Apple spending over $10 billion on robots and lasers... Why aren't their competitors?

Apple is forecasting just over $10 billion in capital expenditures (CAPEX), basically on buying or improving the stuff they use to make the stuff we buy. Bloomberg:

To get a jump on rivals like Samsung Electronics Co. and lay the groundwork for new products, Apple is spending more on the machines that do the behind-the-scenes work of mass producing iPhones, iPads and other gadgets. That includes equipment to polish the new iPhone 5c’s colorful plastic, laser and milling machines to carve the MacBook’s aluminum body, and testing gear for the iPhone and iPad camera lens, said people with knowledge of the company’s manufacturing methods, who asked not to be identified because the process is private.

I've tried, with mixed-results, in the past to explain why only Apple is able to build iPhone 5s-class devices, the patience it takes, the investment in manufacturing and logistics, the cost involved in bringing the future into the present, but this puts numbers on it, and the numbers in context.

Robots, lasers, those just sound cool, but Apple is mixing old techniques with newly invented ones, often side-by-side on the same product line. From Apple A7 chipset to iPad Air to the new Mac Pro they're spending a small fortune to make an even larger one. Or, as Horace Dediu is quoted in the article:

Apple deploys capital as a competitive advantage

Conceivably, other wealthy companies could decide to do likewise. They could even be pressured to. That's what I'm hoping for, because I'd dearly love to be able to get iPhone 5s-class devices from multiple companies. I'd dearly love for that to become the next great consumer electronic battle ground. Because it benefits us.

Go read the article, then let me know what you think.

Source: Bloomberg

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, ZEN and TECH, MacBreak Weekly. Cook, grappler, photon wrangler. Follow him on Twitter, App.net, Google+.

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There are 24 comments. Add yours.

Quis89 says:

Might this lead to job cuts? No thanks. Let's keep actual people employed.

IIJBII says:

Innovation like this is inevitable. Jobs will no doubt be cut but it will bring new jobs as well. Its part of how evolution and the economy works.

iSRS says:

Job cuts where? What would you say to Apple reducing its dependency in cheap Chinese labor, bring some manufacturing jobs to the States, with fewer, yet significantly higher paying jobs to maintain these machines?

That is a trade off I would be willing to make.

If the end result is also that I can by my iPhone 7 with the following? Even better.

Designed and Made by Apple in the USA

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Becjr says:

... This.
Well played.

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Bulldawg says:

Technological advances often displace workers. We can't keep making buggy whips just to keep buggy whip manufacturers employed. The work force needs to adapt and will adapt whether through just finding a new manufacturing job or getting trained for a new career.

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Trappiste says:

"Conceivably, other wealthy companies could decide to do likewise. They could even be pressured to. That's what I'm hoping for, because I'd dearly love to be able to get iPhone 5s-class devices from multiple companies. "

I, instead, would love to get Nokia-class maps and location services from Apple, and better cameras, too. I would the high quality aluminium they use even on an inexpensive feature phones instead of Apple's soft (cheap?) one that scratches on its own.

I guess others invest in what matters more to the end user. By the way, why doesn't Apple have their own manufacturing facilities like e.g. Nokia? Is it because thus they can wash their hands from the substandard conditions in which their products are made -- instead of having to commit to proper manufacturing standards from non-robots' point of view? Just wondering.

I would love my iPhone to be a more ethical product. And to have working maps. And to have a better build quality. And not to be so fragile it cannot take a single drop.

If only Jobs was still around...

Rene Ritchie says:

Nokia bought Navtaq, and has invested heavily on it since. Maybe Apple would have done better buying TomTom (or even Nokia), but that's a great example of an area where Apple didn't preplan enough, and is now struggling to catch up. The inverse of their hardware problem.

Apple has among the best cameras in the business. They've chosen to stick with thin rather than bigger lenses, but they can keep up with a 920, so it's impossible for sane person to find fault.

I don't know enough about working conditions at Nokia manufacturing facilities, or whether they make every component that goes into their devices, and if not, working conditions in every component manufacturing facility. I'd be surprised if there was any major electronics company that could hold its head very high in that regard.

It's a very serious problem.

StuartV says:

"Why aren't their competitors?"

Typical iMore rubbish headline. The Bloomberg article that you sourced says:

"Samsung ... is ... outspending Apple, according to data compiled by Bloomberg"

The same article also says:

"Chief Executive Officer Tim Cook ... is pumping money back into the business as sales growth has stagnated amid competition from Samsung and others"

Samsung sold more smartphones last quarter than Apple, HTC, and Nokia COMBINED. And they are outspending Apple in capital expenditures.

