Apple has been championed as a shining example of successul vertical integration in regards to their iPhone and iPad production. Vertical integration simply means that a significant percentage of the supply chain in the creation of a product is under the control of one company. Apple designs the software and hardware for their devices. This allows Apple to optimize the processor, RAM, and other hardware specs perfectly to their in-house software. By designing the hardware and software in tandem, Apple can install just the right amount of processor power and battery capacity for the bundled software which can cut costs of the overall product. Additionally, vertical integration allows Apple to control the supply chain for their products and plan for interruptions or changes. They are less impacted by sector-wide part shortages and supply shocks.
Google’s purchase of Motorola Mobility in August is most likely an attempt to imitate Apple’s successful vertical model. The Android OS is currently designed by Google to fit many different phone models from HTC, LG, Samsung, and others. This discontinuity means that in some circumstances the hardware has superfluous computing power in comparison to the capabilities of the installed version of Android. The average user subsequently pays more for a phone with insane specs which the OS doesn’t really need to function well. Google is expected to not only use their acquisition of Motorola to create a single perfected phone, but also to further Google TV through Google-engineered Motorola set-top boxes.
Microsoft’s Windows Phone software is aesthetically inviting, has great exchange support, and overall the OS is fairly streamlined. However, most of the Windows Phone handsets are clunky and flawed. Some have tiny screens, others from HTC are too big. Speed, build quality, camera performance, and phone design vary among the many models detracting from the overall brand of a “Windows Phone.” The Nokia Lumia 900 is a great example of a beautiful phone (perhaps the sharpest on the market) with significant hardware/software limitations that will prevent Windows Phone 7.5 from becoming a true threat to Android or iOS. Windows Phone does not support dual or quad core processors. This means no threaded multitasking and lower performance. The software limits the screen resolution to 800×480 which makes competing with the Apple Retina Display impossible. The Lumia 900 is also a fortune unlocked.
Apple has proven that companies make their money selling the actual phone, not licensing their software. Google is already preparing for this transition (as shown in their purchase of Motorola) and if Microsoft continues to treat the mobile sphere like the OS licensed desktop computer market, Windows Phone wont reach its true potential. Windows 8 Metro looks fantastic but without an affordable and Microsoft optimized tablet to complement the software, it has no realistic shot at the iPad.
Apple’s vertical integration model is dominating the tech sector. Google is already making the necessary changes to compete. It’s time to build hardware Microsoft.
[Image via Techsling]