Apple’s Risky Balancing Act With the Next iPhone

Jason Snell, in a terrific column for Macworld:

This is one of those areas where Apple may be the victim of its own success. The iPhone is so popular a product that Apple can’t include any technology or source any part if it can’t be made more than 200 million times a year. If the supplier of a cutting-edge part Apple wants can only provide the company with 50 million per year, it simply can’t be used in the iPhone. Apple sells too many, too fast.

Contrast that to Apple’s competition. On the smaller end, former Android chief Andy Rubin announced the Essential phone, but even Rubin admitted that he’d only be able to sell in thousands, not millions. Same for the RED Hydrogen One — groundbreaking phone, hardly likely to sell in any volume. The Google Pixel looks like it’s in the one million range. Apple’s biggest competitor, Samsung, has to deal with a scale more similar to Apple’s — but it’s still only expected to sell 50 or 60 million units of the flagship Galaxy S8.

As one DF reader (thanks, SH) put it in an email a few weeks ago:

People commonly think that scale is an unambiguously good thing in production, but the tremendous scale at which Apple operates shows this not to be the case. Annual iPhone production is so large that Apple is likely experiencing diseconomies of scale, a phenomenon one doesn’t often hear about. What significant, break-through technology can a company practically introduce to 300 million new devices in a year? I’m not even sure it would be physically possible to manufacture 300 million OLED screens in a single year, for instance. Much less any more dramatic change, like new materials or manufacturing processes.

It’s not just this year that Apple has to pull off a risky balancing act regarding the features and components of the new flagship iPhone. It’s every year. I don’t think that balance is attainable without a change in strategy to add a new higher-priced lower-volume tier.

★ Monday, 17 July 2017