Sunday, 10 November 2013

MacPro, 4K displays, and supply chain co-ordination

Many including me, have regularly hailed the innovative character of Apple.  In previous posts though, I have noted their innovation in areas other than product which normally steals the limelight. These other areas include in retail and in company cultural learning etc.  Tim Cook, now CEO, was previously in charge of supply chain, and it is this in which we see some clever co-ordination if not yet another example of innovation.

The MacPro product line has hit the headlines in the last twelve months for its delayed upgrades, and since the new radically different design was announced, the fact that it will be assembled in the USA rather than the far east.  One specification detail however has caught my eye, the fact that it can drive two 4K (ultra HD) resolution displays as well as an HDMI screen all simultaneously.  It's not the technical spec itself that peaked my interest (a lesson many traditional tech commentators and analysts should remember) but rather an aspect relating to market size and supply chain.  

Consider the market size for the new MacPro.  It's really aimed at supporting the most demanding professionals in music, video and software development roles.  And even some of those who would have previously bought the MacPro line will now be satisfied with the top end iMac models, given their capabilities. So the market size is likely to be less than it ever was.  The screen components are typically one of the most expensive parts of computers, so how could Apple repeat the trick of economy of scale in their supply chain for 4K displays which they exploited so well across other product lines (e.g. flash storage in iPod and iPhones, and wireless chipsets between computers and mobile products etc.)?  The answer may well lie in their rumoured entry into the television market.  4K TVs have so far sold in very few numbers due to many factors including very high price.  

The provision of an ultra HD 4K screen option in any TV offering (and not touted as the main selling point as others have mistakenly done - the Apple TV will headline other more consumer-friendly distinctive selling points) would offer a way to make economies of scale for the 4K display for MacPro and essentially lower the bill of materials (BoM) cost for both product lines by giving Apple much bigger purchasing volume potential for the cash that they hold.  Secondly, the storyline of the need for 4K display panels when negotiating with suppliers, many of whom like LG and Panasonic may well also be competitors the Cupertino firm wishes to beat in the TV marketplace, is at least useful and at most a strategic masterpiece.  Such competitors have no need to be nervous about 4K displays for the MacPro; their interest in a new player in the TV market would be rather different!  

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