previous next

If Apple can't scale production impossibly fast, the race for the new 64-bit platform standard looks like it's down to Vista-64 and Linux.

The lead story in the Business section of today's Austin-American Statesbeing is about Acer, a Taiwanese PC manufacturer, buying Gateway. This deal also gives Acer the remains of eMachines and Packard Bell, and results in them becoming the third largest PC maker after HP and Dell. But that's not the interesting part.

The interesting part is the sidebar in the print version, attributed to Gartner, Inc and reproduced at the end of this article. It shows the market share for the largest PC manufacturers, both worldwide and in the US, for new sales in the second quarter of 2007.

Apple has 6.4% market share in the US PC market. That's not enough.

This means that for Apple to achieve 50% market share by the end of 2008, it has to double its production, then double it again, then double it again. In the next year. And that's just in the US: worldwide they need yet another doubling in that time period. The Macintosh's US market share is less than a quarter of the size of the whitebox market, and 1/5 the size of Dell.

From a purely logistical standpoint, it probably isn't physically possible for Apple to grow that fast. The Macintosh's US market share is less than a quarter of the size of the whitebox market, and 1/5 the size of Dell alone. No matter how high demand for its products becomes, Apple can't scale production rapidly enough to meet the demands of the entire computer industry in time to capture the next platform standard. Apple can't build the infrastructure, or hire enough people in time to make a difference, and that's ignoring ramp-up issues like training, distribution, quality control, scaling tech support scaff...

Worse, computers cost money to produce before you can sell them, and Apple hasn't got the money to buy enough parts to make all those computers. To purchase the necessary inventory, Apple would have to borrow tens of billions of dollars and gamble it could sell them before the loans came due. Another way to state Moore's Law is that computer hardware depreciates 50% every 18 months, and the secret of Dell's success has been rapid inventory turnover. The last thing Apple wants to do is own lots of computer parts for a long time.

Apple could bankrupt itself trying to grow that fast, and Steve Jobs clearly knows this. A serious attempt to capture the PC market would be a huge risk, one Jobs hasn't shown any interest in taking. Instead of paying to expand Apple's computer business, Steve Jobs seems to prefer to invest Apple's limited resources in the iPhone, the iPod, and Apple TV. If the Macintosh is just one product line within Apple, it must compete with a wildly successful and rapidly growing consumer electronics business, and an entire media distribution arm (iTunes).

If Apple had been willing to license its Macintosh hardware design to third parties, those other companies could switch over their existing production lines, spend their own money on inventory, and take their own risks trying to sell it (to their existing customers, through their established distribution channels). In that case, MacOS X just might become the new platform standard. But the prospects of the MacOS X operating system have always been limited by Apple's hardware production capacity, and that shows no signs of changing.

PC market share, 2nd quarter '07

United States
CompanyMarket Share
Others (whitebox)27.2%
CompanyMarket Share
Others (whitebox)40.9%
From August 28, 2007 Austin American Statesman, page D1.