Apple was not the first or the only company to look to East Asia for cheap manufacturing, elctronic equipments, chips, or cheap labor. The trend was started and accelerated by motor companies and hardware just followed suit.
Then, some other points are just...there. Apple is America's semiconductor problem because Apple is so big it purchases things in bulk and gets discounts - like every other big company in every industry.
TSMC sold 100% of the capacity to Apple for 3nm chips because no one else had the designs ready, Apple needed them in bulk, and the yield wasn't that high. It is problematic, but you need to mention these things when making a claim.
The problem is two fold - other companies are not really innovating and experimenting at semis with a scale at which Apple is. This is a market failure more than an Apple failure. Others were reliant on Qualcomm, broadcomm, samsung, and Intel, with slower pace of innovation. Then there is Asian countries with cheap economies of scale.
It's one thing to assume the most nefarious intent from the start and then look at everything from that lens. It mostly leads to paranoia, not insight.
It isn't Apple who is the problem here, it is Intel who refused to manufacture ARM chips for Apple. So Apple didn't have much choice as there aren't much fabs around to choose from. Now Intel, sore looser, is competing for CHIPS money against TSMC/Apple (and Intel will definitely get and waste a lot of those CHIPS money thus making the problem even worse). The article, which looks like a hit-piece, is written by a think-tank funded by Omidyar who is pushing for CHIPS and seems to be connected with Intel a bit here and a bit there. Did somebody say "submarine"?
The market changed recently. With ARM (and not sure how many others), it democratized chip design to an extent that companies could design their own requirements, simulate, add standard functionalities, and then find a third party fab which can manufacture that in bulk. The core value transferred from one company doing everything in a centralized manner to three distinct sections - chip design done by individual companies, fab + manufacturing on given designs (eg: SK Hynix, TSMC), and ARM which enables both these sections to function as they do. As with tech markets, once democratized, the overall pie increases massively. (This is a gross simplification and at conceptual level. Not this clear cut, but this is pretty much the value chain)
ARM allowed companies to focus on design, and not having to worry about manufacturing. Nvidia is mostly dependent on TSMC, but truth is they can move to SK Hynix and Samsung without a drop in quality. (Basically whoever has the capacity to build the chips at their nm level).
I laud the authorities for stopping Nvidia/ARM acquisition a couple of years ago. More than any other acquisition, this would have skewed things up massively.
>It's one thing to assume the most nefarious intent from the start and then look at everything from that lens. It mostly leads to paranoia, not insight.
That’s a marketing tactic that even works on HN I’m afraid. Create an enemy and then tell a story about that nemesis.
Our human storytelling brains need to hear tales of good and evil.
If you want to get an article like that ranking that’s one way to do it. Unfortunately.
On the other hand if you have ever worked at a high level in these companies they are hardcore evil. Maybe not in this case but they 100% do the evil thing and press it to their advantage.
Sure but there are different kinds of evil. Some larger categories are:
- Screw everyone if I get more money and power
- Self-aggrandazing evil
- Hurt people for fun evil
- Comic-book style take over the world evil
I think these are sorted in order of commonality. The top one is also the kind boardrooms attract at the upper echelons, just because of how the game is played.
That reads like a bad rationalisation of evil. Survival at the expense of someone else is not survival, it's the law of the jungle. The law of the jungle in the jungle is not evil, but we can do better than that, and we broadly expect better than that from others. So we should do better, even if sometimes to the intentional detriment of our profits and bonuses.
Depends on whether you define evil by actions or motives.
I'd argue that the use of motives to define evil is often used as a - when they do it it's bad/ but when I do it it's fine - excuse.
For that reason I'm not really interested in the 'evil' part of this conversation - rather more what drives perceived bad outcomes.
So all I'm saying is fear is a big driver of many of those bad outcomes. That's not to justify it - but rather understand it as a first step to fixing it.
Note I'm also not saying whether the fear is rational or not.
Yes it’s primarily variations of your first one. At the owner level it has some flavor of the final one you list though.
I’d encourage you to have a conversation with Theil or Larry at some point and really hear in person how detached to the point of ‘evil’ they can get — and wrapped up in reshaping society for their own egotistical reasons.
I would call this "understanding" and reckon it you could use it as a reply to pretty much any comment. Unless you see things exactly as they are and apply no interpretation, then this is the mechanism by which humans "make sense" of the world.
I guess you mean that the story is harmfully reductive or demands further critical examination, but I just want to defend telling oneself stories as a thinking tool.
People committing genocide also presumably don't wake up saying they're going to be evil again. Being able to justify an act to yourself doesn't make it not evil.
A few other things jumped out to me:
- Automotive's advanced features require chips but not the most advanced chips (by design, for reliability).
- Micron's HQ is in the US but has operated globally since 1998 including design. ("Micron really went global in terms of its operations once it acquired the TI DRAM operations in 1998")
- TSMC's 90% share of global semi is why Apple can get the exclusive on advanced processes.
- Isn't a lot of CHIPs Act money help prop up Intel who didn't succeed in mobile and is laying off thousands anyway?
- Apple did not cause poor pay and working conditions in China, the conditions, pay and environmental protections are how China attracts businesses.
- Apple can not tax you because they can not arrest you if you don't pay 30% commission.
- Massimo is medical device company, I'm curious how big a semi concern they are.
> Automotive's advanced features require chips but not the most advanced chips
Exactly, and if Matt Stoller was honest he would bring up that point.
Most automotive chips use 28nm, 40nm, and 60nm nodes and China has been very competitive in this space now because of existing capacity built from OSAT and AMTP consolidation in China by Taiwanese and Malaysian/Singaporean players like UMC before the 2019 HK protests, MediaTek, and ASMPT from the 2000s-2010s.
It's analog chips, 28nm/40nm nodes and Packaging that have been getting a significant amount of CHIPS funding, as well as similar funding from the Japanese, Taiwanese, South Korean, Malaysian, and Indian governments recently.
From a NatSec perspective, it's those kinds of nodes that have a critical impact as most weapons systems can subsist on a Intel i7 and Nvidia Maxwell comparable CPU and GPU.
Think EWS, C-RAMs, Guidance Systems, etc.
> Isn't a lot of CHIPs Act money help prop up Intel who didn't succeed in mobile and is laying off thousands anyway
Those layoffs are staff who don't have experience with High NA EUV processes (aka staff who didn't skill up). I can safely say that.
The CHIPS funding is a mix of subsidizing High NA EUV nodes as well as domestic OSAT and AMTP/Packaging capacity.
Also probably worth mentioning that a lot of the automotive chip shortages were a result of industry-specific factors:
1) Auto manufacturers incorrectly predicted that the pandemic would result in much lower sales, and reduced their component orders accordingly. When auto sales stayed stronger than expected, they were forced to buy those parts on the open market - reducing the number available to other customers.
2) A couple of major semiconductor manufacturers had incidents at their facilities (most notably, a fire at a Renesas fab) which limited production.
Where are you getting that idea? There was absolutely a chip shortage! A lot of electronic components which were readily available before 2020 became unavailable or prohibitively expensive, and stayed that way for as long as a year or two afterwards.
A weird article indeed, and it shows the weak mentality of the author. Apple picked East Asia because East Asia were more productive and reliable. The real question to ask is why the chip manufacturing in the US has been declining in the last two decades?
> This is a market failure more than an Apple failure
Arguably it's a Microsoft failure more than anything.
If they had delivered a version of Windows for ARM capable of seamlessly emulating x86 code with no compromises and released it a decade ago the world would likely be different.
>
If they had delivered a version of Windows for ARM capable of seamlessly emulating x86 code with no compromises
This is hardly possible on most ARM chips because x86 has a much stronger memory model than ARM. Also concerning "with no compromises": common x86 implementations have a very fast implementation of the SIMD instruction sets (SSE..., AVX/AVX2, perhaps AVX-512) that is much slower to emulate on ARM because their SIMD instruction set is different. The only reason why people don't realize this is that a lot of common software makes no intense use of these SIMD instructions. Then there are the subtle parts that (as far as I am aware) the ARM FPU handles multiplication of denormalized floating-point numbers slightly different than x86 (both implementations are allowed by the standard) etc.
Well, Apple seems to have achieved this (for all intents or purposes) on MacOS (https://en.wikipedia.org/wiki/Rosetta_(software)#Rosetta_2 - "In some benchmarks, x86-64-only programs performed better under Rosetta 2 on a Mac with an Apple M1 SOC than natively on a Mac with an Intel x86-64 processor"), so there's no reason why Microsoft shouldn't be able to do the same for Windows? Of course, Apple designed the M series ARM CPUs specifically for their devices, but I'm not sure how much care went into optimizing x86 emulation?
The M1 was significantly faster than other ARM chips.
Why? My impression is that due to Apples permissive licence, they are able to make more changes. If we just look at the mess that ARM is making of Qualcomm situation, where we finally have a performing alternative chip.
Arm hasn't granted anyone else the ability to make significantly modified chips for multiple platforms, so Nuvia were fine while it was all just research.
