Think of what it means to sell 200-million of anything. Apple sells on the order of 240-million iPhones each year, and each one is packed with technology components from displays to cameras, from SSD storage to CPUs to RAM, from various sensor, antennas, and buttons to cameras. With one obvious exception*, none of the parts suppliers can keep up with Apple’s demands for components.
Over the next 12 months Apple will ship somewhere on the order of 250-million iPhones, but they will not have the latest and greatest components found in iPhone X. In fact, some of the parts are a couple of years old which helps to explain why the iPhone line expands from iPhone SE at $349 to iPhone X at the other end of the spectrum at $1,149. In between are last year’s iPhone 7 and 7 Plus, and the iPhone 6s and 6s Plus from 2015.
Apple cannot obtain enough parts specific to iPhone X to sell 250-million units.
The iPhone sells in such numbers that Apple often is forced to used older components while competitors, specifically Samsung, but others, can use the latest and greatest because they sell so few smartphones by comparison. Apple sells more iPhones than Samsung sells Galaxy models, so even the Korean conglomerate has its own issues with components. But only Samsung makes smartphones and sell components to competitors, including Apple.
Apple has a problem with parts.
*The exception? The Apple designed, ARM-based CPUs, including the most recent; A10 Fusion and A11 Bionic which powers iPhone 8 and iPhone X. Apple designs the CPUs but manufacturing is farmed out to the likes of Samsung and TMSC in Taiwan.
Apple has a parts problem with technology giant Qualcomm which makes its own CPUs for smartphones and tablets, plus most of the modems and various chipsets in smartphones, including Apple’s iconic iPhone. These days Qualcomm and Apple are involved in a bitter dispute over royalties and contractural arrangements.
Apple has a problem with parts.
Our favorite Mac and iPhone maker is good at design but relies on components manufactured by others. Apple’s own CPUs help to differentiate iPhones and iPads from competitors, but the company relies on Intel, Qualcomm, and other component makers who sell the same parts to Apple’s competitors.
Apple has the money to buy any competitor and most component manufacturer, but even that strategy could go awry in a heartbeat because competition continues to drive the industry forward. Qualcomm and others who build the parts in modern smartphones make it easy for anyone to compete with Apple because all use mostly the same parts, and all smartphones– Android or iPhone– run mostly the same cross-platform applications.
Apple needs unique parts but doesn’t own much that differentiates iPhone from others– except for CPUs and various components here and there. Apple is suing Qualcomm now because it has a second source for modems. Intel.
Yet, even Intel is something of a speed bump for Apple because the Mac relies on Intel Inside and iPhones relies on Intel modems which are not as fast as Qualcomm.
This is a complicated supply chain and component maker problem for Apple but one thing is clear. Apple needs to make more of its critical parts.