“People who are really serious about software should make their own hardware.” — Alan Kay
Didn't help Sun Micro much :-). One could argue they weren't "serious" about the software I suppose.
This article is basically saying that Apple becomes nearly untouchable/catchable when they are building their own chips and devices and software. And yet that particular pattern has failed again and again. Digital Computer Corp was my first experience with it, Sun was my second, there are companies that decided to make Java "engines" which probably qualify as the third.
From what I have observed, companies and the software they produce can be viewed as exploring a graph where a local maxima is a successful product and a minima a failed product. If you can accept that model, then you can see that different hardware options can enable you to reach different maxima on the same graph, however once you've started building your own hardware you limit the spaces you can reach to only those where your hardware can reach them.
As a result, people who are trying to sell hardware (chip companies), being unconstrained by the local maxima you are pursuing, wander out into the solution space and uncover different and sometimes wildly better maxima that can solve the same problem. The vertical manufacturer then finds their bespoke hardware a drag on their ability to move from their current maxima to the one growing in the market adjacent to them.
If the new comers execute well they either put the vertically integrated old timers out of business or constrain their growth to a limited part of the graph.
I thought Apple had learned that lesson with PowerPC but perhaps they just felt they were doing it wrong and this time it will work. I'm guessing it won't work long term.
So far, Apple seems to be doing a good job of only doing their own hardware where they can turn that into a real advantage. They rightly gave up on the niche PowerPC architecture and switched to Intel CPUs. There are still tons of off-the-shelf components in Macs and even iOS devices, with lots of third-party IP in Apple's SoCs.
There aren't many examples of what looks like Apple doing their own hardware purely for the sake of being different and incompatible. Nothing stands out as a custom component that Apple would be better off replacing with a generic off-the-shelf part. And Apple isn't locking themselves into their own CPU architecture or anything like that; if they do end up falling behind with their mobile SoCs or something like that, it isn't hard for them to buy a different SoC with the same CPU instruction set.
Interesting so far no one has put out any numbers yet.
There is one important factor that is missing in your thesis, unit economics. None of the companies you names, Power PC Apple, Digital Computer and Sun are are anywhere near the unit economics Apple is currently holding.
Out of the 1.3B Smartphone sold yearly, Apple has 220M, ~17% of Total Market. With ~40M iPad, Apple TV, HomePod, Apple is approaching 300M SoC that are produced for the iPhone ( I am ignoring Apple Watch S1 for this reason which has a similar design for its own ). This number is bigger than the 260M microprocessor unit Intel ship every year. ( While some people likes Horace Dediu from Asymco like to mention this, I would also like to add the number from Intel does not include Chipset, and SSD Controller shipment, both are included in Apple's calculation. So not an entirely fair comparison, but a relevant one )
When you command a substantial percentage of the market, and more importantly, a near monopoly in the premium market, it makes sense because the unit economics not only saves you money, but also allow you to innovate on your own pace. The Apple W1 / W2 for example are one the best low power bluetooth / WiFi chip, instead of paying EXTRA $5 per chip for another company to sustain their OPex and R&D, they are doing the work themselves which will later filter upwards to those 300M iOS unit, or Broadcomm will try to please Apple with a price that Apple thought is not worth doing it on its won.
And it is precisely the same reason why I don't think Apple will switch to ARM on the Mac. The Mac CPU list consist of TDP from 6W to 220W, 4-5 different TDP variation in between those 25M unit. That is anywhere between 20 - 40x difference in unit economics.
Although Apple being Apple, I believe unit economy is only one driving factor. The first reason they make such move would be they are not getting what they wanted, and if it is not good enough they will decide to make it themselves. Saving money was only ever the consequence, not the reason.
All your examples are "people who are really serious about hardware" - not software.
A better example is perhaps the British company Acorn, which made computers for a couple of decades but ultimately morphed into the very successful company ARM. (Which originally stood for Acorn RISC Machine.)
