Back in 2009, Tim Cook signposted Apple’s plans for world domination: “To own and control the primary technologies behind the products that we make.”
At the time, Cook was still two years from being the company’s CEO, and he couldn’t have forecast the upheaval to the supply chain seen over the past few years. But Cook’s comments are seeming rather prescient, as the company continues to make key components for its own products.
This past week, news broke that Apple is planning to replace the iPhone modems supplied by Qualcomm and Broadcom with its own wireless communication chips.
In 2019, Apple bought the majority of Intel’s smartphone modem business, meaning that Qualcomm’s days as the supplier of iPhone modems are truly numbered.
Reports also claimed that Apple was planning to make its own displays, news that has been a long-time coming, given Apple bought LuxVue, who makes low-energy screens, back in 2014.
Apple’s own forays into processing chips started in 2020, with its own M1 “system on a chip” that replaced GPUs and CPUs once provided by third-party supplier Intel.
This has since been superseded by the impressive M2, which has significantly bolstered the performance of the 2022 Apple machines.
Bringing these chips inhouse saw the company’s ‘return on capital employed’ take an immediate leap: to 48 per cent in 2021, then again to 60 per cent last year.
Meanwhile, Apple estimated it saw a financial hit of up to A$11.5 billion in the June 2022 quarter alone, as China’s COVID-19 policy saw the company reduce its iPhone 14 order numbers, delay the iPad and MacBooks, and deal with violent protests at Foxconn’s giant iPhone plant in Zhengzhou.
Recent unrest in Taiwan also means that major supplier TSMC presents a current danger.
Such clear downsides — and the benefits of going it alone — are likely to spook the likes of Qualcomm, who relies upon its Apple contracts for 20 per cent of its business.
It seems inevitable, then, that Apple will keep moving to avoid leaving the success of its products to an international supply chain that continues to see major disruption.
The disruption this will create, however, is less clear. Zhengzhou is known as ‘iPhone City’ due to the dominance of the factories manufacturing the smartphone.
As Apple brings more and more of these processes inhouse, these companies will be forced to look elsewhere for work.
