Mobile phone makers that can't sell 35 million phones every six months – three per cent of the global market – are doomed, according to Taiwanese analyst outfit Trendforce. The firm has just popped out some predictions about the mobile market, one of which suggests “obtaining upstream components and materials at good prices can …
BMW and Mercedes sell less cars and have a small market share compared to othe manufacturers, they are more expensive yet they sell and the companies make money.
It really depends on the product does it not?
Re: BMW and Mercedes
I think there are significant differences between the mobile business and the car business. The likes of Apple don't make their own phones and they don't make the components that go into them. Whereas MB make their own engines, gearboxes etc... as well as the main body of the cars. Sure, they have a supply chain, but I suspect they are less dependent on buying a few common components available to all their competitors.
Re: BMW and Mercedes
It probably mostly boils down to the ACs last sentence "It really depends on the product does it not?"
It does all depend on the product, or rather the product type.
The market for cars is going to behave differently to that for phones, or that for baked beans, or the one for geostationary satellite launch services. So looking at the car market and trying to say that because it behaves in manner "x" then the market for phones is not going to behave in manner "y" is a bit of a long shot.
"a small market share compared to other manufacturers"
BMW in UK (2012) are 6.5% which given the number of manufacturers (~40) is pretty good. They are only bested by Ford, VW, Vauxhall although VW group are the real leaders with ~20%
The other thing to bear in mind for the (wrong) car industry comparison is that BMW also make Minis and Rolls Royces (so as if Blackberry also made HTC and those hideous gold plated mobiles that cost a bazillion quid) and Mercedes also make Smart cars and have huge chunks of other (mostly far east) car manufacturers, so whilst the brands may not sell that many cars thenselves, the companies product goes into a lot more sales too (not to mention motorbikes for BMW and commercial vehicles for MB)....
Re: BMW and Mercedes
@Dazed and Confused
You seem to be mixing up off the self parts and contract manufacture. It you were to name to components supplied to Apple that could be sold to other companies, you will find the list is almost identical to Samsung.
CPU - No. Apple design the CPU, Samsung fabricate it, however not many people understand that is like being contracted as the printer to print a book where the words are encoded, you can't even read them and your contract forbids you from any attempt to reverse engineer the code so that you can (which is in any case a huge undertaking) and you are certainly not able to pass the book on to anyone else. Apple employ Samsung for this because Apple need the book printed on really thin pages and Samsung are able to do this at volume. However SMC are catching up fast with Samsung in this regard and Intel are also moving into the "thin page print books for anyone business," so Apple will have another alternative supplier there.
Remember Apple are one of the largest employers of chip designers in the world and design their own chips based on the ARM Core. Samsung do buy their own chips off the shelf and have only just announced they are going to be designing their own. Samsung can't supply Apple chips to anyone if they want to but anyone can buy the CPU's Samsung use.
Camera - No. The camera is built for Apple by Sony using an Apple exclusive and proprietary 5 lens design. The CCD also is produced to an Apple specification and is not available to other companies.
Motion Chip - No. Logic secret to Apple and proprietary design.
Logic board - No. Apple proprietary.
Display - No manufactured for Apple by Samsung and LG to an Apple propriety design. These companies can't supply iOS device screens to other companies even if they want to as they contain Apple owned IP. Screens more than most tech contain a blend of IP. Businesses seeking to supply screens, of course, provide a license for the IP they use within the screen, Apple have no such obligation, so keep their own screen design for their own exclusive use.
Biometric security chip/subsystem - No. Apple purchased Authentec and own all the IP.
Battery, maybe but probably not, probably also contains Apple proprietary tech (not sure on this one how much proprietary IP Apple are contributing).
Screws, OK i'll give you that many of the screws used will not be to an Apple owned design and could be supplied to other companies. And other parts like capacitors etc.
Apple are also in the process of investing 15.5 billion USD buying manufacture automation equipment (with a heavy focus on robotics). This equipment will be sited at contract supplier/parts manufacturers, for Apple's exclusive use and to support precision manufacture of high quality parts at high volumes (so much covering milling and polishing and precision fitting during assembly - the 5 already uses a proprietary method for precision matching the plastic antenna cover with a metal surround that has a fit an finish no other company can currently compare to).
Apple's objective is to have exclusive, state of the art joined-up (integrated) manufacturing processes operated by external businesses. The kit will be installed and maintained by Apple employees to ensure it can be transported to other manufacturers/suppliers. Of course there will be many kinds of deal done. In some cases, like a hire purchase agreement, the suppliers will rent the kit from Apple and take ownership after an exclusive period comes to a close (by which point it can be assumed the exclusivity advantage will been eroded as other suppliers will have implemented similar systems). Also for all the points listed above, clearly the design and IP involved is often going to be a two-way conversation with the supplier. That can be a big advantage. To all accounts the Apple Sony collaboration on Camera tech has been extremely beneficial for both parties, with cross licensing of many design aspects that would otherwise be exclusive to each company (though not the entirety of the design).
Look also at Apple's recent investment in synthetic Safire manufacture. Much stronger even than gorilla glass.
So no the "Apple doesn't make anything" meme lacks understanding of the real picture and how modern business is conducted and the deep integration they have with their supply chain whilst preserving maximum flexibility.
