How Losing Control Can Win the Game? Learning from Apple

"In the grand tapestry of technology, we are all weavers, but few see the whole cloth." - Just Me

In the gleaming halls of Silicon Valley and the neon-lit streets of Shenzhen, a silent revolution churns on. While tech titans grab headlines with their latest gadgets, a hidden network of companies forms the backbone of our digital world.

Today, following our previous blog entry, we pull back the curtain on this global web of electronics manufacturing - and why it matters more than ever to the world, and of course, you.

These are not the tech giants with brand ambassadors or viral commercials; these are the critical cogs, the vital veins pumping life into every chip, every motherboard, and every circuit. They are the companies engineering, manufacturing, and supplying the very components that make our digital world possible.

Yet, few people know their names. And that’s not by accident - it's by design.

Get ready, this is just another step in our journey, yet, not the final!

• Why ‘Made In’ No Longer Matters?

• Back to Apple - Why Not?

• Apple Value Chain Disaggregation

• Success As Part of the Apple Ecosystem

• How Gorilla Glass Redefined Mobile Tech for Apple and the World

• Examples of How Strategic Partnerships Drive Economic Value

• Price is a Race to Zero

• What's The Outcome? How Losing Control Can Win the Game?

Why ‘Made In’ No Longer Matters?

Quick, name the company that made the chip in your phone. Drawing a blank? You are not alone. The truth is, that the brands that dominate our digital lives - Apple, Samsung, Google - are merely the tip of a vast iceberg, yet, they take all the credit. Beneath the surface lies a complex ecosystem of manufacturers, many of whom you have likely never heard of.

It is about time to challenge a sacred cow: the idea of national tech champions. In a world where a single smartphone contains components from a dozen countries, does it make sense to talk about "American tech" or "Chinese tech"?

The reality is far messier - and more interesting. The most successful companies of the future are those that can navigate a truly global innovation ecosystem. This means:

1. Tapping into global talent pools, not just relying on domestic expertise

2. Forging strategic partnerships across borders

3. Rethinking R&D as a disaggregated, distributed, and global endeavor

Remember the word "distributed." It’s crucial, and it is the next step.

Back to Apple - Why Not?

From the labs of Japan to the factories of Taiwan, from Korean display makers to American chip designers - Apple's "chain" is a glorious mess of interdependencies. And guess what? It is their greatest strength.

Here is the real kicker: this isn't just about tech. Every industry is racing towards this disaggregated model. The question isn't if your value chain will fragment, but when. And whether you will be nimble enough to surf the shockwave or get crushed beneath it.

Now, let's revisit the Smile Curve and see how Apple dominates both ends - where the real value is, yet, only by leveraging diverse partnerships and executing a brilliant product strategy.

Here is the genius: Apple doesn’t try to own everything in between. Instead, they leverage a diverse network of global partners for manufacturing and assembly - companies that specialize in the ‘middle’ part of the value chain. It’s this intentional strategic orchestration - an unyielding grip on high-value activities combined with deft use of partnerships - that allows Apple to sustain its market dominance and remain a step ahead in the global tech race.

This approach turns the complexity of global production into a powerful competitive advantage.

Remember the below? Now, let's unpack this thought and take it to a whole different level.

When you apply the logic that we explained in our previous blog entry, this chart below is the outcome you would expect. Yet, when it comes to Apple, the truth runs far deeper.

The concept of a "dead zone" could be the immediate answer, yet it can be easily challenged, and we will see "why" and "how". Companies can still create value in seemingly low-differentiation markets.

Yes, that's right - but there's a catch. It's not just about owning a piece of the value chain; it's about how masterfully you dominate, leverage, and orchestrate that piece. Success isn't simply about presence; it's about influence, strategy, and vision. That’s what separates breakthrough innovation from mediocrity or, worse, irrelevance. Apple's playbook shows us that winning isn’t just about being in the game - it’s about commanding it.

So, the real question is: how does Apple consistently dominate the market? Why do they always come out on top? They don’t manufacture everything themselves, yet they are always steps ahead of the competition. What’s their secret, while pushing vendors lower down the value chain? The answer lies in their ability to guide the narrative and dictate the terms. Apple doesn’t just participate - they orchestrate. They extract value from every layer, ensuring they are not just a player in the game but the ones writing the rules.

Apple Value Chain Disaggregation

This isn’t just a supply chain; it's a masterclass in economic prowess and brand dominance, where the real winners are those who own the narrative, not just the product. Are you ready to redefine where value is truly created?

Let's add a bit more context and content to the specific case of Apple, by coupling it with the Value Chain Disaggregation model by Michael Porter.

At one end, we have Apple USA, the brain of the operation. Here is where the magic happens - R&D, product design, and the intricate choreography of a global supply chain. It's the realm of turtleneck-clad visionaries and engineers pushing the boundaries of what's possible.

At the other end? Another slice of Apple USA. This time, it's all about marketing wizardry, brand management that borders on cult-building, and after-sales services that keep the faithful coming back for more.