Their software was eventually, after the failed Oracle NC project and a number of legal shenanigans, nearly-open-sourced as RISC OS Open, and has a small number of mainly British dedicated followers, but otherwise did not make a huge dent in the universe. https://www.riscosopen.org/
I think you are drawing the wrong conclusions from history because you are conflating platforms and companies.
People think about the PC as successful because the platform is so big. Yet for the company that created the PC it was a failure. IBM lost the PC battle.
Sun would have lost whether they had made the software or the hardware, because the platform they made hardware and software for was outcompeted.
And anyway I think there is a significant difference. Sun and SGI were essentially hardware companies which happened to make software. I feel Apple is the reverse. It is a software company making hardware.
Apple harware was never impressive, sun harware was. Apple was all about the experience the software gave you. The hardware was just built around the software to facilitate that.
They have to keep as far away from being another HP or Dell as possible as more and more services head to the cloud.
I look at Apple as being like EMC when they were printing cash. EMC was selling high margin software with hardware. You paid maintenance on both and re-purchased the software every refresh.
The question with Apple is how sticky the services are. Those blue iMessage bubbles are powerful peer pressure. I don’t think that Sun, DEC, or EMC had anything like it.
The other thing I like about Apple is they are less exposed to political winds of change. Government (PRC) have already broken Google in their locales. Apple is not as vulnerable imo.
The difference between PowerPC and Apple's A series is compatibility. If somebody comes out with ARM-based SOC that is leaps and bounds better than what Apple's got, they can easily become a customer and build an iPhone around that rather than their own work. There would be no need for a long and difficult transition like the one from PowerPC to Intel. Another option would be to buy or license specific components and incorporate them in to the next A-series SOC. The haven't boxed themselves in at all.
Nah, it’s simpler than that - once you bring a dependency in-house, it’s almost impossible to shop for the best option on the market because your internal product is always “the best” and if you don’t agree, then you are a “jerk”.
Apple doesn't make their own hardware. What they do is design their own hardware and chips. I agree with you that if they actually made their chips this would be bad.
Case in point, you can see Intel really struggling because not only do they design their own hardware but they also make it quite literally with their own fabs. This has resulted in a lot of delays moving to 10nm and beyond.
AMD on the other hand spun out their fabs and now use fabs around the world to handle the actual manufacturing. This frees them up to actually design hardware and innovate at a much greater clip. Heh, they are even going to 7nm.
The same applies with Apple. It is quite cheap to be vertically integrated because you simply don't really have to make anything. The capital investment is quite low. It is something that Sun didn't have the luxury of.
However, companies need not be constrained to the local maxima you describe.
They can switch hardware platforms. In fact, Apple is the obvious successful example of this, where the Mac line has moved from Motorola to PowerPC to x86/x84. Not to mention, the introduction of an historically successful new product line on ARM.
The general problem with hardware platforms is that they have very high fixed start-up costs. This is exacerbated by the fact that they are moving quickly so that these start-up costs are incurred again and again for products on the forefront. The way to deal with this economically is have large scale. Usually that scale is achieved though a market in which multiple companies are the buyers. But in Apple's case they are apparently large enough to achieve that scale by themselves for the iOS lines so are able to bring that in-house and then get the additional advantage of control over the hardware.
Now, of cours, Apple's A-series SOCs may well reach a maxima at some point in the future, and then get bypassed by some other hardware technology (though it's not like the A-series is sitting still). That doesn't mean Apple can't or won't adopt that new platform. And if they don't, that has nothing to do with whether their old platform was in-house or out-of-house.)
In general, this is about gaining control over key technologies they rely on due to their scale and strategic planning, which is generally a good thing. Of course, they also need to execute, but that's true entirely aside from "going vertical".
A key difference is economy of scale. Apple produces a much larger number of chips than Sun’s or DEC’s markets could support back then.
Some other specialized vendors may still produce more chips but their scale advantage over Apple’s is relatively minimal and Apple’s ability to customize chips for its own platforms may outweigh that.
Not really sure what this article's final point is? Facebook and Google have hardware teams that allow them to build impressive data centers. Cisco has lost a lot of potential revenue from all the components FB and Google have managed to build in-house.
