Apple: The low-cost producer

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.

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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

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193 comments
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  • RE: Apple: the low-cost producer

    I have a hard time believing that you think $500 for a tablet and $1000 for a notebook is low cost. Now I know the article is full of it once I read this line:
    [i]PC sales are dropping and we?re just getting started.[/i]

    An article on ZDNet just stated that PC sales were up 2.6%. You need to do better research.
    LoverockDavidson
    • RE: Apple: the low-cost producer

      @LoverockDavidson If you had read the article, you would have noted that $500 for a tablet is cheap if you look at the price range of tablets of similar specifications and functionality. And again, if you had read the article, you would see that the author is not suggesting that "$1000 for a notebook is low cost." Rather, the author is suggesting that "$1000 for an ultrabook is low cost."

      Regarding your reference to the article, you missed an extremely important keyword: "just." PC sales were up JUST 2.6%. In fact, if you had read the author's statement that "PC sales are dropping," with an open mind instead of a cynical one, you would understand that the author means to express that GROWTH in PC sales has slowed significantly.


      &tldr; Learn to read. =)
      fumoboy007
      • RE: Apple: the low-cost producer

        @fumoboy007
        I read the article and I still stand by my statements. $500 is too much for a tablet that only has limited use, and $1000 is too much for an ultrabook which is a notebook when you can buy 2 for the same price. The other article clearly stated PC sales are up. I'm right and your wrong.
        LoverockDavidson
      • RE: Apple: the low-cost producer

        @fumoboy007 [i]If you had read the article, you would have noted that $500 for a tablet is cheap if you look at the price range of tablets of similar specifications and functionality.[/i]

        Just bought the Acer A500 for $300.00. Similar specifications and functionality.
        Badgered
      • RE: Apple: the low-cost producer

        @LoverockDavidson

        "I'm right and your wrong."

        Priceless.
        rbgaynor
      • Similar, but still way worse than iPad; hence the difference in price

        @Badgered
        DDERSSS
      • RE: Apple: the low-cost producer

        @fumoboy007 Not really, the Viewsonic GTab is only $299 (not running honeycomb but a Modding favorite!

        The Transformer is $399 and may not have the build of the Apple but in other areas it is as good.

        The XOOM is $499 for the WIFI version and the only thing the iPad 2 has over it is weight. Everything thing else is steadily swinging the XOOMs way... The 3.2 Update should correct the Browsing Issues and Add the SD Card Support thus making it the Tablet to beat for Build Quality and Feature Set amongst the Honeycomb Bunch.
        slickjim
      • RE: Apple: the low-cost producer

        @DeRSS, depends on what you use it for...

        If you use it for watching HD video on the Tablet, then it is better.

        If you use it for Gaming Emulators with a Bluetooth Controller then it is better.

        If you use it to purchase books from within your eReader Apps like Kindle or Nook, then it is better.

        If you use it for GPS then it is better.

        You see, better is relative!
        slickjim
      • Message has been deleted.

        ParsonsJon
      • RE: Apple: the low-cost producer

        @Badgered

        I have an iPad 2 and A500. The A500 is .. "nice" .. but it doesn't come anywhere near close to touching the iPad 2. Mine still hasn't even gotten the official 3.1 update, had to resort to custom roms. 3.1 makes it much better then 3.0.1, but still not close. The screen is also terrible compared to the iPad's.
        tk_77
      • RE: Apple: the low-cost producer

        @fumoboy007,
        Nice try fanboy. He was wrong about PC sales, period. The iPad is great for someone who wants to watch videos, play phone style games, and listen to music.
        randmart
      • ITunes suppliments the IPad

        @fumoboy007 As long as they get people buying media from ITunes they can sell it for that cheap. I buy my media from Amazon because its way way cheaper.
        A Gray
      • RE: Apple: the low-cost producer

        @randmart: "The iPad is great for someone who wants to watch videos, play phone style games, and listen to music."<br><br>Not only are you completely wrong about that (my iPad has replaced about 90% of my laptop use) but it's obvious you haven't checked out the state of gaming on iOS which is well beyond simply "phone style games." but hey, maybe I'm wrong and you can show me a phone running Infinity Blade, Metalstorm or Marathon.
        Andre Richards
      • RE: Apple: the low-cost producer

        @all <br><br>Yes, the iPad is nicer in several ways... but the A500 is also nicer in some ways. SD, USB, etc.. etc.. oh yeah... and price. The point was Similar in specifications and functionality... not an exact match item for item. Sorry, but for saving $200 (even more if you consider I can make it a 48GB tablet for less than any wi-fi version of the iPad) it works great for me.
        Badgered
      • RE: Apple: the low-cost producer

        @DeRSSS [i]Similar, but still way worse than iPad; hence the difference in price[/i]

        Way Worse? Seriously... you have too high an opinion of the iPad.
        Badgered
      • RE: Apple: the low-cost producer

        @tk_77 [i]The A500 is .. "nice" .. but it doesn't come anywhere near close to touching the iPad 2. Mine still hasn't even gotten the official 3.1 update, had to resort to custom roms[/i]

        "nice"... hmm.. I suppose that depends on your point of view.

