperboard (which will suit most non-luxury products),
the combination of full-color box and custom foam can be had as low as
$5/unit, or less, in quantities starting at 500 units. Once you start getting
into custom multi-wall product, you're often having to pay die costs which
greatly drive up the per-unit price.

------
ww520
Build a Facebook lite for such and such...

