Apple is sitting on a ton of cash, with nearly $100 billion in cash on hand. The tech industry has been looking to Apple to see just what it’d be doing with all that dough, and a report out of The Next Web gives us a good idea of one of Apple’s expenditures. The Next Web spoke with an insider at Hewlett-Packard, who relayed struggles the company had with its HP Touchpad WebOS tablet.
The Cupertino company is using its cash reserves to ensure its dominance over the tablet market by blocking other manufacturers from having access to the best parts for their products. By throwing some extra money in the pot, Apple is able to secure exclusive deals with manufacturers for the best parts, ensuring that competing devices wouldn’t have access to the same displays and some internal components. Competitors would either need to find another supplier for better components, or wait for Apple’s exclusivity deals to run out.
Given Apple’s market position in both the tablet and smartphone arenas, exclusivity deals are a no-brainer for manufacturers. These companies have guaranteed sales to the industry leader, ensuring both business continuity and large volumes of orders. Of course, they are losing out on some orders by not offering products to competitors, but many of Apple’s suppliers keep their production lines full with Apple’s orders.
Before you go hemming and hawing over Apple’s tactics, The Next Web notes that Apple’s supply chain prowess comes from a combination of a forward-thinking business strategy and hard work. While Apple wasn’t the first company to make a tablet computer, they were the first to make a tablet computer that people actually wanted to buy. They accomplished this by securing deals with suppliers for high-quality parts, building a top-notch machine, and making the software simple to use. Apple saw the potential for tablets at a time when most companies had already written off the idea of tablet computers, and what we’re seeing here are the first-mover advantages of a company willing to jump into a new(ish) market.
The exclusivity deals might not be as meaningful as Apple would like, however, as competitors are already offering products with hardware that rivals the iPad. Clearly, manufacturers are becoming fairly successful at finding different suppliers to provide similar parts to include in iPad competitors. As Android now comprises over 50% of the smartphone market, customers could soon flock to Android tablets as Google’s tablet OS matures.
For now, however, Apple’s solution of throwing cash at suppliers is paying off big.
[via The Next Web]