Apple is considered by many to be the leader of the smartphone market. Though overall numbers of handset sales show that Apple lags behind Korean-manufacturer Samsung, Apple’s weight in the industry is attributed to their relative market success from ONE singular product – the iPhone.
Since the introduction of the iPhone by Apple in January of 2007, the handset has been the very definition of “iterative improvement”. The first iPhone, with its multi-touch screen and application-based environment was considered revolutionary to the smartphone segment. Since that time, there has been five generations of iPhone models, each one improving on the model preceding it. However, none of them had the disruptive impact that the first iPhone had to the handset industry. Within five years, Apple has generated over $150 billion in revenue from the iPhone family of handsets and accessories, with over 100 million units of the iPhone itself being purchased by consumers, according to research firm Strategy Analytics.
One of Apple’s keys to success is their component selection. Under the direction of then Senior VP of Supply Chain, and now current CEO, Tim Cook, Apple developed supplier relationships from the development of the very first iPhone that have become stronger over time and with every iteration of the handset. From a supply chain point-of-view, this tells us that Apple is relatively set in their ways of which semiconductor manufacturers. For example, ten manufacturers with design wins in the original iPhone found themselves with the same socket wins within the iPhone 4S. Large semiconductor manufacturers like Samsung, Texas Instruments, and ST Microelectronics are as firmly entrenched in the iPhone’s development as smaller companies like Dialog Semiconductor (main power management IC provider), Skyworks (power amplifier modules provider), and TriQuint (baseband power amplifier modules provider).
It is often major news when Apple decides to replace a manufacturer of a key component selected for the iPhone. For example, it was newsworthy when Apple made the switch from utilizing Infineon-manufactured baseband processors to those from Qualcomm. That transition was made rather slowly though, as Apple created a GSM version of the iPhone 4 using an Infineon baseband processor and a CDMA version of the same handset using Qualcomm’s baseband chip. The switch to Qualcomm seemed imminent as the IC selected for the CDMA version had GSM capability. To the surprise of few, the iPhone 4S used only the Qualcomm baseband processor and Apple’s relationship with Infineon (now Intel) ended. It was also news that Sony manufactured image sensors were found in the iPhone 4S, replacing one of the two socket wins previously held by Omnivision, another holdover from the original iPhone.
With an intimate understanding of how Apple selects its components, it’s fair to say many of these companies with design wins across each generation of iPhone will most likely see themselves with sockets in the next iPhone (tentatively called “the iPhone 5”). The opportunity exists, however, for other semiconductor manufacturers to usurp the existing socket winners, but that will all depend on what the newest iPhone has to offer.
If the next generation of iPhone is another iterative improvement, the same manufacturers used in the iPhone 4S will should find themselves with design wins in the iPhone 5. However, if Apple tries to “re-invent the wheel” with the iPhone 5, and attempts to create a revolutionary new product in the vein of the original iPhone, the opportunities for semiconductor manufacturers on the leading edge of technology will yield surprising results.
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