Whereas MB make their own engines, gearboxes etc
"The likes of Apple don't make their own phones and they don't make the components that go into them. Whereas MB make their own engines, gearboxes etc... as well as the main body of the cars. Sure, they have a supply chain, but I suspect they are less dependent on buying a few common components available to all their competitors."
Sorry but that's just not true. Of any modern mass-market car the majority of components come from external suppliers. Mercedes does design some(!) of their engines (not all of them, some are bought in from other mfgrs) but even there lots of parts like pistons, bearings and other stuff all are made by external suppliers.
And not all components made by these external suppliers are open market parts, quite often parts are custom made for a customer (i.e. MB or Volkswagen).
The reality is that the amount of stuff that is actually made by MB (or any other car manufacturer) is very very small. Car manufacturers nowadays merely assemble the externally produced components.
Re: Whereas MB make their own engines, gearboxes etc
With cars, the differences in component costs vary greatly between manufacturers - i.e. the engine. However, if you choose to dig to deep into this metaphor, I'm sure it will fall over as BMW/Mercedes will be paying the same for one particular set of tires as all their competitors...
With mobile phones, while the CPU may differ, the price difference is insubstantial compared to the discounted price at volume. My understanding is that small runs (<10,000 units) of a custom ARM processor are in the order of US$25/unit. This drops to the US$7-US$14/unit mark when ordered in sufficient volumes.
Similar economies of scale apply to the screens and the RAM/flash.
And there will be assembly on top of that.
If Apple/Samsung can make a US$200 phone and sell it for US$500 all is good.
If BB are making a US$300 phone and selling it for US$350 it might be time to dump the shares....
Where next ?
This is correct if you take the existing market as a snapshot in time. However, we're getting to a point in Smart-Phones where the hardware differentiation between top end models and lower-mid range devices is eroding.
Like with the business PC market, once CPU's got to 2.4GHz single core, or the first generation of dual core chips, that was enough power to do 95% of the tasks, so it became a race to the bottom and a market with only enough margin for those who could off-load massive amounts of desktops and see a return of 5%. The PC market consolidated into mass production 'good enough' desktops and premium workstations.
The smart phone will and is following this trend, where the differentiation will be in the quality of the materials used and the operating system, however, for much of the planet the price point of $550 for top end devices is out of reach. Where the large players will engage will be in the low-middle arena, something that Motorola has quite smartly identified - as there is evidently no room in the top end- high volume sales bracket for anyone besides Apple and Samsung ( currently ).
Watch for Huawei and Lenovo to join Motorola with a concerted effort in the $100-$200 bracket. The western market for top end devices is slowing, people may chop and change brands occasionally, but the real growth is in India , China etc. The low margin phones will still make a whole lot of capital to the vendors peddling last years tech as 5% profit on a billion device sales is still a healthy profit for those that can scale and ship volume.
Apple will never be in this market, no matter what the analysts or stock holders tell them to do as it's not what their brand represents. Had they wanted to launch a low cost phone, they would have done it with the 5C - they didn't and had they launched a $200 device it would have damaged the brand and crippled the very high margin premium ( 50% ) device where they make all their cash.
There is room for Blackberry but its in the enterprise sector, best strategy for them right now is to get their software onto iDevices , Android and WinPho providing the kind of end to end security that the Enterprises used to enjoy before a marketing firm re-invented the market ( I'm an Android User but still respect what Apple did ). Better to sell a few hundred million software licences on other people's platforms than to compete in a market that currently isn't allowing others to compete in.
It's a consumer market not a tech one
This is what killed Blackberry. Over five years ago the rate of growth in the core business market for Blackberries, started to slow. It had been exponential as businesses adopted mobile email. In the tech world it's hard for us to realise how slow some industries can be. There was growth there but saturation was starting to happen.
But just at the same time the teen market discovered BBM. A Bold or Perl became the cool device and if you didn't have BBM you were a social outcast.
This kept up Blackberry's rate of growth. And they started to believe it would go on for ever. That there were always new markets and opportunities. That something intrinsic about Blackberry meant that they would always grow faster and faster.
Of course they didn't seek the teen market. There was an ironic period where chief executives had iPhones and their daughters had Blackberries. Not something anyone in the industry could have predicted or planned for.
But it was all built on straw. The core market was what mattered. Teenagers are fickle and the next new thing was around the corner. While Blackberry bought QNX and desperately wanted to be Apple, the teenagers were getting bored of their devices and moving onto iPhones.
So we saw some rubbish phones such as the Storm, Torch and 9900 which alienated the core. In at atmosphere where the corporate users wanted iPhones it made the decision of an IT department to stay with Blackberry hard to defend.
So both the teens and the suits moved to Apple. The mavens have long since decamped to the Galaxy (note, not Samsung, not Android but the phone to have is an S3 or S4), and they are sniffing around for what next. Lumia smells good.
Blackberry will never recapture the youth market because it was just a fad and they have passed through. It's not about how good the phone is, or the ecosystem but about fashion.
Blackberry needs to play to its strengths: efficient email, security, good qwerty keypads and a short-cut filled UI. They should build something that does this with e-ink and have amazing battery life. Forget music and videos, forget chasing young girls and stick to its knitting.
And while we are here Apple should be watching and learning. When the fashion moves away from you it's impossible to win it back. Nothing is less fashionable that something that used to be hot.
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