The answer is obvious but few people stop for a second to wonder about this. After all, it is not like Apple has control over all aluminum in the world. Apple were just the first to see the potential of such bodies and began to increase their orders. In just a few years Apple became the main partner of Catcher Technology, a company that possess the necessary expertise to manufacture such bodies. Apple’s production orders amount to 60% of the company’s production capacity. It takes three hours to create just a single body of this quality and, naturally, it is more expensive than a plastic body.[..]Thanks to the production scale these aluminum chassis cost Apple just as much as carbon fiber chassis cost to Sony and just a bit more expensive than plastic chassis for laptops of that price range.[…]
By now you must be wondering: why are they taking it? And if there is a short supply of aluminum bodies all they have to do is buy more CNC machinery and make all the chassis they need. But it’s not as simple as that: it takes up to a year to purchase, install and launch CNC equipment. The management also needs time and courage to allocate large funds to such a project. That is why it was so long before Apple got real competition in terms of laptop chassis. Asus purchased the necessary equipment some time ago but it began to work at full capacity just now and Asus UX21 is one of the first representatives of this work. And due to lower production volumes the production costs of these chassis are higher for Asus that for Apple. Besides, Apple is not paying for the equipment thanks to big binding contracts with their partners. [ Mobile-Review]
ASUSTeK started out making the simple circuit boards within a Dell computer. Then ASUSTeK came to Dell with an interesting value proposition: ‘We’ve been doing a good job making these little boards. Why don’t you let us make the motherboard for you? Circuit manufacturing isn’t your core competence anyway and we could do it for 20% less.’
Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. On successive occasions, ASUSTeK came back and took over the motherboard, the assembly of the computer, the management of the supply chain and the design of the computer. In each case Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. However the next time, ASUSTeK came back, it wasn’t to talk to Dell. It was to talk to Best Buy and other retailers to tell them that they could offer them their own brand or any brand PC for 20% lower cost.
I linked to this already, but it’s too good not to copy this para
In a sense, I feel like the shanzhai are brethren of the classic western notion of hacker-entrepreneurs, but with a distinctly Chinese twist to them. My personal favorite shanzhai story is of the chap who owns a house that Iâ€™m extraordinarily envious of. His house has three floors: on the top, is his bedroom; on the middle floor is a complete SMT manufacturing line; on the bottom floor is a retail outlet, selling the products produced a floor above and designed two floors above. How cool would it be to have your very own SMT line right in your home! It would certainly be a disruptive change to the way I innovate to own infrastructure like that â€” not only would I save on production costs, reduce my prototyping time, and turn inventory aggressively (thereby reducing inventory capital requirements), I would be able to cut out the 20-50% minimum retail margin typically required by US retailers, assuming my retail store is in a high-traffic urban location.
A couple of fascinating posts on Shenzen small manufacturing.
Significantly, they do not just produce copycat phones. They make original design phones as well, as documented in this PDF (it is in Chinese, but the pictures are cool; the collage above is ganked from the PDF). These original phones integrate wacky features like 7.1 stereo sound, dual SIM cards, a functional cigarette holder, a high-zoom lens, or a built-in UV LED for counterfeit money detection. Their ability to not just copy, but to innovate and riff off of designs is very significant. They are doing to hardware what the web did for rip/mix/burn or mashup compilations. The Ferrari toy car meets mobile phone, or the watch mixed with a phone (complete with camera!) are good examples of mashup: they are not a copies of any single idea but they mix IP from multiple sources to create a new heterogeneous composition, such that the original source material is still distinctly recognizable in the final product. Also, like many web mashups, the final result might seem nonsensical to a mass-market (like the Ferrari phone) but extremely relevant to a select long-tail market. Interestingly, the shanzhai employ a concept called the â€œopen BOMâ€ â€” they share their bill of materials and other design materials with each other, and they share any improvements made; these rules are policed by community word-of-mouth, to the extent that if someone is found cheating they are ostracized by the shanzhai ecosystem.
More here where an excellent point is made about the Emilia-Romagna area in Italy. One of many things that drives me to despair about economists is that their impoverished model of how things work cannot distinguish between $x for investment in a computer system designer in a place like Austin where you can get someone to make you a small run of boards in a week, and the same dollar investment in a place where you cannot.
Also see the Strategy+Business article
Ms. Yang, a Beijing office worker, shows off her new mobile phone to her co-workers. It boasts all the features of a typical handset â€” touch screen, camera, MP3 and video players â€” but it offers a lot more besides. Shake it, and its wallpaper changes automatically. Dial it, and lights on the sides flash in sync with the most popular ringtones. This phone is not a Nokia, a Motorola, or a Samsung. In fact, it has no brand name at all, and it costs just US$70 (480 yuan), less than a fifth the price of similar branded products. This is what is called a shan zhai model in China.