Apple in the long run

With the release of the iPhone, Apple has struck another brilliant move. In a market already filled with several incumbent giants, newcomer Apple not only succeeded to generate a huge buzz with its iPhone, but that buzz translated into sales (270,000 iPhone sold on the first 30 hours, not too shabby).

Now, let's take step back and examine Apple's hit products, past and present:
- Apple I & II
- iPod
- iPhone

(no, the Mac doesn't make the cut. If generations of Macs have been generating a lot of buzz over two decades, they nevertheless only represented a niche market)

What do those products have in common? They are/were all in a relatively new markets where integration matters. The significant exception was with the Newton as Apple failed to enter the PDA market, but this has probably more to do with CEO of then John Sculley's lack of proper leadership than anything else.

What Apple excels at is design as well as integrating components into a sleek product. The Apple I was designed by an electronics genius in his garage. Cramming all the iPod components into a Nano case was an engineering feat. Same thing for the iPhone.

But there comes a time where integration doesn't matter anymore. Consider the personal computer. In the 70's and early 80's all personal computer vendors were designing all the electronic boards because they had to. The only thing they could buy off the shelf was electronic chips. Designing the motherboards where those chips would fit was up to them, and that's where they provided value. But standard like ISA and later PCI took over, and all of a sudden pretty much any vendor could assemble high-quality components from different specialized vendors. Sure, a Mac still runs smoother than a PC thanks to a tight control on the hardware. But the PC is good enough, and has numerous other advantages.

And such a day will eventually come for portable devices as well. When batteries and flash memory become small enough, pretty much everybody will be able to design an iPod Nano or an iPhone. The way the different components may even be standardized. This day, Apple's added value will shrink. They could go horizontal and license the embedded version of Mac OS X used inside the iPhone to other manufacturers but this is highly unlikely (and would really be a first) as Apple has a strong vertical integration culture. They want to sell us some gizmos directly, not sell components to a vendor that will sell us the gizmos, as Microsoft prefers doing.

What can they do then? First of all they may move on to new markets where integration still matters. After all this is what they've done with the iPod. But this time they may also be able to keep their position on the MP3 player market thanks to some proprietary standards. For instance, keeping control of the connecting standards between an iPod / iPhone and any other device allows to control the access those hundreds of devices (people buy an iPod because there are so many peripherals, and and peripheral vendors only produce for the iPod because it holds the market). But it will be a tough fight for Apple to stay on top in the long run.