02/28/2007, 9:50am, EST
Wednesday, February 28th
Manufacturers vie for iPhone contracts
Manufacturers from around the world are racing to secure building contracts for the iPhone, according to one report. iPod sales rose to 21 million in the last quarter, and the iPhone is heralded by many as Apple's next big success, according to The Times. The winners of current contract competitions may fall into 'guaranteed' income from both Apple and other clients, attracted by prestige. Research from iSuppli suggests that one of the main frontrunners in the competition is Hon Hai, which already assembles the iPod nano. Likewise, Samsung is a strong contender for continuing NAND memory production, and British company Wolfson may resume producing audio chips.
Other contenders identified by iSuppli include Catcher Technology which is expected to build the casing; Micron, which could contribute the two-megapixel camera; and CSR, specialists in Bluetooth chipsets. Marvell is a likely supplier of the iPhone's 802.11 wireless connectivity, but one of the more unusual competitions exists for the CPU contract. Despite Intel's edge as the core of modern Macs, the company is still in the running against Renesas, a Japanese maker that may be more familiar with compact devices.
Analysts warn, however that an iPhone contract may not signify instant riches. iSuppli believes that despite selling for $600, the product may actually cost just $280 to build, with the most expensive part being a $70 memory card. That total amounts to a 50 percent-plus profit margin, which is considerably higher than most consumer electronics, says Ovum, another research group. Apple may use its dominance of the digital audio market to exert maximum pressure on suppliers.
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Hell, if your business model involves sitting around waiting for a company to come to you to ask you to manufacture something, you'll probably not be getting too many customers.
Then again, with still 4 months to delivery, there's no reason why apple has yet to come to terms with manufacturers and suppliers. Can't make agreements until you know what's going to be in your product. And you can't make good agreements until all potential bidders (giving you competition and lower bids) know what you're trying to build.
BTW, tim_s, if all those rumors were right, we wouldn't have to be waiting another 6 months for the iPhone's release (and certainly they could already have the FCC approval, the process that Jobs tried to lay the blame on for why it was still 6 months away, at least).
These kinds of contracts are arranged well before the designs are finalized, but after enough time to see what sorts of injection molding will be needed, capacity of lines. All of this should be old hat for the iPod team as they have done it many times. You have to negotiate prices and specifications. Apple probably isn't designing and laying out all of the electronics either. Some one is already doing that and they need to have expectations to who and how it will be made. It takes time to ramp up and qualify production lines. Sorry, this doesn't happen in 4 months.