> Arm's claim against Qualcomm and Nuvia is about protecting the Arm ecosystem and partners who rely on our IP and innovative designs, and therefore enforcing Qualcomm's contractual obligation to destroy and stop using the Nuvia designs that were derived from Arm technology
Its rather telling that Qualcomm are allowed to make mobile chips, but not these ones because they want to "protect the ARM ecosystem".
> Arm hasn't granted anyone else the ability to make significantly modified chips for multiple platforms,
Of course they have. Many of the licenses are TLA (Technology License Agreements) but ARM has also made ALA (Architecture License Agreements) with several companies, apart from Apple also with Qualcomm, nVidia, Broadcom, Samsung and many others.
> so Nuvia were fine while it was all just research.
Nuvia wasn't just "research", they got a very permissive license from ARM to create ARM-based server-architecture and build a business with that, with the licensing contract explicitly limiting their IP to use for servers and only to Nuvia.
Qualcomm acquired Nuvia with the clear plan of using their IP for other use-cases ("powering flagship smartphones, next-generation laptops, and digital cockpits, as well as Advanced Driver Assistance Systems, extended reality and infrastructure networking solutions"). Apart from the fact that Nuvia had no license for these markets, the acquisition voided the license they had and the contract states that without license all the IP developed under the license has to be destroyed.
There is no dispute on this, Qualcomm confirmed this in court, but they argue that they have ANOTHER license they want to transfer the IP to, and that the terms of the ARM-Nuvia Agreement are offending and "a threat to the industry"
> Its rather telling that Qualcomm are allowed to make mobile chips, but not these ones because they want to "protect the ARM ecosystem".
Because Qualcomm is in progress to fragment the ARM-ecosystem, by using its dominant position in Smartphone chipsets to establish its custom architecture as the new standard for other industries.
For decades, ARM is carefully avoiding this to happen, by allowing selected partners to "explore" evolutions of the IP in a industry but with methods to make sure they can't diverge too much from ARM's instruction set.
ARM has designed new architectures (Blackhawk, Cortex-X) which achieve comparable performance to Nuvia's IP, but Qualcomm's assumption is that they can apply Nuvia's IP on top of their existing architecture without the need of licensing any new ARM design.
So there's a catch 22 here. ARM was niche on desktop because no-one made the first move. That is, until Apple launched the M1, which is exactly the failure of imagination of Microsoft that GP is talking about. Though a quick google shows they did indeed investigate this avenue in 2016 for Windows 10, though they obviously didn't commit to it:
> On December 7, 2016, Microsoft announced that, as part of a partnership with Qualcomm, it planned to introduce support for running Win32 software on ARM architecture with a 32-bit x86 processor emulator, in 2017. Terry Myerson stated that this move would enable the production of Qualcomm Snapdragon-based Windows devices with cellular connectivity and improved power efficiency over Intel-compatible devices, and still capable of running the majority of existing Windows software (unlike the previous Windows RT, which was restricted to Windows Store apps). Microsoft is initially targeting this project towards laptops.
To show them that their battery life could go from 2.5 hours to 8 or more, perhaps. That was the Mac experience that customers weren't asking for yet "wowed" them when it came.
they definitely were asking for longer battery life and cooling systems less noisy than a fighter jet, but the supply side of the market was a desert filled with minefields and duds until the M1.
ARM tends to have better performance per watt, leading to improved battery life and thinner/lighter devices at the same performance and price point. Are you sure nobody is asking for it?
Correction, ARM chips tend to be designed for better performance per watt. The instruction set has nothing to do with it. For a long time intel and amd neglected the mobile markets. That is about to change.
It never ceases to amaze me that the "magical invisible hand" folks instantly leap to socialism whenever they actually need to invest in innfrastructure 8-/
If intel/amd/etc can't build their own fabs, and expect we-the-people to pay for it, then we-the-people should jump to socialism and nationalise the lot.
> It's one thing to assume the most nefarious intent from the start and then look at everything from that lens. It mostly leads to paranoia, not insight.
The intent is pretty clear and uncontroversial: profit by all means, like any other for-profit entity. Real problems arise when the company becomes (nearly-)monopolistic and their actions start to harm whole industries, like in this case. In other news, monopolies are bad for you.
> Apple buys a far larger share of smartphone and computer semiconductors, given that it accounts for half of global smartphones sales and earns 85% of all smartphones
I feel like I'm getting trolled by the author who is citing sales and profits instead of units produced as a metric.
I've commented (with citations) enough on HN about Stoller's biases and issues around analysis [0][1]
He's upped his content publishing the past few months now that he is competing with Oren Cass to change mindshare and build a prominent profile, but Cass is a Romney protege so he's limited.
If Trump becomes president, Stoller is most likely going to be nominated as an FTC commissioner because of his close relationship to JD Vance [2]
Let me get this straight: the "close relationship to JD Vance" is that he wrote an article that mentioned that Vance said something nice about Lina Khan, and this article means that Trump will "most likely" fire Lina Khan and hire Matt Stoller?
That article is one of the several engagements he's been putting on recently in the right-sphere.
His most damning quote was from 2023 that “fundamentally, my view is that authoritarianism is coming from the private sector,” not from those who’d attempt to seize control of democratic institutions by force. [0]
> Trump will "most likely" fire Lina Khan and hire Matt Stoller
He doesn't need to fire Lina Khan (though he most likely would) because Melissa Holyoak's term is expiring in 2025
Given Android has 71% of the worldwide market share it’s difficult to make the argument Apple holds a monopoly on the smartphone market [1]. Even in the US, until about 2020, Android had a higher subscriber base, and there is no reason the situation could not reverse and iOS drop below its July 2023 53% subscriber market share [2].
Moreover, give iPhones are significantly more expensive than comparable Android phones, Apple’s ability to claw market share back from Android phones over the last decade is the opposite of how a monopolist might operate by flooding a market with cheap alternatives. It speaks to a consumer perception that iPhones have a larger value.
As a tagalong to my comment, I really wish Android phone makers would get their act together and give Apple better competition. If the trends of the last ten years hold up, iPhones might actually become a monopoly product at some point. ;)
Please explain how android isn't competitive with apple.
My experience switching from iPhone to Android is I lost pretty much nothing and gained a lot, particularly by going to a folding phone (which Apple obviously doesn't offer yet). Android is much easier to work with in most ways - iOS is so set in its ways it can be very difficult to do basic things like transfer files from the phone to a computer.
Apple's processors may be faster, but this is becoming an increasingly less useful distinction on phones. The only thing on phones that continues to require increasingly faster processors is stuff like games, and fair enough, but I honestly just don't play them on my phone personally.
I am very happy with my 5 year old Xiaomi Android phone.
Not sure what kind of competition is needed to browse the internet, watch YouTube, listen music and occasionally shoot few pics.
On top of that, I have been locked out of my apple account for 2 months when my iPad with the authenticator suddenly died, good thing I had a desktop to use as I could not login in my MBP.
Apple just kept sending me emails of them contacting me in two weeks to reset my password and kept not doing it.
And I won't even mention their "privacy" charade. If you forget your MBP password you can reset it in recovery mode and thus access any MBP.
Sure, all your apps get logged off, but you can still open any file.
I hate their products and wish I didn't have to deal with them, but I have to test apps and websites on their hardware.
> I really wish Android phone makers would get their act together and give Apple better competition
Google and Samsung tried and failed. Google with their flagship Pixel line, which just doesn't sell well, so they moved downmarket. Samsung with their Galaxy line, but they're always playing catchup/copycat to Apple.
The sad fact is that 1) Google sucks at hardware, 2) Samsung sucks at taste.
Apple really has a magical combination of (arguably) good taste, and operating chops to deliver the hardware at scale.
LG had great hardware and great taste. Unfortunately, consumers weren't interested, outside of a small minority who liked some of the somewhat geeky features that LG pioneered (like always-on screen display) or added (like fancy audio DACs).
Agreed that Samsung is just playing copycat to Apple. They used to make great, innovative phones without being a copycat, like back in the S4/S5 days, but then they just decided to copy everything Apple did, like eliminating the headphone jack.
I think that’s part of the problem - android doesn’t work as a product model, for literally anyone involved.
Google would not be doing it if it wasn’t for the advertising business. It’s pretty much the definition of a loss-leader to get people into the ecosystem for things that google can monetize. So android as a product is implicitly, foreverially tiedup with marketing and spyware, because google isn’t onboard otherwise. Same as gmail or search was a loss-leader to get people onboard for advertising too. Google only cares about these things insofar as they might stop being a funnel into their money-makers.
SOC vendors can’t make a run providing 7 years of driver/firmware support for a product they sell once at bleedingly thin margins. Or at least, they really don’t wanna.
OEMs can’t make a run providing 7 years of support for someone else’s software, especially when they also have to do a lot of the driver work themselves thanks to IHVs abdicating their job.
Consumers get stuck with a product that loses support in 2 years or whatever, and may even have landmines involved with unlocking it to continue support (Sony wipes the camera firmware if you unlock the bootloader for example). They face a completely unnecessary hardware and software treadmill due to all these other factors. Supporting your own phone is not a reasonable expectations for Joe Sixpack either.
