Low End Mac Reader Specials

TypeStyler For Mac OS X is Now Shipping! Download The Free Fully Functional 60 Day Tryout at www.typestyler.com

Don't install Parallels to play poker online! Poker Mac will show you how to download and install a native Mac poker application such as Full Tilt Poker Mac.

Compare products like desktop computers, apple laptops, apple macs, and LCD Monitors side by side! All the information and reviews to make the best purchasing decision for new mobile phones, sat nav systems, or MP3 players. The Ciao online shopping community makes searching products easy for you.

Taking Back the Market

Apple's New Production Technology: Is It Worth It?

Tim Nash - 2008.10.27

Popularity:

Bookmark in del.icio.us

In the Q3 conference call for analysts, Peter Oppenheimer reduced margin expectations for the just reported quarter because of the "back to school" promotion, component pricing firming up, and the costs of transitioning to an unannounced product line. He forecast $7.8 billion revenue, so each 1% less margin costs $78 million in profit. However, the drop of 3.3% was nearly the same as last year, which was due to "back to school".

A cynic might think Apple wanted to put the rumor mills back to work.

Surprise! It worked!

Analysts expected the margin drop off from reduced pricing and got into a feedback loop with bloggers with "reports" of ever lower prices. On top of this, others dusted off wish lists and fantasised over Apple entering yet another low cost market. On Tuesday, October 14, reality set in as only the entry level MacBook dropped by $100 and Apple continued with its highly successful "value for money" strategy.

On October 21, Apple reported a drop in margin of 0.1%.

Obviously there are transition costs for the move to the new line. Old MacBooks in the supply chain have to be marked down, but even this helps to establish the value of the new range. The new product line had to be set up. The CNC machines to shape the new MacBook and MacBook Pro body will be paid for over their expected life, but since machining aluminum is more expensive than injection molding plastic bodies, this will reduce margins for some time, as reported in the Q4 conference call. The investment in this new line also meant that Apple lost the flexibility in having 2 production suppliers. According to DigiTimes, Quanta will be handling all the production of the new MacBook in 2009 - previously Apple balanced notebook orders between Quanta and Foxconn.

This does give another sort of flexibility. The more automated the production line, the easier and cheaper it is to do short production runs. The 2.5 lb. aluminum brick is the same. So to change from MacBook Pro to MacBook bodies, all Quanta has to do is change the program running in a few CNC machines and some of the attached tools. This will further strengthen Apple's top of the class inventory control.

The more rigid, more precisely engineered body may also help to reduce mistakes in assembly. It should certainly help with warping as the MacBook ages and lessen returns for cosmetic reasons, such as discoloring. The gap in consumer satisfaction scores between Apple and the rest should widen.

In many people's minds plastic means cheap, metal means expensive, and flexible is cheaper than rigid. This way of thinking is reinforced by the $999 entry level MacBook and cheap PC laptops. So for $1K+ laptops - about half of the US consumer market - the metal MacBooks make similarly spec'd offerings from Dell, HP, and others look like worse values.

The greenness of the new MacBooks may also improve Apple's share of the Scandinavian and DACH (Germany, Austria, Switzerland) markets, where green has a higher priority, as well as reducing Apple-bashing from lobbyists such as Greenpeace. However, it's probably too much to hope that Greenpeace starts to "walk the walk" and standardises on the greenest PCs available. What could also help is adding a section to Apple Environment showing how Apple "makes Macs last longer", including a simple table with each recent version of OS X and the oldest Macs (with their release dates) that can run it.

When competitors see profitable markets move away from them, they will respond. Apple took the time to prove the production process with the MacBook Air before scaling up with MacBooks, so this and the time to make a design that works will delay any competition for a while. Other companies don't have Apple's cash reserves, and while the economic turmoil lasts, they will find it more difficult to make an expensive decision that will reduce already tight margins even further.

If the delay is long enough and Apple's sales strong enough to support another production line, will it make most sense to keep it close to the current suppliers in China or to install it close to the customers? For now this is another step towards the Jobsian vision of a fully automated factory and, perhaps, another step towards Apple restarting manufacturing in America.

