An interesting Quora discussion has been making its way around the web this morning. In particular, a post written by an anonymous user that does a good job explaining Apple’s ability to stay on the cutting edge of technology seems to be very popular.

Steve Jobs himself said that the original iPhone was 5 years ahead of the competition. While that is a debate for zealous Android fans software-wise, most would agree it’s indisputable hardware-wise. Ever wonder why it took competitors a few years to match the iPhone’s touchscreen response?

It’s no secret that Apple is sitting on a truckload of cash. Most investors don’t like a company hoarding cash because it’s a waste of assets. It earns almost nothing in the bank and most believe it would be better spent on strategic acquisitions or given back to shareholders.

According to Anon User, Apple is without a doubt spending its money strategically:

“When new component technologies (touchscreens, chips, LED displays) first come out, they are very expensive to produce, and building a factory that can produce them in mass quantities is even more expensive. Oftentimes, the upfront capital expenditure can be so huge and the margins are small enough (and shrink over time as components become commoditized) that the companies who would build these factories cannot raise sufficient investment capital to cover the costs.”

Apparently, Apple uses its money to pay for the construction costs (or most of it) of these facilities in exchange for exclusivity on the factory and its products for an allotted amount of time. This allows Apple to release groundbreaking products that are initially impossible to duplicate.

This is also how Apple negotiates cheaper component costs. For instance, “I’ll build you this factory to mass produce your new super slim 8MP camera sensors if you give Apple 6 months exclusivity on the sensors and then 20% off each unit after that.”

“If it feels like new Apple products appear futuristic, it is because Apple really is sending back technology from the future. Once those technologies (or more accurately, their mass production techniques) become sufficiently commoditized, Apple is then able to compete effectively on cost and undercut rivals.”

Though we obviously can’t confirm anything, the anonymous poster’s explanation of Apple’s wicked supply chain strategy is very intriguing. We’ve heard before that the Cupertino company held some weight with overseas parts manufacturers, but nothing compared to this.


[Fortune via TiPb]

  • lalu

    I gota question what happens after apple shuts that model off like the iphone 3g what happens to that company

    • Well these manufacturers then redesign their machinery or get new one to produce the new components i would assume,
      nice article btw

    • They work for samsung

  • babeh

    well our indonesian jailed by local police for selling ipad2 other country without local certification and local manual. The ipad2 is not come yet. More mass production please, so we can get/sell legally.

  • Gstring

    Telling peoples how to hold their phone in order to avoid reception issue is what we would do in the future too?I’m not trolling, just curious..still love iPhone btw.

  • Tr0jan69

    “babeh says: July 5, 2011 at 4:32 pm
    well our indonesian jailed by local police for selling ipad2 other country without local certification and local manual. The ipad2 is not come yet. More mass production please, so we can get/sell legally.”

    Objection your honour, fails to show relevance!

    • r0cket

      lol! I objectulate

  • 69

    “Steve Jobs himself said that the original iPhone was 5 years ahead of the competition”

    Not true at all…. HTC produced smartphones since 2003, I agree not with capacitive touch, and a sucky operating system. Apple did NOT invent any hardware they use in their phones, the only strong point was their operating system, I said “was” because indeed Android is eating a big part of their potential customer base these days.

    When it comes to technical points, then I see Apple on the same level as Samsung, HTC and similar manufacturers, just at almost double price..

    • haha

      …”While that is a debate for zealous Android fans”

      • rdqronos

        Ikr? Dude, the iPhone actually was the first of its kind. It was the first mobile phone to incorporate a multitouch screen that simply worked. You didn’t need to hold anything, click anything, you just touched an icon, and shit opened. And also, it did support multitouch. And much, much more. And yes, iOS does outdo Android. Wanna know why iOS doesn’t crash? The same reason Macs don’t crash. The software is designed for the hardware, and vice-versa. iOS is designed for the iPhone, and the iPhone is designed for iOS. Android is like Windows. It’s a so-called “universal OS” in that it runs on (almost) any modern mobile device. The problem, Android isn’t written for every individual phone, which means that there’s gonna be some faulty shit going down.

        Good sir, I believe I have just pwnd you.

  • siralsmooth

    Pfftt, you didn’t pwn anyone. While android is a “universal” phone OS, there is a different variation for each device, however, its the responsibility of the manufacturer to find and work out the bugs for each device. In its stock form, android is better than IOS, BUT, when you root or jailbreak, and start modifying stuff, thats when the problems start. And that applies to both IOS & Android. There is reason my 3GS died twice in 18 mos. Tweaked and jailbroken. And trust me, IOS can crash. Guess you never had a highly modded jailbroken IOS device or you would know this. You should poke around the xda forums sometime, might learn a thing or two rdqronos.

  • Ok