How Apple (AAPL) Sends Back Technology from the Future

Over on Quora, an anonymous author has a fascinating post about another dimension of Apple’s and Steve Jobs’ brilliance–managing its supply chain:

Apple has access to new component technology months or years before its rivals. This allows it to release groundbreaking products that are actuallyimpossible to duplicate. Remember how for up to a year or so after the introduction of the iPhone, none of the would-be iPhone clones could even get a capacitive touchscreen to work as well as the iPhone’s? It wasn’t just the software – Apple simply has access to new components earlier, before anyone else in the world can gain access to it in mass quantities to make a consumer device. One extraordinary example of this is the aluminum machining technology used to make Apple’s laptops – this remains a trade secret that Apple continues to have exclusive access to and allows them to make laptops with (for now) unsurpassed strength and lightness.

Eventually its competitors catch up in component production technology, but by then Apple has their arrangement in place whereby it can source those parts at a lower cost due to the discounted rate they have negotiated with the (now) most-experienced and skilled provider of those parts – who has probably also brought his production costs down too. This discount is also potentially subsidized by its competitors buying those same parts from that provider – the part is now commoditized so the factory is allowed to produce them for all buyers, but Apple gets special pricing.

Apple (AAPL) is not just crushing its rivals through superiority in design, Steve Jobs’s deep experience in hardware mass production (early Apple, NeXT) has been brought to bear in creating an unrivaled exclusive supply chain of advanced technology literally years ahead of anyone else on the planet. If it feels like new Apple products appear futuristic, it is because Apple really is sending back technology from the future.

About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

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1 Comment on How Apple (AAPL) Sends Back Technology from the Future

  1. Apple’s supply chain is the best in the world, and Apple’s success in that field can be attributed to a Steve Jobs decision that can be boiled down to three words: Hire Tim Cook.

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