It sounds to me like the market has spoken. And Apple is desperate to catch back up after 2 or 3 years of doing NOTHING interesting.

angermeans says:

Samsung didn't sell more smartphones than apple, Nokia, etc like you said. What they did do is sell millions upon millions of glorified feature phones that don't even access apps or even the internet. I didn't read what you stated I'll have to look at it later, but this argument is getting old. Samsung is not outselling apple where it counts and that is high end market devices. So not only does Samsung not outsell apple with one of their devices like the gs4 or note 3, but their entire lineup of S class phones don't even outsell the newest iPhone (in this cAse the 5s). Why do you think they don't release numbers (like all other android OEMs)? I'll tell you because if they did it would paint a much different picture so instead they keep beating this dead worldwide market share horse and android fanboys such as yourself eat it up without even bothering to do any research. If you want to count numbers like this then I would bet Nokia would still be a worldwide leader and blackberry. What we are talking about is the high end smArtphoen market and it is sad at best that you and others quote these numbers when in actuality dozens of samsungs flagship devices can't aren't even outselling just one of apples.

StuartV says:

I'm sorry. I was wrong. Samsung sold more SMARTPHONES than Apple, Nokia, and Blackberry, combined. I said HTC, but the 3rd company was not HTC, it was Blackberry.

http://www.androidcentral.com/samsung-sold-more-smartphones-apple-blackb...

angermeans says:

Ok I spent the time reading the attached Bloomberg article. I have to say you are reading into things that aren't there. Read the article. Apple is spending 10 billion just in making the process of manufacturing phones better. Samsung is paying 22 billion which probably includes marketing because they obviously aren't spending money on making phones. Yes, marketing is great and has done well for Samsung, but they are not known for hardware design, in fact I would say they are more of the joke of the industry. People have come to expect poor design and horrible build quality. They've done an excellent job marketing their devices and have sold a ton of them, but like I mentioned above they are no where close to what Apple is selling. If Apple doesn't even compete in the low end market then why are we quoting phones that barely run android in third world countries. Android has simply become the feature phone OS for most phones because it is versatile and free. It's no small feat to have 80% world wide market share, but we are talking about two completely different markets here and Samsung has been in this low end market for years and years and Apple just since the iPhone in the high end. What counts is the money being made off these phones where Apple is killing the competition.

The real news in this article is that Apple continues to innovate and make their products better whereas companies like Samsung are happy to copy Apple later or simply make a device at every .1 inch display size and see what works. Apple meanwhile is spending billions just to make their manufacturing process better and it shows just look at the build quality. Remember the iPhone 5 release? The top glass piece that houses the camera on the 5 and 5s is cut and then a laser is used to find the best possible match out of millions of parts so we are talking about 1000ths of a mm in difference. Who else pays this close to details? Samsung is busy making cheap and fake faux leather backs. This is just one of many reasons that Apple will always sell more (where it counts) than the competition and I don't see this changing anytime soon. In fact, if Apple does indeed sell a larger iPhone next year how much bigger of a batter will they be able to fit in? Not only this but the innovation they've put in the processor, OS getting best possible power vs battery life, and the fact that a battery 1/2 to 1/3 the size that Android OEMS are putting in their phones, yet the iPhone performs as good or better than Android phones. So Im betting we not only see a larger iPhone, but one that has 2-3 days of battery life. What then will Android do to differentiate. Apple has laid the groundwork here for the next 3 years and Android OEMs like Samsung don't seem to be doing the same.

For example, lets take a look at the A7 processor. Samsung and others are scrambling to cheat their benchmark scores just to keep up and the A7 is half as fast and the iPhone is using 1/3 the RAM power. The work Apple has done in their processors has taken years and now the benefits are starting and little things like 64bit will help years down the road. Apple is then hand clocking these cores to have the best power vs battery life and it shows. This chip is wiping the floor with the competition. This article just explains yet another field Apple is spending money on and innovating when the competition is ignoring it. Apple has a whole pie of these types of things that not necessarily the end user ever sees, but they reap the benefits in a device that runs hands down better than any other device on the market. They've done this in everything and it is the reason I love Android yet choose to use iOS more.

I already answered your little comment. Samsung does not outsell Apple where it counts and they are not SMARTPHONES. Of the 81% market share I would dare bet that 80-85% are phones that are not flagship devices. These numbers your quoting don't matter because Samsung refuses to release numbers on how many Galaxy S phones they actually sell. If they had really sold so many don't you think they would flaunt it from the highest hill tops? Instead they twist numbers just like you are doing now.

StuartV says:

The AndroidCentral article I linked above says you're wrong.

Rene Ritchie says:

Samsung is certainly capable of making the investment needed to produce iPhone-class hardware, they just don't think it's a competitive advantage.

HTC, which is struggling to make a profit, is producing better manufactured handsets than Samsung.