The idea is supposed to be the “linux model” but honestly linux has the same problems, it is reliant on the same unpaid labor around driver work to make up for the inability of vendors to track the ecosystem and provide the long-tail of support. In cases where the vendor can’t open source it, the functionality simply ends up broken, and driver support, kernel versioning, and DKMS is a constant battle for end users. Just like with custom roms for android.
Android simply has too little margin split among too many disinterested parties to ever really work. And fixing it would involve either increasing the size of the pie (margin), which consumers in this segment hate to an unfathomable degree (android users = cheapskates is a reliable first-order approximation, borne out by the app store revenue too).
But that's the free-market system working as intended, right? Literally every penny has been squeezed out of margins, software costs pushed onto free labor in the open-source community, and ad revenue used to contra-fund and push end-user prices even lower. Android is the finest solution the free-market can deliver, that's how the system is supposed to work, and it’s delivered an excellent product for the needs of the customer - it's just you're not the customer, you're the product.
The alternative is vertical consolidation and bringing more things under the same roof, raising the price, and targeting the consumer needs instead of the ad revenue needs. Basically the apple model. But that can never be a viable path in a GPL world. And it will still probably involve paying more - phone costs are currently subsidized by all these indirect costs like ad money and vendors cutting corners on support. There is more work that will need to be done, and that contra-revenue from advertising revenue needs to be backed out of the purchase price, so at the end of the day consumers will simply have to pay somewhat more (hopefully not apple prices of course). But again, people are cheapskates, android users doubly so.
I don't know why people got so allergic to the idea of paying for their operating system, the baseline assumption now seems to be that it needs to be free, and if that's the case you will never be free, only stuck in a choice between advertising-mongers and exploiting unpaid labor. And that can either be in hardware costs, or in actual recurring support costs, but either way, someone needs to be paid to sit down and make sure the bluetooth and sound drivers work.
You see the same problem in software too - open-source projects get commercial entities tapping their value without providing contributions back, or existing via patronage to the needs and goals of the commercial entity. Without an incentive by the actual developers to provide end-user value, and with permissive licensing, you end up with a constant struggle for financial homeostasis. Firefox/Mozilla, for example.
People complain about android but they still are not willing to pay a little more to opt-out of these problems. The revealed preference is for purchase price above all else, and people still think in the yardstick of Apple being "too expensive" rather than Android being "too cheap". The yardstick is still the artificially-cheap advertising-subsidized Android product.
These are fundamentally problems of not enough margins to support all the players in this ecosystem, which leads to them looking for places to find the revenue to make it work. Pay a little more and these problems go away.
If you want to stop being the product, get used to opening up your wallet. That transactionality is a good thing - you can’t really demand boundaries when you’re living on someone else’s dime. It’s Google’s house and they’re letting you crash for free. But this is the very deepest core of the problem - people will do anything except just pay a little more.
You will never stop being the product if you can’t bring yourself to be a customer.
I mostly agree with your take. Mobile is particularly challenging. I'm optimistic about a hardware only startup succeeding (Framework but for phones), but building your own hardware and your own OS is much harder, I think.
For an even spicier take: GPL has accelerated/worsened this trend, imo. Not out of anything they really did wrong, but actually just by well-intentioned success.
It’s about “code revenue” vs “services revenue”. If I can’t sell you a copy of Office 97, well, obviously that pushes things to the Office 365 model. And the unfortunate reality is that a huge amount of important code is now GPL, which means a huge amount of the world’s codebase is now un-monetizable in that sense. This has fueled a massive push for “alternative revenue”, and the whole google model has been that the "alternative source" is advertising dollars.
Moreover, GPL itself has conditioned people that the right price for software is “free”. And obviously software is not free to produce, nor is the ecosystem of phones conductive to the Linux “hardware bazaar” model in the same way as 1990s era IBM-compatible PCs. [0]
Well, if the only valid price for consumer-facing software is “free”, and a huge amount of the software in the world is now un-monetizeable in the sense of being able to sell a copy of the software to fund your R&D effort… obviously that just pours gas on the fire of the tivo’ization and SaaS revenue models. That is a correct business-development response to the changing market conditions.
GPL has essentially forced the collapse of the traditional “fee for source” or “fee for binary” model. I think it probably would have been out-competed by service revenue eventually anyway, given that consumers obviously prefer “free” to paying money, but basically this is an accelerationism thing whereby GPL has more or less collapsed the entire proprietary-software market (to the extent that many people now view hardware that doesn’t have open drives as being somehow fundamentally bad or illegitimate), driving everyone into the arms of the SaaS providers. It has accelerationism’d us right into tivo’ization.
Big “my neighbor’s cats keep getting eaten by coyotes and he says that he just goes to the shelter and gets another cat and I said it sounds like he’s just feeding shelter cats to coyotes and his daughter started crying” energy. Like GPL literally has been so successful that people think proprietary software is illegitimate… except for the “free” ones backed by advertising dollars.
GPL has been feeding consumers to the coyotes. It doesn't mean they meant to do it, but, functionally by killing fee-for-software models and by conditioning everyone that the only valid price is "free", that's what it's kinda done. Proprietary software still exists... you just don't pay with money anymore.
I am of course human too, I groan at the thought of paying $350/year for a personal jetbrains license or paying $1000 more for an apple laptop than a comparable commodity one... but software costs money to develop and you make your choices about what is worthwhile and which relationships you want to accept enshittification on. My point is just that transactionality (ie, you pay money and receive a service) is actually a good thing, because those services are much less likely to enshittify if it's going to come at the expense of actual paying customers rather than just some livestock waiting to be sheared. It changes the nature of the relationship.
It doesn't mean there aren't bad companies that do enshittification anyway, but if the expectation is pay money => receive good, then obviously you can reasonably hold expectations about the nature of what you're going to receive, vs GPL and proprietary models fostering the "it's free, why are you complaining" mindset. GPL and SaaS models are alike in that respect and GPL has both directly reinforced that mindset, and also pushed far more companies to SaaS far more quickly with its own success.
[0] (Wireless+modems have specific regulatory requirements that are inherently incompatible with open-licensing, it is illegal to release a wireless chipset which is capable of violating local band-regulation requirements, which functionally imposes the requirement that devices listen to the local band to detect weather radar upon bootup to see if they're allowed to use the band in a given locality. This is part of why modern routers are so slow to boot up! And to prevent tampering/replacement, this effectively must be put in a closed blob to pass certification. Which is why projects like OpenWRT are struggling with Wifi 6E/6GHz and other newer hardware - when I checked maybe a year ago, there were zero 6E devices supported. And unfortunately, it is not possible to make a very good phone without wireless connectivity. It literally is one of the most challenging domains to try and go open-license on because the FCC ain't playin'.)
Outlawing this "contra-revenue"/ad-supported moel is low-key one of the biggest things the EU could tackle though. Big problem, wide problem.
Granted they're walking down that path with GDPR dismantling a lot of the worst of the surveillance capitalism, and with forcing Android to have actual reasonable OS support lifespans... they are gradually forcing these externalities/defects to be priced in properly. But I think it is explicitly worth stating as an end-goal: transactionality and fee-for-service or fee-for-product is a good thing, because then companies are competing to service customers and not competing for more livestock to be the product.
If you want to stop enshittification, get rid of contra-revenue models. The thing you are paying for, should be profitable to produce at the price you sell it. If you have engineering effort that's shared with other products: fine, amortize/attribute it however makes sense. But if you are selling a widget that costs $10 to produce for $9, on the expectation of $3 of revenue: no, that should be illegal.
If nothing else it's a competition issue, you can't have "honest" firms ever break this situation if you have other companies "dumping" and selling below-actual-cost. It is really no different from any other kind of dumping.
Otherwise, the advertising-supported companies will always be able to out-compete the "honest" companies, so it will always be a race to the bottom.
--
anyway, as far as hardware startups specifically: those exist and they just haven't gotten any traction. Fairphone, pinephone, lightphone, etc. These inevitably end up getting very little traction among enthusiasts etc. I don't think the existence of these solves any real problem with the android ecosystem.
Also, ecosystem is a major factor in OS adoption. Like you could go run MenuetOS right now, so why don't you? Ecosystem and network effect and available codebase etc. So these hardware startups have to work within the existing OS ecosystems etc - almost all of these startups are android and the ones that aren't, frankly are doomed. Consumers don't want featurephone or phone-specific app stores in 2024, especially for some niche product with no actual apps released for it. There is very little point to making a custom OS from vxworks or whatever, that's not where the problem lays here.
Similarly: Framework and System76 are attempting to thread that needle of supported hardware+OS configurations on "generic linux". This exists, just not to massive success or fanfare or changes in how the world works. And they're not re-engineering the OS. Even System76/PopOS is based on ubuntu iirc. Jumping to MenuetOS or other completely-new-OS things is a whole other can of worms.
Despite Framework/System76 existing, the world still runs on Windows 11 ad-supported installs or free Linux labor. So I don't know why it would be different for phone hardware+android.
Overall great comment, I wanted to highlight the part about "dumping". A huge amount of dumping-equivalent behaviour guess on in the software industry, I sometimes wonder what kind of market we'd see if it were prevented.
