Apple’s Supply-Chain Secret Revealed: Hoard Lasers

The secret to Apple’s success is its complete control over operations, supply chain and manufacturing activities.

Apple designer Jony Ive made little green light appear next to the webcam in MacBook. Photo: FastLizard4/ Flickr

What is Apple secret? How do they manage to keep secret products that require huge billion dollar deals, years of planning and cutting-edge technology up with no information leakage? And, finally, how does Apple do all of this while maintaining record profits and 40% gross margins?

Some years ago, Apple designer Jony Ive, decided to create a brand new feature for the next MacBook: a small dot of bright green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. What is the problem? The point is … it is physically impossible to shine light through metal.

Apple Inc. design guru Jony Ive. Photo: Apple Inc.

Ive invited in a team of experts specializing in manufacturing and materials, so that they should found out the way how to implement his idea, according to a former employee familiar with the development who requested anonymity to avoid irking Apple.

The team discovered a customized laser could be used to make holes in the aluminum small enough to be nearly invisible to the human eye but large enough to let light through.

So, Apple needed lasers, and lots of them. Ive found a company which made laser equipment for microchip manufacturing which, after some tweaking, could do the job.

Each machine typically costs about $250,000. Apple convinced the seller to sign an agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads, and wireless keyboards. There’s also the story of how Steve Jobs bought out all air freight for Christmas 1998:

To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport.

So, it illustrates two of the things which are invisible to most of Apple customers: money and attention to detail. It’s all of those billions in the bank that give Apple the freedom to lavish gobs of attention on many things such as massive manufacturing problems and small but critical details.

The things the company can do with that freedom differ from buying out the world’s supply of smartphone displays to Senior VP of Industrial Design Jonathan Ive and some of his team staying near a manufacturer’s facility in China “for months” to closely monitor the design manufacturing and prototyping process for future products.

For next year, Apple seems to follow the same tactics as well. It has already said via its annual report to the SEC that it will spend “$7.1 billion for product tooling and manufacturing process equipment.”

It is going to be interesting to see how Tim Cook, Apple’s new CEO and longtime supply-chain genius, will continue to use the company’s budget in different way as Jobs did.

Jobs made Apple quite a conservative company when spending and investments and resisted any calls for investor dividends or share buybacks. Cook, vice versa, indicates that he and Jobs differ in their methods.

“I’m not religious about holding cash or not holding it. I’m religious about a lot of things but not that one. We’ll continually ask ourselves what’s in Apple’s best interest. So it’s a topic for the board on an ongoing basis,” he said. [Via GigaOm and Business Week]

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