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Apple’s Insurmountable Platform Advantage (stevecheney.com)
48 points by Doubleguitars on Oct 11, 2015 | hide | past | favorite | 35 comments

Not so much a comment about this particular article but its funny how companies are realizing the advantages of being fully vertical again, and we the consumers get to witness the the pros and cons of this trend.

It goes back to the days where DEC, NCR, IBM etc... came with entire portfolios of competing implementations, none of which interoperated with each other. IBM for example also had the "Insurmountable Platform Advantage", it had the full stack ... literally, from sillion, chip design, operating-systems all the way up to software-services, but the industry lost out due to big blue's big-iron prices and the pc clone-wars began.

I don't see what the pc clone-wars are in this case, android doesn't seem to make much of dent in apple's profits here.

True story: DEC was so vertically integrated that it owned a turkey farm, because that was the most cost-effective way to give every employee a turkey for Thanksgiving.

Do you have a source for that? It seems far more humorous than probable.

>android doesn't seem to make much of dent in apple's profits here

Of course it does. Imagine the profits if iOS had 90% market share as Windows once did (or still does) on the PC.

Your point about IBM is a good one though. I think the reason why vertical integration can be dangerous is that the entire platform is only as strong as its weakest link. You don't want great industrial design being held hostage by, say, bad batteries or slow CPUs.

Android's market share mostly comes from phones much cheaper than the iPhone. Galaxy S-whatever is stealing market share from the iPhone; $100 Huaweis largely aren't, because people who buy them could never have afforded iPhones.

True, but that doesn't change the fact that Android makes a massive dent in Apple's profits. Android's market share has surpassed iOS is almost every rich country where people can afford Apple's devices.

True, but that doesn't change the fact that Android makes a massive dent in Apple's profits.

This is false. Apple's percentage of the profits in the cell phone industry has only increased over the years; it's up to 92% now: http://www.wsj.com/articles/apples-share-of-smartphone-indus....

Apple may make 92% of the profit of the phone industry, but without Android competition they would be making a lot more money:

- a good portion of the people currently carrying Android phones would buy an iPhone instead of a Windows or Blackberry phone if Android wasn't an option

- viable competition provides pressure on Apple to keep prices down and/or add more features to their phones at their current price. (For example, without Android pressure, Apple would probably still be shipping 3.5 or 4 inch phones)

Apple may make 92% of the profit of the phone industry, but without Android competition they would be making a lot more money

Apple set the world record for the largest quarterly profit ever—$18 billion—during last year's holiday quarter when they sold 74.5 million iPhones, which is more smartphones than any company has ever sold in a single quarter.[1]

And given this year's iPhone 6s weekend launch surpassed last year's opening weekend (13 million vs. 10 million phones), they could break their own unit and profitability records.

It's difficult to imagine Apple making more money than they do now.

[1] http://www.cnet.com/news/apple-beats-world-record-in-quarter...

Taking percentage share of profits from device sales is not the only way to make a dent in Apple's profits. Profits are not a constant.

What would Apple's profits be if Android did not exist? I believe they would be much higher just as Microsoft's profits would be much higher if Linux didn't exist.

But it's a counterfactual question. So we will never know for sure.

The situation in Android is such, that even if you can afford an expensive android phone, you don't lose much by buying a $200 phone , in many cases. And that's a huge market.

I suspect vertical integration is more efficient and wins out, so long as you accurately read the market and don't throw your advantage away.

IBM didn't bring the personal computer to market early enough, which left the door open to Apple, Commodore and others. Then they signed the MS-DOS licensing deal... and the rest is history.

In other words, until apple makes a stupid mistake, they're unstoppable.

This is a ridiculous article. When you talk about a platform's 'advantage', you're talking about features that enable it to dominate its sector.

Apple does no such thing. They make lots of money, but they don't dictate the direction tech is going. They make nice devices for the present, but they offer no additional utility over an Android device.

The fact that Google doesn't make as much money selling phones is a moot point because they're more of a service provider than a hardware manufacturer. They want you to be using Google services, and Android/Nexus products merely enable that.

As for the utility of an iPhone vs. Android, my Android phone (via Google services) keeps track of traffic for my various commutes (work and school), makes appointments for me based on the content of e-mails (reads schedules, meeting times), and does all sorts of other predictive magic. And has been doing this for awhile now. Apparently Apple just started adding these features to iOS 9 (as well as split-screen multitasking, their new Notes app, public transportation on Maps, )? Dunno, based on the feature sheet of iOS 9, seems like Apple is 2-3 years behind Google/Samsung.

The article is not about features, but about profits. But to your point about features: Follow the money. How else would Apple be making so much money if not by giving customers the features they want. That is exactly how they make money: features.

