Apple doesn’t make toothpaste

What Apple is, says Mark Hibben, is “one of the most successful fabless semiconductor companies on the planet.”

From “Why Apple Is Still A Growth Company,” posted Friday on Seeking Alpha:

Another misconception I frequently encounter among the bears is that “Apple is just a consumer goods company.” …

I’ll be blunt. Consumer goods are things like toothpaste and dish washing liquid. To call Apple a consumer goods company is to completely ignore the fact that Apple is one of the most successful fabless semiconductor companies on the planet…

Briefly, Apple became a fabless semiconductor company with the A4 system on chip (SOC) that powered the first iPad and iPhone 4.

Apple’s vertical integration of semiconductor engineering, device design, and operating system design has fueled the growth of iPhone and other iOS derived products such as iPad, Apple Watch and AirPods. It’s not an exaggeration to say that the products simply wouldn’t be possible at their current level of performance and functionality without Apple’s semiconductor prowess.

And if there’s still doubt about the significance of Apple’s business model, one only has to look at the way Apple’s key competitors try so hard to emulate it. Following Apple’s September iPhone event, both Microsoft and Google held events to feature their own self-designed hardware.

My take: Hibben is one of Seeking Alpha’s better Apple watchers.

See also: Ben Bajarin on Apple’s secret sauce.

8 Comments

  1. Kirk DeBernardi said:

    This is probably the most sharp-point example of Apple “stickin’ to their knittin’” one could make about the company.

    Apple’s vision is long, thought out and iterative. Their obsessive “how do we get there from here” process is a thing to behold and might provide a glimpse into why the public so appreciates the final product of this — call it creative — process.

    3
    November 9, 2019
  2. Romeo A Esparrago Jr said:

    Great post, Mr. Councilperson,
    Mark Hibben has characterized Apple’s hardware strength & prowess (that seems newfound but isn’t) wonderfully. I love reading about the company’s chip endeavours and currently enjoy reading the Ax SOC evolution series by Daniel Eran Dilger on AppleInsider. Apple can always decide to be a semiconductor company long-term but why be a contract company dependent on others’ great designs, software, products, ecosystem, media content, et al, AND SCALE, when it can achieve all those things on its own?

    3
    November 9, 2019
  3. Jerry W Doyle said:

    I long have articulated and denoted on this blog, the unique juxtaposition of Apple being a growth AND a value stock. This excellent, measured and very well written thought-out article by Mark Hibben strengthens intrinsically my observation. What better stock could an investor ever dream to own.

    0
    November 9, 2019
  4. Fred Stein said:

    Great article, thanks. Im a Big fan of PED, DED, Hibben, Dediu, and others. And gotta love Hibben’s revenue projections.

    Hibben notes that Google’s failure with Wear, which drove them to acquire Fitbit, was a failure of the disaggregated approach. Failure means failure, as in lost, dead, kaput. Huawei and Samsung have a chance to build a some wearable platform business. In a few years, Google will ask themselves, “What went wrong?”

    This, Apple’s triumph in wearables, is historic. It is incredibly rare that winners of one ‘wave’ win again in their forties.

    0
    November 9, 2019
  5. Fred Stein said:

    Apple are not a consumer goods company. They are a software company.

    Apple’s chips are pure software, just a bunch of 1’s and 0’s sent to TSMC. Services is software, just 1’s and 0’s streamed to Apple products where we consume them. Services like the Genius bar or Apple support line are software, but analog, delivered to us by the best device ever designed, humans. All the OS’s, API’s, SDK’s, etc. are software. Apple Pay etc. are software.

    Apple entire ecosystem, from supply chain down to the materials mined from the earth to the stock trading Apps on iPhones, is software, a combination of software tools and people managing them.

    4
    November 9, 2019
    • David Emery said:

      That’s right. And the systems engineering that puts it all together is basically yet another kind of software engineering.

      That being said, it’s worrisome that Apple is having growing problems with software quality. The best way to get quality in software is to design it in (it’s why Apple products have substantially fewer computer security problems.) But some of the bugs I’ve observed strike me (with 35+ years doing software) as just ‘sloppy coding and testing.’

      1
      November 9, 2019
  6. Gregg Thurman said:

    But some of the bugs I’ve observed strike me (with 35+ years doing software) as just ‘sloppy coding and testing.’

    Is it possible that all the variations of MacOs X that Apple maintains, that the platform is getting just too big to perform the kind of quality we’ve become accustomed to, with a one upgrade schedule?

    How much better would the variations be on an 18 month upgrade schedule?

    0
    November 10, 2019
    • David Emery said:

      The interesting thing about testing is it’s one of the few things in software development where you can actually ‘throw bodies at the problem’. But a lot of the bugs I’ve seen are “regression bugs”, things that used to work that now break. So that tells me Apple needs to be a lot more careful with changes to existing code, and to do a better job capturing and rerunning the tests on that existing codebase.

      0
      November 10, 2019

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