It's one of the biggest problems with "sustainable software" if you will. How is honest software supposed to outcompete "free", especially for key "platform" things like email, where "getting platformed" (in the sense your mail delivers) is non-trivial?
things like that really need to cost money, because they cost money to deliver. and "I get it with my ISP" isn't a satisfying answer either.
SMS 2FA is another similar problem. It's basically an identifier token at this point and you have very little choice over it etc. I actually have been denied for credit cards twice (I think, microcenter told me why it usually fails for them and it makes sense) because my phone number is in my parents' name... (I pay them for a line on a family plan as an additional line). It's obviously not the same problem but it's getting at the problem of these "bundled" services having become de-facto identity providers.
Cause it's not adobe making photoshop free, right? It's bundled search, mail, identity provider, as a free service (you don't pay with money).
But there are many many smaller places it happens etc. I don't quite know how to draw the line of "this is a feature that's bundled" vs "this is actually a separate service" but like, in the large picture there are places where it's not really questionable, right?
"Free as in freedom" is obviously on the clear side of the line. I don't quite know how to draw it for everything, because again, you can see ways where "free MS windows" could be exploitative even if it were free. I guess that falls into the "actual damages" sort of regulatory scenario.
I haven't exhaustively developed the concept but yeah, I mean, "dumping" seems obviously problematic in a market-fairness sense.
> iPhones are significantly more expensive than comparable Android phones
This misperception is key to understanding the market, which is really two markets: Android has cheaper phones and dominates there but in the mid to high-end market the situation is reversed because the equivalent Android devices aren’t cheaper and because Qualcomm/Samsung lagged so far behind on CPU performance you’re getting something which performs like 1-2 iPhone generations back in most apps.
Breaking out of that dynamic is hard because the Android manufacturers have to share more of their hardware revenue with less service revenue to compensate, so they don’t really have much room to lower prices since they’re already underperforming at the same price points.
What could change a lot would be regulators forcing App Store competition or limiting revenue sharing across units. Apple and Google both benefit from that at the expense of the pure hardware vendors, but I’m not sure how effective e.g. the EU App Store regulations will prove in practice.
It sounds to me like you’re saying that Apple management recognized that an integrated ecosystem (phone, tablet, watch, desktop OS etc…) could offer significant value to its costumers (in Apple’s case, the customer is the end user) while providing sufficient margin to serve as a profitable business model. Google, an advertising company, was focused on giving away free stuff (Gmail, Android, etc…) as an means to build profiles of its users that it could sell to its customers (in this case, advertisers).
A bit off topic, but I personally find Google, and by extension, the Android ecosystem, to be an underhanded business model. I don’t feel bad it’s ending poorly for them. It’s especially rich Google ripped off Apple in order to get Android launched [1].
I don't know how you can call Android, a Free and Open Source OS, "underhanded" in comparison to it's competition. For Christ's sake; Apple is currently fighting the EU over whether or not they have the right to charge developers for using hyperlinks.
You claim, without evidence, that open source software determines the ethics of business models built upon it. This is false. Much of the foundational software of the internet is open source, but internet businesses and organizations run the gamut from philanthropies to crime syndicates.
Conversely, many proprietary business models are carefully hidden from view to prevent people from understanding the extent of the harms. When a software product is made Open Source it fundamentally proves that there is nothing to hide. We can both agree that Google's business model is acerbic, but they aren't putting themselves between the user and the OS like Apple does.
Even if you're the most anti-Google person in the world, you have to admit it's a bit ironic that Android can be built with all Google services disabled whereas iOS, due to it's wonderfully-designed Google Search integration, cannot.
This is such a ridiculous take and a ridiculous cited source.
Apple makes 25% of its profit from laundered ad money. Like you need to stop trying to understand a sophisticated duopoly ecosystem from a fanboy blog.
So because Apple makes higher profit, they purchase a higher proportion of the highest quality parts. And the fact that they choose to purchase from Asia is bad because we want domestic production? I guess I can buy it, but I feel like this is more of a failure of American fabs more than anything.
But the 85% figure is almost certainly profit, not revenue. In that case using that as a proxy for units sold is so absurd that it's bordering on bad faith argumentation.
It really isn't. Apple pays insanely well to exclusively use TSMC top tier node. I would not be surprised if the SoC in an iphone costs Apple 10 times as much as the average android phone SoC.
The “average” SoC or the high end ones in flagships? Don’t be surprised at how much Qualcomm charges for their flagship stuff. Even if Qualcomm is a node behind, they also need their “margin” for making the thing. Apple pays a big design team, but they don’t pay the additional margin on the SoC… just whatever TSMC charges. Remember, Qualcomm has to pay TSMC too.
units sold dont matter when the competition is selling $100 smartphones at a loss. The fact that one company is making 85% of the profits in an entire industry as massive as SMARTPHONES should be terrifying, but i guess we don't care about monopolism for some reason
Apple really is an unusual phenomenon--in most other industries, the bulk of the profit is made on mass-market products, while high-end products are able to cater to a niche that is willing to spend much more. In smartphones, however, the highest-end product you can buy is actually quasi-mass-market--there is no Ferrari or Rolex of smartphones, an iPhone is legitimately the best product you can get, and it's within reach of a substantial portion of the buyer's market.
Not sure if this is good or bad, but it's certainly unusual, and it's part of the reason that this "monopoly" question is sometimes confusing--Apple makes by far the most profit despite also selling the highest-end product, and their unit sales, despite being somewhat less than Android, are still in the same ballpark.
> when the competition is selling $100 smartphones at a loss
That is actually terrifying, because logic dictates they make up profit in other ways. I can imagine how an ad company or nation state can go about it.
I have zero doubt Apple's influence is considerable and maybe monopolistic or something like that in a number of ways.
But I find an article that doesn't even address any other companies a little hard to swallow. Are other companies simply not able to "reshore" chip fabs?
I have no idea what some of the tidbits thrown in about the apple watch has anything to do with the topic. Let alone some of the heavy handed lines in the article that simply aren't supported as far as I can tell.
Some of the lines in this article seem borderline hysterical...
> But I find an article that doesn't even address any other companies a little hard to swallow. Are other companies simply not able to "reshore" chip fabs?
I urge you to look at the earnings of some of the most popular chip manufacturers and then look at the earnings of apple (also ignore nvidia as it is an obvious outlier). Creating a modern chip fab takes A LOT of money and is simply impossible when some of the most popular semi companies struggle to even make a small profit. TSMC's fabless business model allows many chip companies to share the capital investment required, but apple just straight up has the money to make the investments but choose not too. Also it would be quite scary if apple is allowed that type of vertical integration.
It would also mean that Apple built a facility that will be outdated in 1-3 years. They'd end up falling behind and have to go back to TSMC or someone else to supply components or invest billions every year to build out improved fabrication facilities.
Certain kinds of vertical integration can last, but when a key part is a moving target (fab capabilities) or commodified then they are inherently time limited assuming any kind of competition (and there is plenty of competition in the PC and phone markets still).
It wouldn't be. People are just afraid of vertical integration because they equate it to vertical monopolies, when the fact of vertical integration does not itself mean that there is a vertical monopoly.
I agree. I feel the quality of the article leaves something to be desired knowing that semiconductors are purchased by so many different players. Feels like a hit piece.
Yeah I'm a little confused by the premise. How would reshoring chip production be easier if Apple weren't out there buying chips? I get that they are buying up all of the TSMC chips in some segments. Doesn't that just create demand for an alternative? I can't cohere the themes of this article.
It's not just TSMC chips. Apple forces other chip manufacturers into exclusive deals to lock out the ability for 3rd party repair to be done cost effectively and reliably. Apple shouldn't be able to control the chip markets as they do. As indicated in the article they create slave labor conditions in a lot of these manufacturers because they're wholly dependent on Apple's whims. This also creates an e-waste problem globally as Apple inhibits the ability to more easily repair their hardware. Louis Rossman has some great examples [0] of Apple continuing to put defective hardware into devices that Apple knows will, and has, failed and there is no easy way to replace these components because Apple has locked up the supply chain via purchasing all available inventory and having exclusive rights to non-proprietary chips. This means you can't repair a device you own at a fiscally fair price. Instead you're forced into buying an entire assembly so Apple can charge a much higher multiple on a part that has higher margins which may just force you to buy an entirely new product because of the price point differential.
There’s no “forcing” chip manufacturers into exclusivity deals. Chip vendors want the business, and Apple wants stuff customized for them. Plenty of IP that can be used in general market parts, too. Also, I can guarantee you that there’s a good amount of vendors that would rather not be forced to offer their chips that they provide to Apple on the general market.
> There’s no “forcing” chip manufacturers into exclusivity deals.
I'm not sure there's a fundamental understanding of how large businesses are changing their approach to supply chain in the name of competition with this statement.
The choice of these manufacturers is either take the volume order from Apple at lower margins and with stipulations or deal with market volatility. It's the stipulations aspect of what Apple is doing that is anti-competitive and generally horrible for consumers. Do you happen to work for Apple? Seems to be a very Apple-apologetic post for no good reason.
