(ICT #4-6)

- In economics, the division between what companies make themselves

and what they source from external partners is referred to as the vertical boundaries of the firm

- We can refer to this as Make vs Buy or Build vs Buy vs Partner

Make versus Buy

 

Make vs Buy: granola economics

 

 

 

 

 

 

 

 

 

 

 

Beachheads: Amazon, books, and Prime

 

 

 

Once you've sold the device: attach rate or tie ratio

 

 

iPod, iTunes, and the music labels

 

 

 

 

 

 

 

 

Switch

 

 

Apple as a platform

 

 

Vital complements, post-case

 

 

 

 

 

Sideways compatibility

 

Apple PC marke share today

 

Apple post-iPod

 

Two more things...

 

Wrap-up and next class

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When software makes hardware

 

 

 

 

 

- EMS = Electronics Manufacturing Service

- Refers to companies like Foxconn, or Flextronics, or Quanta, or Pegatron

  that specialize in making devices on behalf of other companies

- Apple has multiple EMS partners (including Foxconn and Pegatron)

Defining EMS

- The "smiling curve" describes value-added across various stages in device manufacture, from R&D maketing

- It is attributed to Acer founder Stan Shih (also TSMC board member), as he looked at the impact of the rise of China on Taiwan's ICT inducstry and PC assembly in particular

The "smiling curve"

 

 

 

 

Let's go back in time to 1977

 

"It is not a question of control effectiveness; it is a question of our policy"

Strategy Brain, v3

 

Shenzen, an early chronology

 

Four SEZ were created in 1980

 

So... what's a Special Economic Zone?

 

 

Reading: The Shenzhen Experiment

 

Hon Hai Precision Industry (dba Foxconn)

 

Let's put ourselves in Foxconn's shoes

 

 

 

Forces at work (pre-Covid) in the Foxconn case

 

 

Other forces at work

 

Demographic forces impact Foxconn

 

 

 

Aging is a global market and opprtunity?

 

 

 

 

Zhengzhou, 2022

 

Breakout: is mouving 15-30% of capacity out of China possible?

 

- Foxconn has set up manufacturing facilities in Brazil, India and Vietnam, among other locations, often as a result of local policy requirements. 

Local incentives

 

 

 

If you get an auto assembly plant, Walmart follows;

if you get a Walmart, an auto assembly plant does not follow.

 

 

A firm is deeply integrated when it buys many of its inputs from other firms in the economy. 

When a firm is deeply integrated, what is good for the firm tends to be good for the economy.

 

 

 

 

 

 

 

Wrap-up and next class