        Mine had the 3.1 update ready to download and install the day I bought it. Which is really "nice" btw.
        Badgered
      • RE: Apple: the low-cost producer

        @fumoboy007 This is the same pathetic thing that goes on when somebody buys a new 2011 SuperWhizBang Turbo V8 Ultra Extra Special Deluxe, made in the Himalay's by Kung-Fu Master motors. They exclaim, " It is just like a BMW/Mercedes/Aston Marton/Lotus, etc (Add the name of the car/motorcycle/ATV/PWC that pushes your button), BUT CHEAPER!!!". If the object of your dreams is not the SuperWhizBang, but one of the aforementioned 'objects'd art', save your bucks and buy the real item, even a certified used can be had for much less than retail. Inverse observation: I know the 2011 SuperWhizBang Turbo V8 Ultra Extra Special Deluxe, and it is NOT a BMW/Mercedes/Aston Marton/Lotus, etc (Add the name of the car/motorcycle/ATV/PWC that pushes your button), BUT CHEAPER!!!"; it doesn't have the component subset, it lacks the build quality, and if your object is peer envy, well sparky, let me know how that works for you. All you Apple/Dell/HP/Whatever lovers and haters, Give it a rest. Well, except maybe you HP haters - they are measurablely terrible - got a labful and their downtime is attrocious compared to Dell servers, as is their support.
        ExEC135CrewDog
      • RE: Apple: the low-cost producer

        @fumoboy007 what this article forgets is that there are cheaper tablets out there that use the same hardware as the galaxy tab xoom and basically ally ipad2 the viewsonic gtablet was down to $280 at one point it has the dual core arm cortex A9 capable of 2ghz, as well as the nvidia tegra 250 8 core GPU/chipset same as the ipad 2 and i believe it had 16gb of storage and either 512mb or 1gb of DDR2 I don't think any of the tablet makers have it down yet, I want to do everything that my PC can(windows Mac and Linux) supposedly windows 8 might be designed to eleviate my woes because it is supposed to be even more universal, I hope Mac does the same for OS but I'm guessing not
        Feds Against Guns
    • Why don't you compare a PC notebook and a $5 calculator?

      @LoverockDavidson <br><br>you say the iPad is expensive yet it is CHEAPER than it's competitors with better specs. Your defence is "$500 is too much for a tablet that only has limited use, and $1000 is too much for an ultrabook which is a notebook when you can buy 2 for the same price." <br><br>IF you don't care about SPECS (Build quality, materials i.e aluminium vs plastic, battery life, weight etc...) then you might as well compare a PC with a pocket calculator... <br><br>what is the point? Seriously the only valid comparison is when you compare something of EQUAL specs.<br><br><br>The Xoom when launched was $800 without a contract and sucky battery life: Wall Street Journal : "Alas, while the Xoom claims up to 10 hours of video playback, I got just 7 hours and 32 minutes. By contrast, on the same test, the iPad, which also claims 10 hours, logged 11.5 hours, or four hours more." Also Ars Technica, Anand Tech etc say the iPad is 2 to 7 times faster than the Xoom in various tests. <br><br>so right now in the CATEGORIES it COMPETES IN Apple is the low cost leader. Saying that PLASTIC PC with sub par components (keyboards, power units, batteries) thicker heavier, generally more fugly (f* up ugly) is cheaper than a MacBook Air (Laptop Magazine reviews it Five Stars out of Five) is pointless.
      Davewrite
      • RE: Apple: the low-cost producer

        @Davewrite
        What is the point? You asked that question and so am I. I won't compare specs because there is no point. Both the $1000 Apple notebook and a $500 notebook will do the same thing. You don't honestly believe that because Firefox will run on a $1000 Apple its somehow going to work better than when it runs on other hardware. Hate to tell you but both will run a lot of the same applications, at least the ones that are cross platform anyway. That's why specs don't matter. If your into wasting money on a metallic case then be my guest, but the laptop's internals are going to be the same and do the same.

        The tablets are still overpriced. The $800 Xoom and the iPad for $500, both overpriced for what they do. You get to watch a movie on it, ooh big deal. $500 for a dvd player, seriously dude.
        LoverockDavidson