> Also, I can guarantee you that there’s a good amount of vendors that would rather not be forced to offer their chips that they provide to Apple on the general market.
OK. I'll take you up on that guarantee. Feel free to reply with reputable sources on the matter.
> The choice of these manufacturers is either take the volume order from Apple at lower margins and with stipulations or deal with market volatility. It's the stipulations aspect of what Apple is doing that is anti-competitive and generally horrible for consumers. Do you happen to work for Apple? Seems to be a very Apple-apologetic post for no good reason.
I don't, I just work in the industry. These aren't an either-or decision on Apple or not Apple products. IP from developments on Apple-exclusive stuff is used elsewhere. Look at TI's USB-C port controllers as an example used in Macbooks. They have a custom one for Apple, but you can buy their general market parts online just fine. It's not like Apple is preventing TI from selling USB-C controllers.
> OK. I'll take you up on that guarantee. Feel free to reply with reputable sources on the matter.
You won't find 'published sources' on this. You'd need to have a fundamental understanding of semiconductor industry. Support for general market customers is HARD. They tend to be particularly needy, especially compared to the return on investment. If your organization is designed around helping large customers (not just Apple, but any large customer) then you just do not have the appropriate business structure in terms of sales, distribution, etc, to manage that. Companies like TI/NXP/ST have that infrastructure, but there's plenty of smaller companies that just do not really support small customers.
I get that repair shops 'just want to buy the chip', but that's really not what making parts available on the market means. It means fielding questions, publishing datasheets, having FAE/sales support, having distribution channels, etc, which all adds to cost for very little ROI. Repair shops are basically a rounding error in terms of buying power compared to a Samsung, Apple, etc.
> I get that repair shops 'just want to buy the chip', but that's really not what making parts available on the market means.
This is where your argument breaks down at the fundamental level because this is flat out incorrect. Organizations like Digikey, and many others, do exactly this. They've been around a long time and they cater to low volume buyers at reasonable margins.
Unfortunately your argument seems rooted in missing fundamentals and conveniently are ignoring entire market segments to bolster your argument that Apple isn't in the wrong here. They are. And what they're doing is anti-competitive.
Did you overlook the rest of my comment? Digikey et al can handle distribution, yes, and in some cases can offer minor applications assistance, but they are not the manufacturer and therefore do not have the domain expertise required to adequately support the product. Especially complicated products. I can tell you I've worked with distribution FAEs directly, and they're more-often-than-not just messengers used to shuttle information from the customer to the actual manufacturer FAE or direct applications engineer.
They also don't produce any documentation, nor produce any application boards, collateral, drivers, etc.
Market segments that a company (a semiconductor company) wants to service all have different needs. General market/distribution is a very different business from custom/large customer business. Just like it's very different from industrial. Or automotive.
The point there seems to be that Apple is pretending to invest and align with moving production to US, but it's really gobbling up the entire foreign production and not at all interested in the "patriotic" narrative, even if they are marketing themselves as such.
Basically, it's mostly: Apple is lying with their marketing, here's what proves they really don't care about moving production to US, but only about price and their profit margins.
Tim Cook has an obligation towards the shareholders and takes it seriously. As an Apple shareholder who doesn’t live in the US, moving to US chip suppliers would not help with his obligations towards me.
I do like the US - don’t get me wrong - but Apple is in the business of making devices, not making investments the government should be at least facilitating.
>How would reshoring chip production be easier if Apple weren't out there buying chips?
Because Apple's dominant position as a monopsonist means it has price setting power and depresses the profits in the chip industry, making all but the cheapest locations effectively unsustainable. Monopsonists essentially absorb the profits of their suppliers. This is for example why nationalized health services are cheap.
This does not sound like a complete picture. Apple might depress the prices for themselves, but not for other fab customers. On the contrary, if there is a supply issue, with one customer getting all the production, then prices should go up overall, helping competing fabs. In a situation with a huge production shortfall, it becomes a matter of initial capital, with which governments can help effectively (either with subsidies or with tax incentives). If the customers are there and demand is strong, eventual RoI should be ok.
In your example, not only has the government huge bargaining power, but the law itself limits other customers, and this there is no demand outside of the government. In contrast, there are plenty of customers for semiconductors. Demand is still here.
So yes, Apple might reduce TSMC’s margin, but the real problem is not that. It’s that there is nobody else operating on the same scale. The fact that there is no alternative for cutting edge nodes is a sign of a market failure.
Besides, this “it’s Apple fault and they depress margins” sounds disingenuous. Apple famously invested quite a lot in TSMC’s fabs in exchange for this access to the latest nodes. And TSMC also benefits from stable, predictable demand. The real problem is the spectacular failure of Intel and the complete lack of effectiveness of the handful of governments that could do something. Things seem to be changing, even if it is slow, but we should never have been in that situation in the first place.
there aren't that many, that's the point. Apple is responsible for most of its suppliers revenue as the article points out, otherwise it wouldn't have price setting power to begin with.
We aren't in a supply shortage, with the exception of a bunch of AI related chips (the only thing the media talks about, hence the skewed perception) we've bin in a supply glut. Semiconductor revenue declined by 11% last year. AI chips aren't the only chips in the world, DRAM makers like Micron, an American manufacturer are the kinds of companies that are effectively at the mercy of Apple because of how outsized of a portion of the market they are.
There’s at least Qualcomm, AMD, and nVidia. All of these are huge. And then there are the smaller niche actors (who tend not to use the cutting edge, but help with RoI by forming the long tail). Demand is clearly there.
> Apple is responsible for most of its suppliers revenue as the article points out, otherwise it wouldn't have price setting power to begin with.
Apple has price setting power because they helped funding the fabs and the process. I agree that the result is not great for the industry overall, but they did not show up one day and kick the other customers out. Again, the main issue is the limited bandwidth because everyone depends on effectively a single supplier.
> we've bin in a supply glut.
Not on the leading nodes, though, right? The ones over which AMD, Apple, and nVidia are fighting. Or I missed that, in which case I would love to have more information (I mean solid, with numbers). That said, if that’s the case it does not help the story’s argument. Oversupply leads to lower margins, but one customer taking a large chunk of production restricts supply, which has the opposite effect.
> AI chips aren't the only chips in the world, DRAM makers like Micron, an American manufacturer are the kinds of companies that are effectively at the mercy of Apple because of how outsized of a portion of the market they are.
DRAM and CPUs tend not to use the same processes, so the only way they are in direct competition is because investment is limited but that point is undermined by Apple financing the fabs. So what is the actual problem here? IIRC Micron is investing quite a lot in new fabs in the US, with the help of the government, which is exactly what needs to happen.
The more I think about it, the less convincing the whole thing is. The story is a collection of rants because the author does not like Apple, but it is full of contradictions and non sequitur. There are some good points beneath, but they are well hidden and not directly relevant.
Post hoc ergo propter hoc. Sure, Apple offshoring their semiconductor mfg compounded the US' lack of domestic semiconductor mfg capacity/expertise.
Apple also did that because it is a _business_, and has not always been the behemoth it is today. They went overseas because it made more sense, not because they had some anti-American goal of crippling US mfg capabilities.
The AELP is, ideologically, a anti-big-co institute, which is admirable but is also why this piece engages in post hoc ergo propter hoc rather than discussing meaningful policy proposals:
> The American Economic Liberties Project launched in February 2020 to help translate the intellectual victories of the anti-monopoly movement into momentum towards concrete, wide-ranging policy changes that begin to address today’s crisis of concentrated economic power
I have to say I’m glad to hear of organizations mobilizing around these problems. Companies above some size reduce fair competition just due to their size, and we need to stop wasting time litigating technicalities with them. Our existing laws and definitions fall really short of recognizing - let alone addressing - the problem (of how competition with them isn’t fair, how it concentrates power, how consumers have little choice). It’s why Microsoft can get away with bundling Teams or abusing Windows users with dark patterns, why Apple can get away with locking down the devices we own with walled gardens and extorting developers with App Store or payment fees, it’s why Google can operate for two decades as a monopoly, and so on. This needs to change, and fast.
Yeah, it made sense to management looking to increase shareholder value. OTOH, since Apple isn't competing on price, they didn't have to do that. So everything that has ever, or will ever, go wrong with their devices is an entirely self-inflicted wound, and anyone who buys their products gets exactly what they deserve for buying from a company that cares more about profits than the people.
>a company that cares more about profits than the people.
Now you're on the hook for showing us a company that cares more about people than profits... and I mean actually cares where it counts, in budget and headcount and not just in gauzy HR propaganda.
Apple was an Intel customer. Talking about Apple’s role in the semiconductor sector MUST include Intel because one must explain how and why Apple decided to develop their own (first mobile, then computer) chips in the first place instead of sticking with Intel. Why is Intel not competitive? THAT question seems much more pertinent to America’s chip travails
> one must explain how and why Apple decided to develop their own (first mobile, then computer) chips in the first place instead of sticking with Intel.
