Failure tends change attitudes and while the second coming of Steve Jobs to Apple in 1997 carried with it a measure of attitude, one thing was learned in the wilderness. Fear of failure. The first 10 years of Jobs return brought about massive changes to Apple. iMac. Apple Stores. iPod. iTunes Music Store. Intel Inside. iPhone.
Wait? Intel Inside? Yes, while Apple was rolling out Mac OS X it also had a skunkworks project going to ensure OS X ran on Intel CPUs. When it became clear that Apple’s chip suppliers– FreeScale and IBM– could not keep up with Intel, Apple made the switch. The rest is history. The Mac no longer had to worry about keeping up with Windows PCs and could focus on other methods to implement proper differentiation.
What of the iPhone, Apple’s second great platform?
Apple decided to use the common ARM architecture for the iPhone. Low power, good performance, easily manufactured. What’s not to like? The problem is the same as the Mac experiences with Intel Inside. Anybody can, could, and did use ARM in their smartphones. Apple needed differentiation so it bought P.A. Semi in early 2008, a company founded by a lead designer for DEC’s Alpha and StrongARM CPUs a decade earlier.
Apple, for all intents and purposes, was in the chip design business, and that is the company’s first not-so-secret secret weapon.
Apple’s new A-series CPUs are fully 64-bit (long before Samsung could pull it off on their own chips, long before Qualcomm could do the same) and tend to run rings around competitors for both iPhone and iPad. P.A. Semi became Apple’s chip design firm, in-house, of course, and that created differentiation between iPhone and iPad and other smartphone and tablet makers.
Of course, these devices have other components that Apple does not control. Touchscreen displays, cameras, RAM, and SSD storage come to mind, but it’s not as if Apple has been standing still. The company is a moving target and may own the designs it wants, but third party manufacturers own the components.
That presents a big problem to Apple because those component manufacturers are selling ammunition to everyone, including Apple’s competitors.
Apple’s second secret weapon is money. Lots and lots of money. That hoard of cash allows Apple to invest in manufacturing techniques, and pour effort into R&D that other companies– other than component makers– cannot afford. While Apple may not be the first to market with specific new technology, component manufacturers need to ramp up dramatically to match Apple’s unit number and quality requirements, those numbers and cash on hand and upfront enable the company to corner the market on the best components.
Apple has two not-so-secret secret weapons. Chip designs. And money. We see new chip designs from Apple in Apple Watch, AirPods, and the new MacBook Pro with Touch Bar. We’re likely to see more such designs in future products.
Apple learned a valuable lesson with partnerships. They fall apart. We saw that with Imagination Technologies, the company that supplied graphic chips for iPhone and iPad. Apple decided to bring it all in house and now the former partner is up for sale.
Hardball? Sure. But Apple is playing a game it wants to win.