Ever wonder how Apple can bring out products year after year that are so far ahead of the competition in construction and materials that they seem downright futuristic… all while maintaining huge profit margins? It’s because Apple is using its enormous pool of cash-on-hand to lock up cutting-edge tech years before the competition has even heard of it.
This thread on Quora explains Apple’s unique strategy.
In short, what Apple does is use its massive pool of cash to strategically shop for new technologies and invest in them, allowing them to come to market years before they otherwise have. There’s a price, though: Apple gets exclusive access to that technology for a window of time, and then a heavy discount on it afterwards.
Apple has access to new component technology months or years before its rivals. This allows it to release groundbreaking products that are actually impossible 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.
This is the reason why two years after the iPad, no one can release a sub-$500 tablet that is nearly as well built or constructed. And it’s why the iPhone 4’s Retina Display still has no competition. It’s tech from the future.
- Via Fortune