Re mobile:
1. Timelines. Apple only transitioned to Intel in 2006 on their computer side, the first iPhone was announced in 2006. As a company they had little overall Intel experience. There was no "sticking with Intel" because they'd just switched to Intel concurrent with the development and release of the iPhone
2. iPod. Apple's prior mobile devices were already using ARM processors. That's a lot of experience and existing supply chain connections to take advantage of.
3. Mobile Intel chips sucked. They drew too much power and were not suitable at that time for a mobile device like a phone (already more power hungry with the wireless components compared to something like an iPod).
Right. So the story of how Intel lost the world’s single biggest customer goes as far back as that and raises the question of why the world’s leading, at the time, chip maker couldn’t or wouldn’t make mobile chips.
Also, when Apple switched to ARM for their desktops the core motivation may have been to bring everything in house. But they gained a momentous advantage in the market because the chips they made were so much better than Intel’s. Again, explaining what happened to Intel to make them lag the cutting edge should imo be the key question, not why Apple made a rational business decision (albeit possibly an unethical one. Shareholder capitalism has entered the conversation.).
I don't think chip design conversation, particularly for mobile, really have much to do with the semiconductor production conversation. Sticking with that theme when Apple was doing their own mobile CPUs with ARM Intel's semiconductor fab capabilities were industry leading.
I think Intel probably deserves a mention in the article but that line of question feels like the wrong angle of approach for it.
Intel was the last company to have domestic leading edge fabs and they used to be one of (the?) highest volume producers by wafer count so they're a pretty big part of any conversation about US semiconductor manufacturing. Another is AMD and their fab spinout as GlobalFoundries, and why GF stopped at 12nm.
You say Intel’s semiconductor fabbing was leading when Apple started to do their mobile processors on ARM. In wafer tech that is probably true, I don’t know. But clearly Intel wasn’t making power efficient mobile chips. Either because they didn’t have the design capability or didn’t consider the segment worth it. There’s an interesting article in that alone.
My only point is that the story of Intel’s disorganized retreat is at least as relevant as Apple’s march forward
Intel's relationship to power efficiency is really odd. They only started doing heterogenous/big.LITTLE in 2020 despite ARM based SoCs using it for more than a decade to great advantage. It's not as if portable, battery powered devices was a surprising application to Intel, we've had laptops for decades, and so leaving such strong efficiency gains on the table for years is quite confusing.
This is, again, the difference between an article talking about chip design problems (which America certainly doesn't have) and semiconductor production problems (which America does have).
If you say Apple is America's semiconductor problem, that's a bit stronger than just "the focus is on another company". The focus is on another company to the exclusion of all else, and that exclusion is creating a rather distorted picture of the actual situation.
Lol, maybe the author should ask himself if we ban Apple will we then see the American semiconductor industry boom and take over the world?
If not, then the logic is strenuous at best, you just viscerally hate Apple and want to find reasons to blame it as opposed to doing anything constructive for the American Semiconductor Industry. Something constructive would involve fixing the work ethic of American Semiconductor Factory employees which seems to be heavily lacking compared to their Taiwanese counterparts, a problem that we don’t see with say the AI workforce or any upper order white collar workforce.
>fixing the work ethic of American Semiconductor Factory employees
How do you pinpoint this to be the problem? How are you sure that it's not some narrative used by corporate to excuse outsourcing or putting pressure on wages?
I think an industry where technical knowledge was outsourced for cost cutting reasons for decades now is probably having issues because only the managers are left, and they're not productive on their own. Blaming it on the factory worker seems uncalled for.
Anecdotally I have found it faster to order pcbs and get them shipped from China than get them built locally. I’m not just singling out factory workers, they don’t work hard but their managers and multiple higher levels don’t either and I don’t know why. At times I question their motivation to even do business. I also don’t buy that this is a US wide cultural thing, I’ve had excellent on call responses from AWS, heck even my customer experience from Amazon is more prompt than many of the PCB/ Chip vendors, which is why I’m singling out the semi conductor industry, though I’m sure there any many other industries suffering from the same maladies.
>Anecdotally I have found it faster to order pcbs and get them shipped from China than get them built locally.
I'm not convinced this is because of the workers still. What you have in Shenzhen is that you have everything in one place to build that PCB. Everything your factory doesn't have, you can get from a neighboring company. The supply chains in the US have been starved for years, so if you want to do the same from the US, you have to wait for parts to be shipped from China. Making quick iteration impossible.
Shipping only the finished PCB is of course faster than if the development of the PCB needs multiple shipments of parts.
I don't have a solution for this, but the US outsourced so much manufacturing, that it can't manufacture efficiently anymore.
You don't "ban Apple", you ban some of the tactics and behaviors they are exhibiting. They mention as positive examples US government banning trade with a Chinese memory chip fab (which was receiving subsidies from government to maintain a 20% lower price) which "forced" Apple to rely on an American fab (that's the implication, even if both Micron and South Korean Samsung are mentioned).
Intel also worked on modems for a long time, ultimately abandoning it and selling it to Apple, who has also not been able to bear fruit with that yet. Modems are hard but Intel with their experience could’ve stuck it out and had a competitive modem chip but instead focused on short term profits which have evaporated now. Note I own shares in both companies.
AFAIK Intel went into modem business with Infineon wireless acquisition at 2015, which was doing fine but dold due to global financial crisis. Intel, as always it does with acquisitions, turned this acquired business into a money pit. They forced all the designs to be ported to Intel fab processes but Intel fabs didn't care about any design business especially a side design (unlike TSMC). Apple leveraged Intel wireless as a bargaining chip against Broadcom and Qualcomm. At the end Apple acqui-hired the people from this unit. I see that Apple is much more serious than Intel to get it done.
I guess apple works more as a "cultural monopoly", where if you don't own some apple device you're automatically ostracized by other apple customers. To them apple is more like a fashion clothing company like gucci than a technological one. Apple provides some sort of "privileged status" to their customers, just like purpur in ancient rome, so of course each apple stan considers themselves superior, and to keep their own privilege they need to buy more apple products.
What a bunch of nonsense. I don't buy Apple products because someone might make fun of me if I don't. It's because they are best in class and integrate so much better than any competing offering.
Good for you. That doesn't change the impression that many of us have when we see relatives and friends who buy Apple products yet have low incomes. I'm pretty confident they aren't doing it because of any technical superiority and they certainly aren't doing it because the devices last since they upgrade every couple of years.
I've tried hard to understand their perspective and I've had to conclude that there perspective does not include the technical superiority of the devices but is driven mostly by a wish to seen to be part of the IPhone owning group.
I don't know the right way to describe it but Apple is the gatekeeper to their customers. I think it's accurate to say they sell access to their customers.
I'n saying that from a chip supply perspective Apple is "monopsony-ish" since they control so much of the demand for chips. This is probably true in many areas of their supply chain.
The "smell" of a monopsony is the ability to squeeze suppliers to the point of having the power to drive them out of business if they don't meet your terms.
Monopoly is not the same as anti-competitive tactics: monopoly is simply a control of a market segment, and while GP was using it a bit freely, affluent phone users are certainly a market segment.
A monopoly using anti-competitive tactics attracts regulatory review, but anti-competitive tactics are forbidden for both small and large companies.
The definition of monopoly has changed drastically over the course of time and will continue to do so.
Regardless of what you call it, any market vertical that you can define with less than 5 genuine competitors invariably winds up being anti-consumer and needs to get broken up.
Apple is the focus here, but Google is no better and neither is Microsoft. Search, messaging, email, video--all of these are easily definable market verticals.
All of these need to get broken up until we have at least a half-dozen competing companies in those spaces.
This isn't limited to tech. Grocery store chains, industrial suppliers, financial companies, etc. all need to get smacked with the same breakup stick--especially if we want not just to not only stomp out anti-consumer behavior but also to have genuine supply chain resilience.
> All of these need to get broken up until we have at least a half-dozen competing companies in those spaces.
You seem to be forgetting, we had your “at least a half-dozen competing companies" situation in the past. It was called the late 2000s and the early 2010s. And the reason it disappeared is not the traditional “everybody merges until only two or three are left standing”, it’s because iOS and Android were so much better than the competition that every other phone manufacturer starved to death or switched to Android.
By the time a new generation of smartphones with sufficiently-equivalent OSes had arrived — in the form of webOS and Microsoft Phone — iOS and Android were so established the newcomers couldn’t successfully compete.
Even today, while there are only two major OSes, there are still numerous successfully competing manufacturers: Samsung, Google, Apple, OnePlus, BLU, Lenovo/Motorola, Huwaei, Xiaomi, Vivo, Oppo, etc. They all make mobile phones, with varying levels of market share across the world.
> it’s because iOS and Android were so much better than the competition that every other phone manufacturer starved to death or switched to Android.
I would argue that it was because Apple and Google could cross-subsidize the market from their other buisnesses.
Google viewed the ISPs as an existential threat and saw both mobile and fiber as a way to disintermediate them. Apple saw phones as an existential threat to iPod which was a huge chunk of their revenue.
Google didn't release Android until 2008. As of 2009 Nokia still had 33% market share and even Samsung(13%) and RIM (15%) beat Apple (11%).
> iOS and Android were so established the newcomers couldn’t successfully compete.
