Apple’s Supply Chain Skills Can Still Score

Apple may be getting beat up by critics for falling behind Samsung in sales and new features, but a recent tear-down of the iPhone 5S reveals that it still has a knack for fostering innovation from its suppliers.

The blog All Things D recently wrote about the tear-down by consulting firm IHS.

According to the report of the IHS analysis of the iPhone 5s 16G, Apple is likely paying about $191 for its components and another $8 for assembly. That means the iPhone’s manufacturing costs are no more than the $199 subsidized price consumers pay for a unit with a two-year contract. Whatever the carriers are paying Apple is all margin. Not bad.

However, that’s not the most interesting SRM story. Buried in the 5S components is a unique set of radio-frequency chips from as many as six different companies that are all collaborating with Apple. Considering the effort that it takes to create a strategic relationship with one supplier, you can imagine what it might have taken to bring six suppliers into an innovation-driven collaboration.

The result may have been worth it. The iPhone 5S has an integrated RF system that can be used in many parts of the world that have different LTE wireless standards. According to one analyst quoted, older Apple models might have been able to connect to five different LTE systems, the new one, 13. That means one model can be sold in many more global markets, and more international travelers are more likely to be able to use their own phones wherever they go. Simplifying manufacturing schedules and inventory in distribution could turn into nice savings for Apple. And the feature could be a nice benefit to people who travel extensively.

It may not have the head-turning appeal of the fingerprint sensor or snappy new graphics, but creating a more global-friendly iPhone could be a big win for the Apple supply chain team.


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