But here's where it gets interesting. Between these two poles of Apple's dominance lies a vast ecosystem of partners, suppliers, and specialized firms. This is not the vertically integrated behemoth of old. This is Apple's secret weapon - a distributed disaggregated value chain that spans the globe.

Look closer:

• Parts? That's AKM in Japan, Diodes in the US.

• Displays? Sharp in Japan, LG in Korea.

• Memory? Micron in the US, SK Hynix in Korea.

• Manufacturing? Hon Hai Precision Industry in Taiwan, Jabil Circuit in the US.

Also, there are many others, configuring a complex, yet beautifully orchestrated symphony of partnerships.

• Accelerometer: Bosch Sensortech (Germany, U.S., China, South Korea, Japan, Taiwan)

• Audio chips: Cirrus Logic (U.S., U.K., China, South Korea, Taiwan, Japan, Singapore)

• Battery: Samsung (South Korea, 80 countries) and Sunwoda Electronic (China)

• Camera: Qualcomm (U.S., Australia, Brazil, China, India, Indonesia, Japan, South Korea, Europe, Latin America) and Sony (Japan, dozens of countries)

• Chips for 3G/4G/LTE/5G networking: Qualcomm and Broadcom (U.S., global presence)

• Compass: AKM Semiconductor (Japan, U.S., France, England, China, South Korea, Taiwan)

• Glass screen: Corning (U.S., global presence)

• Gyroscope: STMicroelectronics (Switzerland, 35 countries)

• Flash memory: Toshiba (Japan, 50+ countries) and Samsung

• LCD screen: Sharp (Japan, 13 countries) and LG (South Korea, Poland, China)

• A-series processor: Samsung and TSMC (Taiwan, China, Singapore, U.S.)

• Touch ID: TSMC and Xintec (Taiwan)

• Touch-screen controller: Broadcom

• Wi-Fi chip: Murata (U.S., Japan, Mexico, Brazil, Canada, China, Taiwan, South Korea, Thailand, Malaysia, Philippines, India, Vietnam, Europe)

And here you have the full list of vendors - right from Apple 📱

A true testament to collaborative brilliance transcending borders, delivering cutting-edge technology to your fingertips - with a smile 🙂

Each link in this chain is a world leader in its niche. Apple doesn't control them - it orchestrates them, in a particular disaggregated way.

This model flew in the face of conventional wisdom. The old guard said, "Keep everything in-house. Control is power." Apple said, "Hold my iPhone" 🤳🏻

Success As Part of the Apple Ecosystem

What’s the real secret behind Apple's unrivaled success? It’s not just about sleek designs or cutting-edge technology. It’s about a meticulously crafted value chain that demands high standards and strategic excellence.

All Apple partners share some common attributes as part of the value chain:

Attribute 1: High-tech Manufacturing Capabilities

Partners aren’t just building parts; they are pushing the boundaries of what’s technically possible. This is where cutting-edge technology meets precision engineering.

Attribute 2: Significant Roles in Global Electronics Supply Chains

From chips to screens, Apple’s partners are integral to the electronics ecosystem. Their work influences everything from the performance of the iPhone to the latest MacBook.

Attribute 3: Involvement in Producing Components or Providing Services

Whether it’s through creating advanced components or providing specialized services for consumer electronics, computers, smartphones, and other electronic devices, these partners shape the future of consumer technology. They are not just suppliers; they are innovators in their own right.

Attribute 4: Participation in a Highly Interconnected and Globalized Industry

The interconnected nature of this industry means that success is rarely an individual achievement. It’s a collaborative triumph that spans continents and sectors.

"The greatest victory is that which requires no battle." - Sun Tzu

Apple’s ecosystem isn’t just about following trends - it is about setting them. The true power lies in leveraging each partner’s unique strengths while demanding unparalleled excellence.

Understanding this ecosystem isn’t just academic - it’s strategic. It’s about recognizing how each element of the value chain contributes to the whole, and how you can apply these lessons to your own business.

It’s about asking tough questions and seeking out partnerships that elevate your strategic game.

If we were to reassess Apple’s approach to recognizing its valued partners, we should reflect this acknowledgment in how their contributions are represented in their products. These partners are not merely suppliers but are integral to the innovation and excellence Apple delivers.

Here’s a thought: imagine if the back of an AirPod case truly reflected the full spectrum of Apple’s value chain - with a smile 🙂, of course. Every element, from design to marketing, stitched into that iconic curve, showing not just where it’s made, but how value is strategically orchestrated across the globe.

After all, the real story isn’t just about where it’s assembled - it’s about the brilliance behind the scenes, from concept to customer.

This is our interpretation - what do you think?

Incorporating their contributions into their recognition strategy aligns with the Smile Curve concept, which highlights the high value-added at the engineering and production stages of the value chain.

How Gorilla Glass Redefined Mobile Tech for Apple and the World

When Apple was developing the iPhone, Steve Jobs needed a game-changing material that was both durable and elegant. There was (almost) nothing like that ever built before.