Even if you say that's not the same, Samsung is probably the closest to Apple in the consumer space. They own the entire pipeline in various degrees.
Yea Apple is winning in profits, but it's not the vertical integration that's doing it.
Their description of PA Semi is a little odd. Yes, I'm sure there was some ARM work but at the time they were far better known for PWRficient and the PA6T, and they still had military contracts for it at the time they were acquired. There were rumours that was going to be the next PowerBook chip until Apple went Intel.
Thanks, I though I was the only one that remembered it still.
I was salivating for an Apple designed PPC back then and was devastated when they switched to Intel.
Even though it was probably the right decision, the world got a little more boring with effectively a single ISA for mobile and desktop.
Same with OSs, something died with the original classic OS that never recovered, even though pragmatically, I love being able to run Photoshop on laptop Unix machine.
From the article: Steve Jobs quotes Alan Kay at iPhone 7 launch.
Announce date of iPhone 7: iPhone 7 and iPhone 7 Plus are smartphones designed, developed, and marketed by Apple Inc. They were announced on September 7, 2016 (https://en.wikipedia.org/wiki/IPhone_7)
But the question is: should developers outside of Apple applaud this trend? How about consumers? Or small startups? Will complete vertical integration eventually spoil the market?
I don’t think there is too much of a market to spoil. Android manufacturers and PC makers who are just using commodity off the shelf undifferentiated hardware and software operate on razor thin margins in a race to the bottom.
Eh, do not really care. All of my apple kit just works. It gets out of the way and let’s me do want I need. As long as that is the case then it works for me, and most others.
Apple could buy a fab but doesn't, so vertical integration isn't a religion for them. Nobody said it was, but I like pointing out their restraint. Maybe when the semiconductor that replaces silicon, say diamond, is close to viable, they'll splurge, not wait for it. They were worried they wouldn't be able to differentiate the iPhone, that's why they bothered with the A series chips. Forward thinking led them to see other phones improving beyond "good enough" or whatever. Maybe VR was on their horizon, too, or something else unknown.
I like to imagine the satisfaction felt by whoever got the board of directors to approve going the direction of designing chips, not that they couldn't afford an R&D folly. Everybody likes to tell Apple how to spend its money, but almost everyone is wrong. Whoever championed ARM acquisitions must feel extra smart, since they were proved right. But will Apple ever make a super inexpensive notebook or PC powered by an A series chip? Probably not, because of stupid economics. They could, but they won't.
It was started by ex-Digital employees that previously worked on the StrongARM, thought that is still an odd mention since IIRC they worked on MIPS cores in the time between.
[+] [-] ChuckMcM|7 years ago|reply
“People who are really serious about software should make their own hardware.” — Alan Kay
Didn't help Sun Micro much :-). One could argue they weren't "serious" about the software I suppose.
This article is basically saying that Apple becomes nearly untouchable/catchable when they are building their own chips and devices and software. And yet that particular pattern has failed again and again. Digital Computer Corp was my first experience with it, Sun was my second, there are companies that decided to make Java "engines" which probably qualify as the third.
From what I have observed, companies and the software they produce can be viewed as exploring a graph where a local maxima is a successful product and a minima a failed product. If you can accept that model, then you can see that different hardware options can enable you to reach different maxima on the same graph, however once you've started building your own hardware you limit the spaces you can reach to only those where your hardware can reach them.
As a result, people who are trying to sell hardware (chip companies), being unconstrained by the local maxima you are pursuing, wander out into the solution space and uncover different and sometimes wildly better maxima that can solve the same problem. The vertical manufacturer then finds their bespoke hardware a drag on their ability to move from their current maxima to the one growing in the market adjacent to them.
If the new comers execute well they either put the vertically integrated old timers out of business or constrain their growth to a limited part of the graph.
I thought Apple had learned that lesson with PowerPC but perhaps they just felt they were doing it wrong and this time it will work. I'm guessing it won't work long term.
