Apple: The low-cost producer

Summary:The competition is unable to match Apple's prices in tablets and ultrabooks. The PC world's low-margin, cut-price, zero-investment strategy has crippled them in the new high-growth markets Apple pioneered.

The competition is unable to match Apple's prices in tablets and ultrabooks. The PC world's low-margin, cut-price, zero-investment strategy has crippled them in the new high-growth markets Apple pioneered.

Forget everything you've heard about the Apple Tax.

Tablets No one has come up with a $499 tablet that compares with iPad 2. They are all slower, buggier, heavier, hotter and have less battery life.

Some have snuck in below Apple by using smaller displays, like 7" Samsung Galaxy Tab for a mere $435. That's why other tablets are struggling to get a toehold against the iPad.

But Android is winning the battle for most malware on a platform. A battle Apple is happy to lose.

Ultrabooks Intel is pushing ultrabooks and the name fits the new MacBook Airs. I have last year's 13" 4/128GB model and it is a powerful little machine despite the old 1.86GHz Core Duo 2.

The new I7 MBA is clocking in at 2.5x. Would-be PC ultrabook competitors are complaining that they aren't competitive:

. . . designing an ultrabook based on Intel's technical suggestions will still be unable to reduce the machine's price level to lower than the MacBook Air's unless Intel is willing to reduce its prices, which already account for ⅓rd of the total cost. If Intel does reduce its prices there is a chance for vendors to provide pricing below US$1,000.

But that's not all. Digitimes also reports that even with more than 20,000 CNC lathes operating 7x24, there isn't enough capacity for competitors to match Apple's unibody case design. The vendors can't afford to buy more CNC machines, so they're going for cheaper fiberglass.

The good news: fiberglass chassis will allow them to lower prices by $50-$100. The bad news: it's plastic.

Displays You can't buy a cheaper 27" 2560x1440 display than Apple's Thunderbolt Display. Samsung has announced one - the S27A850D - that might be a $100 cheaper but no one seems to have them.

The Samsung lacks the 49 watt speakers and the world's 1st Thunderbolt I/O hub. The hub supports 3 powered USB 2.0 ports, a FireWire 800 port, a Gigabit Ethernet port and a Thunderbolt port.

OS X Apple OS X Lion is only $29.99. The server version - which includes many services like DNS, VLANs, a cluster file system, mail and calendar servers, and unlimited user support - is $49.99. The only competitor on price is Linux.

Windows doesn't come close at retail. And they won't either: Microsoft needs the revenue to support its money-losing businesses like search.

The Storage Bits take Is this the end of the old no-investment, low-margin PC business model? Yes, it is.

PC vendors let Microsoft and Intel pay for innovation and development while they competed on price. It was a successful strategy, keeping Windows dominant and driving down system prices.

But they assumed a steady-state market. And the smartphone/tablet world is not steady-state.

People who don't need a keyboard on a desk are deserting. PC sales are dropping and we're just getting started.

The low-margin PC model has left vendors unable or unwilling to invest in the costly manufacturing technologies and large upfront payment supply contracts that Apple uses to differentiate itself. Apple also acquires small technology companies as needed to get exclusive access to compelling technologies.

It looks like Apple has built itself a long-term competitive advantage - turning the overhyped "Apple Tax" into a compelling new narrative: Apple the low-cost producer.

Comments welcome, of course.

Topics: Intel, Apple, Hardware, Laptops, Mobility, Tablets


Robin Harris is Chief Analyst at TechnoQWAN LLC, a storage research and consulting firm he founded in 2005. Based in Sedona, Arizona, TechnoQWAN focuses on emerging technologies, products, companies and markets. Robin has over 35 years experience in the IT industry and earned degrees from Yale and the University of Pennsylvania's Wharton... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.