The New Apple iPad: High-Tech Supply Chain Transparency (Part 1)

Any time Apple (or another well known high-tech device or computing manufacturer) comes out with a new mass market product, it's usually mere days before the trade and business press literally rips the thing apart in hopes of not only understanding how it's made, but which suppliers are playing a key part in its production. There are lessons from this for other industries, but let me begin this post by sharing the latest findings on the new iPad, which sold around 300,000 copies in its initial launch. According to the above-linked WSJ article, "A look inside Apple Inc.'s new iPad points to more business for some familiar component suppliers to the Silicon Valley giant ... iFixit Inc. and UBM TechInsights began taking iPads apart shortly after the product went on sale Saturday morning."

According to their research -- and also that of the Federal Communications Commission, who conducted their own analysis -- the iPad leverages many of the same technologies found in the iPhone and iPod touch, provided by a similar looking supply chain. Foxxcon, of recent "Blood Macbook" fame, is the primary contract manufacturer of the device. This should of course be no surprise, as Foxxcon and Apple usually partner in the manufacturing area for devices such as this. Moreover, Foxxcon plays by Apple's intensive secrecy rules (to the point of beating up and threatening reporters). As I previously wrote, "If you think Apple's development and production initiatives follow a secretive approach inside the company's four walls only, guess again. Apple takes as much interest in how its supply chain partners guard information as it does in how its own employees do ... Reuters cites a source [who works at Foxconn] who suggests, 'Security is tight everywhere inside the factories ... They use metal detectors and search us. If you have any metal objects on you when you leave, they just call the police.'"

Further down the supply chain, among Apple's iPad partners, "One of the most prominent is Samsung ... Apple has used the Korean company and Toshiba Corp. of Japan as its main suppliers of flash memory, chips frequently used to store data in portable devices ... the flash chips found in the iPad, one of the most costly parts of the system." For the chip itself, Apple designed its own unit this time around, which they call the A4. Samsung provided the DRAM memory for this as well. The chip leverages the ability to read and write data in large "64-bit" chunks to speed up routine tasks such as launching applications, downloading e-mail or even surfing a website.

Other Apple supply chain partners run the gamut of big names and usual suspects in the industry: "the battery supplier is Amperex Technology Ltd., a Hong Kong-based company that is a unit of Japan's TDK Corp" and "other component suppliers for the iPad, Mr. Carey said, include Broadcom Corp., which supplied chips that help manage the machine's touch screen as well as allowing it to communicate using Wi-Fi and Bluetooth technology; Texas Instruments Inc., which supplied another chip associated with the touch screen; and Cirrus Logic Inc., which supplied a chip for managing audio in the device." ISuppli's analysis of the supply chain costs of the Wi-Fi-based iPad add up to "$229.35 in materials and manufacturing charges" for a device that Apple is selling for $499 -- plus, of course, their revenue share of application downloads.

For now, the ability for the media, customers and competitors to rapidly break down a supply chain like the iPad's is largely limited to high-tech. Stay tuned for Part 2 of this post, where we'll examine the benefits of this type of analysis and how greater transparency outside of high tech may afford the ability to rapidly tear apart a company's supply chain -- including the business, labor and other practices of its suppliers.

- Jason Busch

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