I'd love to see a Samsung phone as well made as an iPhone, but it doesn't seem to be their priority.

Raw numbers aren't what matter - lots of companies out spend Apple in lots of ways - it's what's done with the money that matters.

How does it benefit us, consumers?

StuartV says:

Where are your metrics to support your claim that Apple and HTC are producing better handsets than Samsung?? Just because you and some other editors like to point at Samsung's plastic phone backs and claim that those plastic backs mean the phone is inferior quality doesn't make it so.

It has been documented numerous times on MobileNations sites that Samsung phones are much easier to repair than Apple or HTC. Ease of repair is definitely one characteristic of superior engineering.

Anecdotally, I'd say that the Samsung "plastic" phones are more impact resistant and thus, handle being dropped better than Apple phones or the HTC One. Of course, that's just anecdotal. But then, all I've seen in ANY article on MobileNations that says Apple or HTC phones are better manufactured is also purely anecdotal.

So, what about defect rates? How about how well they handle being dropped? Got ANY numbers to support your claim?

And why, again(!), the negative slant on Samsung? They are "capable of making the investment"?! That 100% implies that they are not making the investment. Your own Bloomberg article (which I already quoted) said they not only ARE making the investment, they are significantly OUTspending Apple in that.

How does Samsung's spending benefit us consumers? Well, I'd say we get phones with more features and better specs. Phones that ALLOW us to swap out the battery when the built in one loses its capacity after a year. Phones that ALLOW us to carry our entire music library around with us (on a microSD card). Phones that allow us to not lose ANY of our pictures that we've taken if the phone happens to die (say, while away from WiFi) (because they are stored on the microSD card). Phones that handle drops better - i.e. are less likely to break. And phones that are easier to repair if we do break them. And, even with all this superiority for the Samsung phones, they are also less expensive than the Apple phones (and is that from superior manufacturing, or simply less greed?).

Of course, I personally can only support some of those statements anecdotally. But, my anecdote is just as good as yours or anybody else's....

admirer_of_you says:

Why not other companies?? Bc no one else has a music store generating billions upon billions of dollars in revenue. Not saying anything negative about Apple. But that's the answer to your question.

Rene Ritchie says:

iPhone is the most profitable business, by far, for Apple. iTunes revenue, while great, isn't much compared to hardware profits.

admirer_of_you says:

When you say iPhone are you saying hardware or the whole iPhone ecosystem? I don't have any research to suggest that one is more profitable than the other. But on the face of it, I would think that iTunes selling billions of songs at a buck a piece or more and keeping what they keep (same as apps?) and the app store sales would be the real cash cow for Apple. I'd be interested to see some published reports supporting either my assumption or yours (which may in fact not be an assumption at all).

iDavey87 says:

It most defintely is iPhone over iTunes.

Apple has HUGE margins on the iPhone device.

ChrisFricke says:

I think if you talked to Samsung you'd find that they ARE spending billions on R&D and new manufacturing techniques. What their budgets for such things are (relative to each other) is undisclosed and probably irrelevant. After all, Samsung invests manufacturing capital on behalf of Apple as well since they build components for Apple (and others). That's just one example - I don't want to sound like a shill for Samsung. Build quality for all of the major manufacturers continues to increase so I'd surmise that they are all investing in improved engineering and manufacturing.

angermeans says:

Just because a company within Samsung might put Apple's schematics and parts together doesn't mean they have the prowess to create what Apple does. They simply put the parts together and not only this, but Samsung is a giant company that has many smaller companies within it. These companies are companies that work on their own, but carry the Samsung name. They are nothing more than an outsourcing partner. Even if they had the plans and knowhow to make produces like the A7 chip (which they don't) they would still have the huge battle or recreating it and then making it work. It would cost far too much money and obviously they can care less about this kind of thing (which is why this article was written as Apple will pay big dollars to make the little things better) as they simply buy from Snapdragon who continues to out innovate Samsung on their chips. Yes, they could spend the R&D, but they don't. Yes, they could spend the money to make better hardware, but up until now they don't. I hate to say it, but Samsung devices are used for a year or two and basically thrown out and this is how they build their devices. Apple products are built to last and are used for years and even kept up to date (for the most part) by Apple. There is a giant difference between Apple and other OEMs. Apple continues to spend the money to innovate and others like Samsung seem happy to simply copy once something is done.

ChrisFricke says:

Admittedly I don't work for Samsung so I'm not intimately familiar with their structure and manufacturing or research practices. Clearly you're an authority on the subject. I defer to your expertise on the matter.

Chris White11 says:

Its unfortunate that so many mistreated and abused Chinese workers may end up losing their jobs.......

auribe14 says:

Funny how when competitors try to copy Apple, they very rarely copy the right things...

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