Enter Corning and their Gorilla Glass. Jobs wasn’t looking for just any glass - he wanted something that could handle daily wear and tear while looking impeccably sleek. The stakes were high, and the conversation between Jobs and Corning’s CEO, Wendell Weeks, was nothing short of intense.

Jobs’ demands were clear: the glass had to be strong, stylish, and capable of elevating the iPhone’s user experience. Weeks and his team at Corning rose to the challenge, pushing their technology to meet Apple’s high standards. This wasn’t just a transaction; it was a high-stakes collaboration that would shape the future of mobile screens.

The result? Gorilla Glass became a defining feature of the iPhone, setting new benchmarks for durability and design. This partnership demonstrated how crucial innovative suppliers are to Apple’s success and highlighted Corning’s role in pushing the boundaries of what’s possible.

Apple’s ongoing relationship with Corning shows that great tech doesn’t just come from within; it’s also about recognizing and harnessing the power of strategic partnerships. This collaboration wasn’t just about supplying a component - it was about transforming the entire mobile experience.

Examples of How Strategic Partnerships Drive Economic Value

Let’s delve into some real-world examples of how Apple’s strategic partnerships have fostered significant value in the market. By examining these partnerships, we gain insights into the broader impact of collaboration on business success.

Example 1: AKM (Asahi Kasei Microdevices)

AKM’s partnership with Apple dates back to 2010. Since then, the company has seen a remarkable transformation in its stock performance more than doubling over the years.

Example 2: Diode Inc.

Similarly, Diodes Inc. has been working with Apple since 2010 and has nearly tripled in value during this period.

Example 3: SK Hynix

Since partnering with Apple in 2011, SK Hynix has also experienced substantial success with the company’s stock performance mirroring their growing business achievements by multiplying by 5.

While it’s essential to note that Apple may not be the sole reason behind these companies' success, it’s undeniable that their collaborations have played a significant role. The mutual benefits of these partnerships illustrate how strategic alliances can drive substantial value and growth.

Price is a Race to Zero

Remember that, and it happens on both ends - buy and sell.

Many business leaders see vendor relationships as a simple transaction: you pay, they deliver. But what if I told you that the real magic happens when you stop squeezing every penny and start focusing on genuine partnership? Think about it - what if engaging with a vendor was less about haggling over price and more about crafting a future together?

Imagine Apple sitting at the negotiation table, not just as a giant with unparalleled bargaining power but as a strategic partner fostering mutual growth. Rather than squeezing vendors for every last dollar, Apple takes a different approach. They recognize that pushing a supplier to the brink of survival doesn’t yield the best innovation. Instead, Apple leverages its substantial influence to forge partnerships where both sides invest in a shared future. Apple ensures that by offering support and collaborating on R&D its partners aren't just struggling to meet their next payroll but are thriving and innovating alongside them.

This approach means Apple’s partners can focus on pushing the envelope and meeting ambitious roadmaps rather than just surviving. It’s a win-win: Apple gets cutting-edge technology and solutions, while partners receive the stability and motivation needed to drive forward-thinking research. In essence, Apple uses its bargaining power not to dictate terms but to inspire and empower its partners to reach new heights, ensuring that the journey is about more than just immediate gains - it’s about creating a long-term, symbiotic success story.

Now, imagine yourself in the same position. It’s about building a bridge that both parties cross together. Picture this one now: you are not just writing checks; you are investing in a shared vision that benefits everyone involved.

This video should serve as a true testament to Apple's philosophy.

So, next time you’re in the midst of negotiations, make it a partnership worth investing in and watch how collaboration can lead to remarkable outcomes beyond the price tag.

What's The Outcome? How Losing Control Can Win the Game?

By distributing their value chain, Apple achieved several masterstrokes:

• Access to Best-in-Class Expertise

  Why be a jack-of-all-trades when you can have the masters of each?

• Flexibility and Scalability

  Need to ramp up production? Your partners can scale faster than any in-house operation

• Risk Distribution

  Market fluctuations? Global events? The impact is spread across a network, not concentrated in-house

• Innovation Acceleration

  With partners pushing the envelope in their specialties, Apple can integrate cutting-edge advances faster than any closed system

• Focus on Core Competencies

  By offloading specialized tasks, Apple concentrates its energy on what it does best - design, user experience, and building its brand

The result? A company that dominates not through control, but through orchestration. Apple doesn't just make products; it conducts a global symphony of innovation and production.

The lesson for every executive is clear: true power doesn't come from clutching your value chain in an iron grip. It comes from being the conductor of a vast, specialized, distributed, and agile network.

The future belongs to those who can let go of control and embrace the power of the ecosystem. Apple wrote the playbook. The question is, are you brave enough to follow it?

But here's the billion-dollar question: Is this model sustainable? As partners grow in power and importance, how long before they start calling the shots? As other tech giants adopt similar models, will Apple's edge erode?

We will delve into this in the coming week - stay tuned for more 🙂