[+] [-] wtallis|7 years ago|reply
There aren't many examples of what looks like Apple doing their own hardware purely for the sake of being different and incompatible. Nothing stands out as a custom component that Apple would be better off replacing with a generic off-the-shelf part. And Apple isn't locking themselves into their own CPU architecture or anything like that; if they do end up falling behind with their mobile SoCs or something like that, it isn't hard for them to buy a different SoC with the same CPU instruction set.
[+] [-] ksec|7 years ago|reply
There is one important factor that is missing in your thesis, unit economics. None of the companies you names, Power PC Apple, Digital Computer and Sun are are anywhere near the unit economics Apple is currently holding.
Out of the 1.3B Smartphone sold yearly, Apple has 220M, ~17% of Total Market. With ~40M iPad, Apple TV, HomePod, Apple is approaching 300M SoC that are produced for the iPhone ( I am ignoring Apple Watch S1 for this reason which has a similar design for its own ). This number is bigger than the 260M microprocessor unit Intel ship every year. ( While some people likes Horace Dediu from Asymco like to mention this, I would also like to add the number from Intel does not include Chipset, and SSD Controller shipment, both are included in Apple's calculation. So not an entirely fair comparison, but a relevant one )
When you command a substantial percentage of the market, and more importantly, a near monopoly in the premium market, it makes sense because the unit economics not only saves you money, but also allow you to innovate on your own pace. The Apple W1 / W2 for example are one the best low power bluetooth / WiFi chip, instead of paying EXTRA $5 per chip for another company to sustain their OPex and R&D, they are doing the work themselves which will later filter upwards to those 300M iOS unit, or Broadcomm will try to please Apple with a price that Apple thought is not worth doing it on its won.
And it is precisely the same reason why I don't think Apple will switch to ARM on the Mac. The Mac CPU list consist of TDP from 6W to 220W, 4-5 different TDP variation in between those 25M unit. That is anywhere between 20 - 40x difference in unit economics.
Although Apple being Apple, I believe unit economy is only one driving factor. The first reason they make such move would be they are not getting what they wanted, and if it is not good enough they will decide to make it themselves. Saving money was only ever the consequence, not the reason.
[+] [-] LeoPanthera|7 years ago|reply
A better example is perhaps the British company Acorn, which made computers for a couple of decades but ultimately morphed into the very successful company ARM. (Which originally stood for Acorn RISC Machine.)
Their software was eventually, after the failed Oracle NC project and a number of legal shenanigans, nearly-open-sourced as RISC OS Open, and has a small number of mainly British dedicated followers, but otherwise did not make a huge dent in the universe. https://www.riscosopen.org/
[+] [-] jernfrost|7 years ago|reply
People think about the PC as successful because the platform is so big. Yet for the company that created the PC it was a failure. IBM lost the PC battle.
Sun would have lost whether they had made the software or the hardware, because the platform they made hardware and software for was outcompeted.
And anyway I think there is a significant difference. Sun and SGI were essentially hardware companies which happened to make software. I feel Apple is the reverse. It is a software company making hardware.
Apple harware was never impressive, sun harware was. Apple was all about the experience the software gave you. The hardware was just built around the software to facilitate that.
[+] [-] Spooky23|7 years ago|reply
They have to keep as far away from being another HP or Dell as possible as more and more services head to the cloud.
I look at Apple as being like EMC when they were printing cash. EMC was selling high margin software with hardware. You paid maintenance on both and re-purchased the software every refresh.
The question with Apple is how sticky the services are. Those blue iMessage bubbles are powerful peer pressure. I don’t think that Sun, DEC, or EMC had anything like it.
The other thing I like about Apple is they are less exposed to political winds of change. Government (PRC) have already broken Google in their locales. Apple is not as vulnerable imo.
[+] [-] seanmcdirmid|7 years ago|reply
[+] [-] cwp|7 years ago|reply
[+] [-] dilyevsky|7 years ago|reply
[+] [-] electic|7 years ago|reply
Case in point, you can see Intel really struggling because not only do they design their own hardware but they also make it quite literally with their own fabs. This has resulted in a lot of delays moving to 10nm and beyond.