In Apple's case the hardware is a feature. Performance is a feature. Build quality is a feature - all of those things come from manufacturing. By controlling the whole process they can ensure quality from both the software and hardware sides.

You are correct that unlike Apple, Google is not a hardware manufacturer, they sell ads - but they are still trying to make money. It's just that they make most of their revenue from ads, and Android is a way for them to ensure they can capture the ads in the mobile space without being shut out by the iPhone.

But, how long will HTC, Huaweii, Nokia, Motorola be around making smartphones for the Android platform if they are not making any money ? Who will make Android phones without turning a profit ?

As for your quote:

> They make lots of money, but they don't dictate the direction tech is going.

I will offer this example: - touchscreen phones ( find a smartphone that is not like the iphone)

Google makes money. Samsung makes money. Xiaomi makes money. I'm sure others do too, even if it's less than Apple.

The fact some companies don't make money is meaningless. Is it Microsoft's fault if an OEM goes out of business?

And the innovation thing goes both ways. Yes Apple popularized a form factor, but remember there still was BlackBerry, Windows Mobile, Maemo, etc..., before iOS.

And every new feature on iOS 9's launch page is more or less taken from Android, some features being several years old.

Thinking about technology that developers use, very little comes from Apple. They contribute, but no one is launching their startup on OSX servers. No one is coding the next search engine in Objective C or Swift. Apple products are a shiny computer that hosts apps.

The point of the article is that Apple has an unassailable position. That's what a lot of people thought about Volkswagen a year ago. What they thought of Microsoft a decade ago. Also what we think of Google today... The point is, Apple does nothing so special that they can't be beaten.

This is a fascinating perspective, but I can't help but wonder if it cuts both ways: In the same way that current auto makers may underestimate their dependence on commodity chips in EVs and autonomous cars, the author may be underestimating Apple's potential dependence on commodity mechanical systems.

Of course, there's no reason Apple couldn't suddenly pick up one of Delphi's smaller competitors next week.

Author of the piece here. Thanks for the perspective. Note it's interesting that Tesla was able to start out (with a fraction of Apple's resources) by building their first car on the Lotus platform. The mechanical stuff is interestingly not expensive compared to technology R&D at all. Which makes sense when you think about modern manufacturing and materials.

>Tesla was able to start out [...] by building their first car on the Lotus platform.

Well, Tesla Roadster used the Lotus body (shape) but not the engine and drivetrain.

Lotus didn't make the engine for the Elise. The 'platform' is the chassis/suspension.

Interesting read, thanks for the write up.

Only time will tell how this plays out.

> Of course, there's no reason Apple couldn't suddenly pick up one of Delphi's smaller competitors next week.

With the fallout from VW's shenanigans and its expected effect on Tier 1s in Germany, there should be plenty of suppliers to buy out.

To a certain extent , the story of "important and unique manufacturing processes" is a story every luxury brand tells his customers ,and it's an important marketing tool.

As for most iPhone users, who mostly use the iPhone for social media and casual games, i'm not sure it's hardware differentiation is that critical. Maybe it was before, but it's not today(since android has matured). It's certainly not in the top 5 biggest competitive advantages the iPhone has,while more mundane things have much more importance like: control of iMessage, strong status symbol, people being used to the platform ,etc


There is no insurmontable platform advantage. Microsoft's Windows and Google's Android are in their best shape yet and one can switch platforms without major inconveniences. Maybe there's the exception of very specialized software applications not available on all platforms, but for most apps, they cost 0.99 because that's what they're worth. Hardwarewise Apple is best in class, but Lumias are fine and I'm guessing there's Android manufacturers that don't suck.

My point is that yes, you probably won't get such a good overall package from anyone else except Apple, but that package does cost a ton of money, and you can get something more than decent for a third of that price. Can't really imagine what an Apple car would do that other cars couldn't, except maybe driving itself, but then I don't see why Apple would beat Google & the others to the punch.

Why would custom chips be particularly useful for tomorrow's cars? Commodity chips seem to be good, so far.

Looks like the author stretches the usefullness of Apple' vertical integration too far.

I can imagine one asking the same question with regard to the value of custom chips in phones, just prior to the appearance of the M7 through M9.

It's all part of the apple bullshit marketing:

"Chipworks found that the M7 most likely is a NXP LPC1800 based microcontroller called LPC18A1. It uses an ARM Cortex-M3 core with a customised packaging and naming scheme indicating that it is for an Apple customized part"


That may be true, but for the purposes of the above question, the name of the thing doesn't really matter so much, does it?

I wouldn't question the usefulness of vertical integration of chip design for phones, but I do for cars.

Cell phones have power and size constraints that cars don't.

>radio interface (RF) chips that traditionally were off limits to all but the most advanced chip makers like Qualcomm. These chips rival CPUs in complexity.

