Comment by prepend
4 hours ago
This has always been my question of why don’t companies just directly emulate Apple.
If lenovo is buying a billion chips a year, why can’t they lock in like Apple?
4 hours ago
This has always been my question of why don’t companies just directly emulate Apple.
If lenovo is buying a billion chips a year, why can’t they lock in like Apple?
> If lenovo is buying a billion chips a year, why can’t they lock in like Apple?
Lenovo controls less of the stack than Apple: CPUs (Intel/AMD), BIOS, operating system, etc. While ostensibly Apple and Lenovo are both selling personal computers, Lenovo is in a (sub-)segment of the market that is commoditized with Dell, HP, etc.
If you need to run Windows and associated (Windows-only) apps, what's special between Lenovo/Dell EMC/HP/etc? How much of a difference is there between Coke and Pepsi?
A lot of vendors hitched their wagon to the Wintel duopoly, and now they're all riding (or being ridden) herd.
All big vendors will place orders some distance into the future. Lenovo does it, too.
You can't lock in prices forever, though. The more volume and stability you have, the more a vendor will be willing to enter long-term agreements with you. Lenovo has less volume than Apple and is not in as great of a financial position, so they don't have as much leverage.
The bigger factor is that Apple already had more margin in their products. The price premium for RAM upgrades on Apple laptops is large, as everyone knows. They could absorb more RAM price increases without being forced to raise retail prices.
I really don't understand why more companies don't emulate Apple in terms of line simplicity. Look at Dell for a great example of a sprawling product mix. I can't imagine having that many product varieties helps with profitability.
In the consumer space, I recently bought a Sonicare toothbrush, and the number of models and combinations is staggering. 1000x plaque removal, 750% plaque removal, it's ridiculous.
PC makers can't count on brand loyalty. If you want a PC and your favorite brand is missing something that a competitor has, it's easy to switch. If you want a Mac and Apple is missing something, it's harder to switch. Enterprise sales are a bit stickier, but not that much stickier.
So Dell, Lenovo, et Al end up trying to address every niche except the focused product catalog niche.
Yeah. Although, there's no "logical" reason for their for their psychedelically large laptop lineup with 50-100 base models. It's purely psychology I guess.
Like Dell Vostro, their "small business" line. Versus Latitude, their "business" line. What on earth is uniquely needed by a "small business" versus a... regular business? Why not introduce a third "large business" line? Maybe a "sole proprietor" line too?
It can only be explained as a psychology play. The dizzying array of options is designed to, I suppose, make you feel like Dell surely has the exact right laptop for you, even if that is bullshit.
It doesn't entirely make sense to me from a psyche standpoint either -- I have no idea why purchasers would possibly feel anything other than anxiety and analysis paralysis. But whatever!
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Dell's claim to fame when they started was they could manage the complexity of a large product mix to get you want you really need. It is a lot of work, but their ability to manage that complexity it what makes them profitable.
Apple has a unique market position due to their OS. A buyer shopping for a Mac can't visit multiple vendors and compare models.
Dell and Sonicare do not have that luxury. They are competing with other PC vendors and other toothbrush vendors.
The strategy is to produce so many models that you appear to serve every price point and need without requiring the user to shop around. You can find something in their lineup that fits your budget or requirements if you look long enough and you don't feel like you need to go looking around at competing vendors as much.
Having may models isn't a high cost because they share so many parts. I bet if you opened multiple Sonicare toothbrushes they'd share many main components like batteries or motors. Dell has a few laptop and desktop lines but they're different combinations of parts within a shared chassis.
Because people continuously underestimate just how good Apple engineering and supply chain management is. And since iPhone and portables is such a juggernaut for them, it goes downstream into every other product line that uses the same architecture. That’s why it was so critical for them to pull off the ARM MacBook transition - the only other alternative for them essentially would have been to exit the market or run mostly at a loss.
They can lock in. However that is risky too - if prices go down they are locked into the higher prices.
More importantly, if you have a locked in price you can sell your products for more profit - or you can sell the things that you have locked in and not have to make the rest of the widget at all. Sometimes someone will give you a good deal to buy out your locked in contract.
Because Apple has the capital to take a loss on hardware indefinitely due to the App Store being their primary source of revenue?
The App Store is in no way Apple’s primary source of revenue.
Apple also makes healthy margins on its hardware products.
But if you read their actual financial reports they have never indicated in any way that their hardware is a loss leader. They disclose this information publicly since they are publicly traded. Yes, the services revenue is higher than Macs and iPads combined and is at a higher profit margin, but hardware also makes a lot of money.
Apple’s only structural advantage should be their custom silicon, but I don’t think that’s a cost advantage as much as it’s a performance and battery life advantage. Apple is still buying huge dies from TSMC and designing them custom themselves which is not cheap. Lenovo shares the cost of designing an Intel, AMD, or Qualcomm chip with dozens of OEMs. Same deal with software: I wouldn’t be surprised if macOS costs more per unit for Apple than Windows costs for Lenovo considering all the employees Apple hires directly to develop it.
Apple in theory should be paying a pretty similar amount of money to make the rest of their systems. They don’t make camera sensors, displays, keyboards, DRAM chips, or anything else themselves.
>But if you read their actual financial reports they have never indicated in any way that their hardware is a loss leader.
Right, I'm just saying they could afford it if it came down to that. They also have enormous margins on their higher-end systems, so they've got plenty of room to lose some profitability before it comes down to that.
Do they have anything like the same volume? Lenovo’s annual revenue is about half of Apple’s annual profit.
They don’t have the same profit margins but they are the #1 volume PC manufacturer in the world. They also own the Motorola smartphone business.
Apple is #4 in PC volume but they certainly make up for it with their smartphone volume.
And of course, they have a lot of service revenue to pad the balance sheet.
I'm not even looking at Lenovo's profits. I'm comparing their revenue to Apple's profit just to emphasize the difference in scale.
By the numbers, Apple is a smartphone business that has a casual side hobby of also being the #4 PC maker. Their PC sales are ~3x less than Lenovo's, but their smartphone sales are 10x their PC sales. There's plenty of commonality so the massive smartphone business surely helps with supply on the computer side of things as well.