AMD on the other hand spun out their fabs and now use fabs around the world to handle the actual manufacturing. This frees them up to actually design hardware and innovate at a much greater clip. Heh, they are even going to 7nm.
The same applies with Apple. It is quite cheap to be vertically integrated because you simply don't really have to make anything. The capital investment is quite low. It is something that Sun didn't have the luxury of.
[+] [-] jmull|7 years ago|reply
They can switch hardware platforms. In fact, Apple is the obvious successful example of this, where the Mac line has moved from Motorola to PowerPC to x86/x84. Not to mention, the introduction of an historically successful new product line on ARM.
The general problem with hardware platforms is that they have very high fixed start-up costs. This is exacerbated by the fact that they are moving quickly so that these start-up costs are incurred again and again for products on the forefront. The way to deal with this economically is have large scale. Usually that scale is achieved though a market in which multiple companies are the buyers. But in Apple's case they are apparently large enough to achieve that scale by themselves for the iOS lines so are able to bring that in-house and then get the additional advantage of control over the hardware.
Now, of cours, Apple's A-series SOCs may well reach a maxima at some point in the future, and then get bypassed by some other hardware technology (though it's not like the A-series is sitting still). That doesn't mean Apple can't or won't adopt that new platform. And if they don't, that has nothing to do with whether their old platform was in-house or out-of-house.)
In general, this is about gaining control over key technologies they rely on due to their scale and strategic planning, which is generally a good thing. Of course, they also need to execute, but that's true entirely aside from "going vertical".
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] nopinsight|7 years ago|reply
Some other specialized vendors may still produce more chips but their scale advantage over Apple’s is relatively minimal and Apple’s ability to customize chips for its own platforms may outweigh that.
[+] [-] gok|7 years ago|reply
IBM’s big iron POWER line would be a case of (moderately) successful vertical integration.
[+] [-] Fnoord|7 years ago|reply
[+] [-] vermontdevil|7 years ago|reply
[+] [-] jarjoura|7 years ago|reply
Even if you say that's not the same, Samsung is probably the closest to Apple in the consumer space. They own the entire pipeline in various degrees.
Yea Apple is winning in profits, but it's not the vertical integration that's doing it.
[+] [-] saagarjha|7 years ago|reply
[+] [-] Cyph0n|7 years ago|reply
[+] [-] classichasclass|7 years ago|reply
[+] [-] tambourine_man|7 years ago|reply
I was salivating for an Apple designed PPC back then and was devastated when they switched to Intel.
Even though it was probably the right decision, the world got a little more boring with effectively a single ISA for mobile and desktop.
Same with OSs, something died with the original classic OS that never recovered, even though pragmatically, I love being able to run Photoshop on laptop Unix machine.
[+] [-] monocasa|7 years ago|reply
[+] [-] aaronbrethorst|7 years ago|reply
Announce date of iPhone 7: iPhone 7 and iPhone 7 Plus are smartphones designed, developed, and marketed by Apple Inc. They were announced on September 7, 2016 (https://en.wikipedia.org/wiki/IPhone_7)
Steve Jobs's death: Steven Paul Jobs (/dʒɒbz/; February 24, 1955 – October 5, 2011) (https://en.wikipedia.org/wiki/Steve_Jobs)
:-\
[+] [-] IkmoIkmo|7 years ago|reply
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[+] [-] beautifulfreak|7 years ago|reply
I like to imagine the satisfaction felt by whoever got the board of directors to approve going the direction of designing chips, not that they couldn't afford an R&D folly. Everybody likes to tell Apple how to spend its money, but almost everyone is wrong. Whoever championed ARM acquisitions must feel extra smart, since they were proved right. But will Apple ever make a super inexpensive notebook or PC powered by an A series chip? Probably not, because of stupid economics. They could, but they won't.
[+] [-] mmmBacon|7 years ago|reply
https://appleinsider.com/articles/15/12/14/apple-buys-former...
[+] [-] flyinglizard|7 years ago|reply
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