Tim Nash lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He has worked for computer companies for more years than he cares to remember, lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

Recent Taking Back the Market columns

Apple vs. HTC Will Delay iPad Competitors, 03.09. By filing suit against HTC, Apple may slow adoption of the Android platform while giving Windows 7 Mobile an unexpected boost.
How Apple Could Sell 100 Million OS X Machines in 2010, 02.15. All Apple has to do is sell 15 million Macs, 50 million iPhones, 25 million iPod touches, and 10 million iPads.
Touch Shifts the Apple Empire, 02.05. Apple dominates mobile computing, and it will be difficult for competitors to match the value of the iPad.
Apple Will Become Bigger than Microsoft in 2010, 01.15. The handwriting is on the wall: Apple is growing while Microsoft is in decline.
More in the Taking Back the Market index.

Links for the Day

Mac of the Day: Mac IIfx, Mar. 1990 - This 'wicked fast' 40 MHz Mac trumped the 33 MHz DOS world.
Group of the Day: StarMax List is for anyone using Motorola StarMax Mac clones.
March 19 in LEM history: 90: Mac IIfx - 99: Fool me twice? - 01: Add FireWire, USB to older Macs - Time to replace your iMac? - 02: The Mac Challenge - Installing Linux on a low-end Mac - 03: Value of the Lombard PowerBook - Your portable should have WiFi - PowerBook 1400 upgrades - 04: The video iPod - 07: Troubleshooting an iMac - 08: Intel Mac mini value
Support Low End Mac

Recent Deals

Best Intel iMac Deals, 03.17. Used 17" from $600; 20" from $750; 24" from $825; refurb 21.5" nVidia, $999; new, $1,099; refurb Radeon, $1,299; new, $1,399; refurb 27" 3.06, $1,499; more.
Best G5 iMac Deals, 03.17. 17" 2.0 GHz, $380; 1.9 GHz iSight, $479 shipped; 20" 1.8 GHz, $509 shipped; 2.1 GHz iSight, $549 shipped.
Best Time Capsule Deals, 03.17. Close-out 500 GB, $140; new 1 TB, $279; used 2 TB simultaneous dual-band, $400; new, $455. Shipping included.
Best iPad Deals, 03.16. 16 GB iPad, $499; 32 GB, $599; 64 GB, $699; 16 GB with 3G, $629; 32 GB 3G, $729; 64 GB 3G, $829. Free ground shipping.
Best iPod classic Deals, 03.12. Used 20 GB, $119; 40 GB, $139; 60 GB, $159; 30 GB video, $129; 60 GB, $159; 80 GB, $169; refurb 120 GB, $189; new, $214; 160 GB, $228 shipped.
Best G3 iBook and AirPort Card Deals, 03.12. 366 MHz 12" clamshell, $89; 466, $125; 500 white CD, $100; 600, $199; 800 Combo, $239; 14" 900, $225.
Best Xserve Deals, 03.12. Used 1 GHz dual G4, $499; 2.0 dual G5, $599; 2.3, $749; refurb 2.26 4-core Nehalem, $2,499; new, $2,699; 8-core, $3,449; refurb 2.66, $4,299; new, $4,799; more.
More deals in our archive.

About LEM | Support | Usage | Privacy | Contacts

Entire Low End Mac website copyright ©1997-2010 by Cobweb Publishing, Inc., unless otherwise noted. All rights reserved. Advice presented in good faith, but what works for one may not work for all. Please report errors to .
LINKS: We allow and encourage links to any public page as long as the linked page does not appear within a frame that prevents bookmarking it.
Access our RSS news feed at http://lowendmac.com/feed.xml.
Email may be published at our discretion; email addresses will not be published without permission, and we will encrypt them in hopes of avoiding spammers. If you prefer your message not be published, mark it "not for publication." Letters may be edited for length, context, and to match house style.
PRIVACY: We don't collect personal information unless you explicitly provide it. For more details, see our Terms of Use.
Low End Mac is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc. Apple, the Apple logo, Macintosh, iBook, iMac, eMac, iPod, iPhone, PowerBook, MacBook, MagSafe, Mac Pro, Apple TV, and AirPort are registered trademarks of Apple Inc. Additional company and product names may be trademarks or registered trademarks and are hereby acknowledged.