This is interesting, I want to know more about why are they so complex?

Analog circuitry is the most complex in chip design. It's part art part science. At the end of the day radio waves are traveling through the air and a lot of things can go wrong.

Hardware doesn't sell the platform, however. The software ecosystem does. Due to the direction OSX is taking, my MBPr I have now will be the last one I own, I will be replacing it with something that runs Windows, most likely a Surface product.

I use Windows 10 on my desktop. OSX cannot be realistically installed on non-Apple hardware, and I built the equivalent of a $4000-6000 Mac Pro for less than half the cost; OSX also has very poor multi-monitor support, which I need, which is a bit ironic given Classic MacOS did it pretty well.

I'm considering ditching my Nexus 5 for a Lumia 950 for proper cross-device ecosystem usage (since there is no "Google Desktop" no matter how much Google tries to push ChromeOS), and if I buy a Lumia 950, I'm probably going to buy a Band 2 to go with it (which Google and Apple both want to just magically go away, along with Cortana on Android). I do not rely on Google Drive or Google Docs, I use Google Photos just as backup storage for photos, and I use Google Music merely as a front end of my collection and do not buy music through it and rarely use the radio.

Also, I'm seriously considering dropping Evernote for OneNote for my personal notes (I already use it via Office365 for Business, and it is such a superior product), I already use Excel heavily for tasks that don't warrant full scale programming attached to a database, I find Outlook to be a superior email client, and I use OneDrive to sync Office and OneNote files across all of my devices (including OSX and Android). All of these are natively supported on Windows 10 and Windows 10 Mobile.

So, explain to me, what does Apple offer me? Or Google for that matter? I don't care what the hardware in the phone is as long as it works, I don't care what the OS does as long as it works: I use a computer to do things, not to sit around and looking at how shiny the UI chrome looks like.

The most ironic thing in my entire life? I spent a good 15-20 years just bashing Microsoft for sucking (legitimately so, I might add), but somehow, with their new CEO, Satya Nadella, they have managed to double down on their core strengths and make products people want.

The biggest problem with Microsoft was the massive lack of core integration of the OS and the hardware, there was no synergy. Major hardware manufacturers would invent standards that OSes (Windows or not) had trouble dealing with, and any time Microsoft tried to force a standard onto manufacturers, unless they could get Intel to bite, the standard would either fail, or be badly implemented in every possible way.

Windows now has their own core devices that are designed for Windows, by Microsoft, from the ground up. Windows for phones are now a first tier product that is Windows, something more than merely being the iOS to Windows' OSX. And, unlike OSX, I am still free to run Windows on any computer I choose to buy or build (including my MBPr, if I choose to) while still being able to choose tightly integrated product lines like Surface without either being second class citizens.

Microsoft, internally, seems to treat Surface and Lumia like their Pixel and Nexus. Product lines that are top tier and show other manufacturers how to build products worthy of Windows.

Does Apple try to build an ecosystem other people get to belong to, even though they want to? No. Does Google do that? No, for the opposite reasons, you CAN use their APIs, but no one wants to.

Microsoft just wants my money, and makes it as easy as possible for me to give it to them. Apple wants my money, but wants ALL of my money and won't let me realistically integrate it into my existing pile of devices. Google wants my money (I think? Do they? Sometimes I question this), but doesn't have a complete ecosystem that makes sense.

And Linux? I ran that as my primary desktop OS for 15 years. Linux on the desktop is a dead dream to me, Gnome 3, and PA, and SystemD, and CFS/cgroups, and all this other weird shit that no one ever wanted just sort of killed it; and I hoped that at least Wayland would come in and finally unfuck the underlying windowing and rendering system (ie, making all the work poured into Mesa/Gallium/DRI3000/etc worth it) just... didn't happen. I still adore Linux on the server, but, yeah, no, it doesn't belong on my desktop anymore.

Just wait until you try a high PPI screen on Windows. You say Linux is a dead dream for you, well high PPI screen on Windows is a dead dream to me. I don't use Metro/Modern UI software, and it seems most software has been stuck at Windows 7 API level for obvious reasons. The result? Ugly ugly ugly. And it will not change any time soon due to 99.9% of Windows (be it XP, 7, 8 or 10) running on cheap hardware with even cheaper TN panels. Even on Microsoft's new hardware, the jarring difference is horrendously apparent even after a quick use. And at this point, if you limit yourself to only the software that is properly PPI aware, you will be much more productive on OS X.

That’s an awful big wall-of-text just to say, “Well, out of seven billion people on the planet, their maximum market share is only 6,999,999,999 customers, because I want something else.”

This becomes interesting, of course, if you can explain that you are an example of a larger market segment, and if you can share with us whether that particular segment is likely to grow or shrink over time.

What direction is OS X taking that makes it unpalatable?

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