That is practically the definition of monopoly, you know?
We can certainly alter definitions when they’re not useful. Anti competitive situations are more complicated these days and redefining this word that is commonly used to point at this type of platform may be overdue. We obviously see definitions change for political reasons all the time these days so I’m not sure why we would avoid it here.
> In 2017, when Apple announced it was moving away from using UK-based Imagination Technologies for graphics processors, the company lost two thirds of its value overnight.
I'm not sure what the author is suggesting here. They licensed technology from Imagine Technologies, so therefore they must continue licensing their technology?
Also: Imagine Technologies is a chip designer, not a chip fabricator. It's stuck in at the end of a paragraph about Apple's suppliers, but unless I'm mistaken—which I absolutely could be!—Imagine Technologies wasn't one. Also it's a UK company, so I'm not sure how Apple ending their contract with Imagine Technologies hurts the US's semiconductor problem.
> I'm not sure what the author is suggesting here. They licensed technology from Imagine Technologies, so therefore they must continue licensing their technology?
I think you're overreading it. I don't think the author is arguing that Apple must stay a customer. Rather they are making a point about how much power Apple has a company. They clearly have the power to make or break other companies. That of course doesn't make the rest of the article correct, but the point about Apple being very powerful does make sense to me.
> I think you're overreading it. I don't think the author is arguing that Apple must stay a customer. Rather they are making a point about how much power Apple has a company.
Maybe, but to me it reads more like "I'm writing a piece complaining about Apple, so I'll bring up every complaint about Apple I can think of, even if they're not really related to the article topic itself".
These two articles are much better at explaining why any smartphone or computer manufacturer could never hope to source most of their components from the US.
It's not just about semiconductors, but the entire supply chain.
This is a pretty disappointing article with some very questionable examples.
The Imagination Technology example in particular is poor since they were a supplier of intellectual property, not physical goods. So Apple’s usage of them as a supplier had limited bearing on the firm’s other customers or lack thereof. Similarly, the ban of Apple Watches over IP theft has nothing to do with the supply chain issues that the authors attempted to outline.
The thesis is also all over the place. The title indicates the problem is semiconductors, but then lots of the arguments have to do with suppliers outside of semiconductors. If Apple’s reliance on TSMC is the big problem, then why isn’t even mentioned that TSMC is the only competitive fab on cutting edge nodes?
Lastly, the overarching theme is severely misguided. All of these supply chain dealings are as old as semiconductors themselves. When the industry moved towards targeting consumer electronics in the 70s, semiconductor manufacturing moved out of the US long before Apple was relevant. And if Apple weren’t a powerhouse of consumer electronics today, other companies would be doing the same things. It’s just part of the nature of trying to manufacture and sell mass market electronics.
It's a strange article. The title says Apple is the problem with the domestic chip industry and then goes on to state how Apple put in orders from both of the new domestic fabs 1-2 years ago.
Then it goes on to state that Apple stole technology when that is not actually a fact -- it's part of an ongoing legal battle that hasn't been proven (innocent until proven guilty in America right? Right?).
So, it just comes across as a weird hit-piece with some pretty shaky arguments.
I think a solution is something the government needs to do, I don't believe there is a free market solution to a problem caused specifically by a free market.
When companies are so big that their value is measured in the trillions I think the line between the two is blurry. These companies are managed top down internally after all, so they’re just a smaller “Soviet” situation.
The Soviet situation is top down planning based on what "should" be produced. Actual consumer demand isn't important. The Soviet union would decide some years that industrial equipment was the priority, then years later consumer goods.
Apple is bottoms-up (through customer and market data), with the leadership approving recommendations from the bottom based on what the consumer wants.
The difference appears in failure. 100,000 companies can bankrupt before reaching a single $1 trillion company and that's just markets working as intended. But the government doesn't get that failure mode, at least it's generally not approved of. Apple wasn't, and isn't, the only company trying to be in their position, but they are one of the few trillion dollar companies.
What incidents over the past ~2 years, with constant layoffs in the industry, give you the peace of mind that there are in fact, consequences to mismanagement when running big companies?
The idea that introducing more regulations will foster the U.S. semiconductor industry doesn’t make sense. History shows that heavy regulation often stifles competition and innovation, leading to stagnation—similar to what happened in Russia’s outdated industries. Instead of imposing more rules that could entrench dominant players, the focus should be on creating an environment that encourages competition and innovation. Overregulation risks making the U.S. chip industry less competitive globally, which would undermine efforts to revitalize it.
> Instead of imposing more rules that could entrench dominant players, the focus should be on creating an environment that encourages competition and innovation.
How do you "create an environment" without "imposing more rules"? If you don't really do anything, status quo remains. I guess you could be referring to rules that need to be abolished, so I wonder which ones are really stopping competitors to Apple from springing up that we should do away with?
Why bring up Russia when we have the Chinese example? History shows that China has captured huge industries by using heavy-handed government regulation
>the focus should be on creating an environment that encourages competition and innovation.
What would that be exactly? Seems like an easy thing to say without specifics, but things like environmental rules and minimum wage laws exist for reasons. If those are obstacles, I'm not sure they're worth discarding.
What are you talking about? History shows that a partially communist country that has extreme regulation has come to dominate huge swaths of global business.
I’m not sure the argument holds water - it seems to be that Apple has huge market power (yes), and manufacturing in Western world basically moved to China (yes), India (yes). But it’s hard to say this is Apples fault.
If Apple had not been there, are we saying manufacturing would have stayed onshore - steel foundaries, car factories and chip manufacturers- I mean China and India account for over 3 billion people, who want roads, houses, cars and washing machines. Where else are the factories going to be - the weight of demand means even if US owned the factories they would still be in Guangdong.
So yeah, Apple probably misuses its market power, but it’s hard to imagine it did anything but tip the playing field further down the way it was already pointing.
So if we tax or punish Apple, do we really think it will all flip back?
My personal take is that energy and computing are the things that need to be in shored - no matter the cost differential. Industrialised counties, hopefully, will become energy independent (lots of solar, lots of insulation, lots fewer transport) and computing is going to be similar - focus on that verifiable secure designs
Intel should have produced ARM chips for Apple as a foundry. If they’re to be wildly successful again, they will be doing this anyway. They gave up 18+ years out of x86 pride and bad leadership. I hope Gelsinger can beat TSMC at the process technology game and win Apple’s business.
I think we’d be better served with 3 or 4 companies with close-enough-to-cutting-edge fabs than just Intel. The times when Intel was the undisputed king were not that good in the long run. We need alternatives.
"With this position, Apple uses its outsized buying power to squeeze the margins of its suppliers such as Foxconn, leading to poor pay and terrible working conditions in Chinese factories."
So Foxconn is either choosing to not do business with Apple's competitors who would pay more (??), or the competitors can't place orders of the magnitude that Apple can and Foxconn workforce would just be smaller with a lot less people being employed.
The intellectual dishonesty in the argumentation is so bad that I'm pretty sure I'll skip future Matt Stoller articles.
But there's a hint of dishonesty in your retort too: obviously, there are competitors who would pay more (and they are paying more elsewhere, since their margins are so much smaller than Apple's), but for much smaller quantities of production. A supplier like Foxconn can't afford to lose a customer like Apple because they were already selling their services cheap with low margins. Apple is basically squeezing them ever more — instead of growing business needs leading to improved conditions for employees, Foxconn is forced to provide more for less because Apple can demand that "or else".
I am not saying this is true, but this line of thinking is still obvious just from the short quote you posted.
In this case, people are the problem for being suggestible and buying Apple obsessively. I've worked for 3 different tech companies which bought and forced me to use an expensive company-supplied MacBook, in spite of the fact that their software project ran in production on Linux which is free. The problem is that people are brainwashed.
That says more about you than about those making those decisions. Have you ever spent the time to figure out why those tech companies might prefer to issue Macs? To look at their total cost of ownership numbers, at the availability of configuration management and security software, at levels of support, and at overall reliability and machine lifespan?
I've been involved in a few exercises to decide what type of machine to use as a standard developer spec device. MacBooks generally turned out to be our best option when taking all requirements into account.
Linux-based offerings are getting steadily better, which is a good thing, but levels of support are still a bit of a problem.
One of the companies I worked for (a non-profit), the product I was working on was 100% open source and 100% running on Linux, but they still forced me to used a company-supplied Apple Macbook instead of letting me use my personal computer which would have cost them nothing.
In the 2 other companies, I started work with my personal Linux computer but they forced me to switch to a company-supplied Macbook later. It's not about costs.
Every company I've worked for in recent years has blocked people using their personal computers for work, for compliance reasons. Unless you could prove that the personal devices are under the same compliance regime you'd fail any audit.
Even non-profits often have to abide by the same compliance requirements, often insisted on by their funders.
Issuing a standard computer with a standard managed configuration just removes a ton of headaches for IT.
> With this position, Apple uses its outsized buying power to squeeze the margins of its suppliers such as Foxconn, leading to poor pay and terrible working conditions in Chinese factories.
I'm sorry what? Poor pay and working conditions in the semiconductor hubs of China has been a problem as long as and before Apple made the iPhone. Apple certainly isn't HELPING that situation, but none of them are. All these fabs have made the news at different times for everything from suicide prevention nets to using slave labor to make Apple products, sure, along with every other major tech OEM in the business. I'd be shocked if you could find ANY large manufacturer of these things that hasn't been embroiled in one scandal or another over shitty conditions in their factories.
> Even for the American suppliers who have managed to stay in business, things are hard. With Apple accounting for most or all of the revenue of many of its suppliers—by buying most of their output and blocking its competitors from using similar components—suppliers “dare not put a foot wrong” by speaking against Apple, or even mentioning it by name.
Then how do you know if they refuse to talk about it? This feels like a piece banking on outrage clicks about Apple.
> In 2017, when Apple announced it was moving away from using UK-based Imagination Technologies for graphics processors, the company lost two thirds of its value overnight. Apple’s monopsony power means component suppliers have few buyers.
Yeah, Intel lost a bunch on the stock market too when Apple announced they were rolling their own silicon. Losing Apple as a client is absolutely going to suck for any supplier and a stock dip makes perfect sense in that situation.
Like, none of this is strictly wrong but it's just describing the highly centralized nature of this industry. None of this is unique to Apple. I'm sure Samsung would have no issues at all swinging suppliers by the tail if they were so inclined to do everything outlined here, and I'm sure they have too.
Monopsony is correct in that case, meaning one buyer. The argument being that Imagination Technologies essentially had one buyer due to Apple's outsized demand for their component. When Apple left, their demand was substantially reduced with no one (or group) to pick up the slack. TSMC is in a better position, everyone is clamoring for their products (or really their services and production capabilities) so if Apple left they'd hurt a bit, but all the other buyers would be thrilled and TSMC would see a blip for maybe a quarter.
>Poor pay and working conditions in the semiconductor hubs of China has been a problem as long as and before Apple made the iPhone. Apple certainly isn't HELPING that situation, but none of them are.
When the dominant player comes to town specifically BECAUSE of these terrible conditions and low prices, and use their market power to push prices even lower, they are absolutely part of the problem.
It's not unique to Apple, but Apple is far better at it and far more focused on it than anybody. It's Tim Cook's particular strength, why he took over after Jobs died and has been a major focus of the company.
Seems like I read this article different than many others here...
I didn't read it as "Apple is the problem because they are evil", but as "Apple is the problem because they reached a critical scale in this industry".
No need to rush to defend Apple for being accused to focus on profit, no need to start 'Whataboutism' how other companies have similar goals. Someone describing how Apple took actions in the interest of maximizing its profit is NOT slander or bashing, it is FINE that they do that.
The article talks about Apple’s sheer size as a buyer and how their actions contributed (and partially even caused) the current state of this supply-industry, and how important it is to understand this and evaluate careful steps to counter this trend.
It also describes how Apple's narrative of being a "good corporate citizen" for forcing its suppliers to setup small-volume production in US is only half of the story, and WHY that is. And this is important to state as well, because Apple is and will continue to focus on maximizing its own profit, which is NOT making them the enemy, but also not an ally.
Both Google and Microsoft had plenty of time, resources and reasons to develop their own industry, they didn't, instead held hostage an insane amount of cash
Now they pay the price
That's what happen when your government consists of clueless warmongers
"Oh no, Samsung is developing their own homemade industry, sabotage! quick!"
I find the article compelling. He cited a lot of other articles, isn't making outrageous claims, provided concrete numbers, and isn't spinning unrealistic conspiratorial claims. The only core feature of human behavior we need to accept to believe the article is that some people are very greedy.
I thought it was weak, his core argument seems to boil down to the idea that if there were more domestic competition then device manufacturers would somehow be willing to buy worse chips for more money. It just doesn't make any sense. The woes of Intel, Micron, etc are nobody's faults but their own.
He's arguing for more competition on the customer side (with Apple) but starting more domestic fabs wouldn't directly help unless they have backing with patience and absurdly deep pockets. A big reason we're in this situation is that it's incredibly expensive to stay at the leading edge, and even when you have the money it's hard to do (see: Intel). Intel is only one node behind (N4 at a fab in Ireland), I'm not sure what will be running in their new US fab in Arizona but it will probably be an older process when they get online. Same with TSMC's facility. Maybe that's good enough, there are also very few customers that have the volume to justify spending on the latest process.
> He cited a lot of other articles, isn't making outrageous claims
One of these citations isn't even about chips, but he kind of implies it is. Not to mention, he said that apple stole technology. That has not been proven, the court case hasn't happened yet. Citing sources out of context, and making untrue claims about what the source says, makes the article less compelling in my opinion.
I was a Windows and Linux user for nearly two decades before really giving Mac an shot, and still engage regularly with both. My first smartphones were Android. I’ve done tons of development work on both the iOS and Android platforms, and been exposed to a mountain of devices from both.
As far as I’m concerned nobody’s even trying to compete with Apple. There are other personal computing products but none of them address the same market as Apple at all. The tiny set of possible competitors for their space all seem to have decided not to even try.
[edit] and, to be clear, I’d very much prefer that they had competition in their segment. Even if I stuck with them, it’d at least put competitive pressure on them to improve and/or cut prices.
That's a weird look. What is that market segment nobody is even trying to compete in?
Integrated ecosystem is something a number of players have tried and failed at, as they simply don't have the resources to build it up and sustain it until they are competitive.
Apple has started small too: tiny little iPods with iTunes + digital content sales really put them back on the map, before they scored a hit with iPhone which was an iPod touch with a modem. They have been riding the iPhone wave since, gobbling up money with iPhone and iPad manufacture and app sales, which allowed them to expand to SoC production for laptops too, which is what got them back on the PC (as in "personal computer") map too.
You also missed that Macs were becoming pretty popular before iPhones existed. There were multiple reasons for this but the timeline is nowhere near as simple as you portrayed it.
They were becoming more popular when they switched to Intel CPUs (was it a year before iPhone: 2006?) and with original Air, but really, this was only felt in the US. With M1 they really went ballistic globally.
But sure, it is a simplistic look: for the purposes of the commentary here, I did not want to pretend this is the full analysis, even if I could do one (and I probably couldn't).
I wasn't that impressed with Android long ago, but decided to give it another look last year when I helped a family member buy a top of the line phone.
Android is still not comparable.
Of course, it all depends on what the end user is looking for, but at least for overall quality of Apple phones is higher both in hardware and software.
The article suggests Apple is using its buying power to push component prices down, so that it can keep more of the profit on its expensive smartphones for itself.
Apple is getting 50%+ profit off of their phones. Not sure their other device categories, but it's probably similar especially with their relentless streamlining of the internals. Moving iPad and all their computers to the same chip family (and manufacturing maybe 2 generations at a time with little overlap), for instance, gives them a substantial (potential) savings across all those product lines due to the combined scale.
Sounds like the tech version of Walmart killing the small town. Except they kill American “tech manufacturing” or whatever you want to call it.
It’s 100% about borderline slave labor pay. I used to think it was because chip manufacturing is very nasty but I think it’s both pay and subpar working conditions.
> Except they kill American “tech manufacturing” or whatever you want to call it.
This is the part I don't understand... they have placed orders with the new fabs that aren't even built yet. How are they killing American manufacturing if there is no American manufacturing for them to buy from?
And it's not just isolated factories. There is a whole ecosystem of interrelated manufacturing & assembly companies that you would have to transplant to the US.
And I keep hearing that there are hundreds of thousands of people working on iPhone assembly. I can't even imagine how long it would take to replicate such a workforce in the US. Wages aside, this seems to be rather exacting, meticulous work with limited paths of advancement. Where are these laborers going to come from?
As Steve Jobs is reported to have told Barack Obama in 2010: "These jobs are not coming back".
Two hundred years ago, it was understood that national borders were things that neither persons, nor goods, nor money, nor information should routinely cross. That understanding was correct and necessary, and must perforce be regained, after who knows what further unnecessary harm has been done.
You would need to provide far more than that. What are you alluding to? 200 years ago was the development of the nation-state as a concept. Borders were completely porous; the technology to close them effectively was more about 100 years in the future.
Also, 200 years ago was the development of colonial empires, which is pretty much the opposite of what you say.
Apple was not the first or the only company to look to East Asia for cheap manufacturing, elctronic equipments, chips, or cheap labor. The trend was started and accelerated by motor companies and hardware just followed suit.
Then, some other points are just...there. Apple is America's semiconductor problem because Apple is so big it purchases things in bulk and gets discounts - like every other big company in every industry.
TSMC sold 100% of the capacity to Apple for 3nm chips because no one else had the designs ready, Apple needed them in bulk, and the yield wasn't that high. It is problematic, but you need to mention these things when making a claim.
The problem is two fold - other companies are not really innovating and experimenting at semis with a scale at which Apple is. This is a market failure more than an Apple failure. Others were reliant on Qualcomm, broadcomm, samsung, and Intel, with slower pace of innovation. Then there is Asian countries with cheap economies of scale.
It's one thing to assume the most nefarious intent from the start and then look at everything from that lens. It mostly leads to paranoia, not insight.