How Apple Stole 1 of Intel's Greatest Weapons

Apple (Nasdaq: AAPL  ) loves to borrow and steal great ideas from other people. If it's not a desktop computing model from Xerox (NYSE: XRX  ) PARC or a tablet design from Stanley Kubrick, Cupertino is modeling retail stores after concepts from da Vinci and Fibonacci, or cloning and then perfecting an existing plethora of music-playing gadgets.

So I'm not surprised to see Apple copying the famous "tick-tock" strategy from chip giant and business partner Intel (Nasdaq: INTC  ) .

The iPhone 4S makes it all so obvious. Every other year, Apple presents a drastic makeover of the iPhone like the sleek, 3G-enabled iPhone 3G or the radical glass-and-aluminum iPhone 4. The years in between simply get a speed bump, refreshed software, and perhaps some fresh accessories. Look for "Olympic Games" on your calendar. If it's there, Apple is going all out again. If not, you'll get the iPhone 5GS, 6X, or something in that vein.

In Intel's model, the company presents either a more advanced manufacturing process or a radically redesigned chip architecture in alternating years -- never both at the same time. Likewise, Apple makes its phones either faster and cheaper, or better and more handsome. You can set your clock by these guys.

Intel has used this model to stave off challenges by Advanced Micro Devices (NYSE: AMD  ) , ARM Holdings (Nasdaq: ARMH  ) , and MIPS Technologies (Nasdaq: MIPS  ) for many years. Apple is employing a very similar tactic against a much larger array of competitors, but has already nearly killed Research In Motion (Nasdaq: RIMM  ) with this deadly weapon. It works.

"Good artists borrow, great artists steal," said Pablo Picasso (unless, as some sources say, he stole that pithy saying from someone else). Steve Jobs leaned on that mantra to fabulous effect. Now it's up to Tim Cook to keep the clock of iPhone progress tick-tocking. Apple is an important part of an even greater tech revolution that keeps Bill Gates up at night. Learn all about it in this totally free video report.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Apple and Research In Motion. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Apple and Intel; creating a bull call spread position in Apple; and creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+ , or peruse our Foolish disclosure policy.


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  • Report this Comment On October 07, 2011, at 12:03 PM, jameskatt wrote:

    QUOTE: In Intel's model, the company presents either a more advanced manufacturing process or a radically redesigned chip architecture in alternating years -- never both at the same time. Likewise, Apple makes its phones either faster and cheaper, or better and more handsome.

    CORRECTION: This is not a weapon.

    A radically redesigned chip architecture takes a long time to develop - on the scale of 2 years or more. And a more advanced manufacturing process also takes 2 years or more to perfect or develop. This accounts for why they may alternate years.

    Apple doesn't do cheaper unless forced to.

    Apple does faster, better, and more handsome all at the same time each year.

    Realize that if there is no reason to make a product more handsome, then it does not do so. For example, the Mac Pro has looked the same FOR YEARS. The iPhone 4 and 4s together will look the same for nearly 3 years. Remember that the iPhone 4 has been selling for the last 18 months - putting a kink in this article's suppositions.

    Apple also does not release a product until it is ready to. This is why it stopped going to trade shows - which forced Apple to update its products each year. Now Apple does not have to update its products each year - e.g. the iPhone 4.

  • Report this Comment On October 07, 2011, at 12:34 PM, austec wrote:

    Intel's greatest weapon, in my opinion, is those multi-billion dollar bribes and threats used as part of their monopolization strategy (outlined very well by regulators in Europe, America and even the NY AG).

    6-billion dollars was paid to Dell in exchange for not buying anything from AMD.

    "Hundreds of millions" was paid to HP to keep AMD's share in their products under 5%. This is smart, because it limits AMD's growth, yet it also helps Intel evade antitrust enforcement by having a competitor around.

    A lot of money and threats were also handed out to other computer manufacturers and EVEN RETAILERS like MediaMarkt of Europe. Intel paid them not to stock AMD products!

    Unbelievable.

    Apple still hasn't picked up that Intel weapon, yet.

    I guess some companies have a stronger sense of right and wrong?

  • Report this Comment On October 07, 2011, at 12:41 PM, techy46 wrote:

    Good artists borrow, great artists steal," said Pablo Picasso.

    Correct - And here comes Microsoft Windows 8 and Nokia W9 and other OEM phones and tablets using WP78 to compete with iStuff.

    Apple is an important part of an even greater tech revolution that keeps Bill Gates up at night.

    Wrong - Bill didn't sell all his stock when he left and still has 600 million shares plus $30 billion in monopoly money. Apple might cause Balmer to work harder but they both could've stopped long ago ala Paul Allen and had fun doing something more exciting.

  • Report this Comment On October 07, 2011, at 12:52 PM, techy46 wrote:

    6-billion dollars was paid to Dell in exchange for not buying anything from AMD.

    AMD was very lucky to have an X86 manufacturing license from Intel to begin with and Intel unfortunately lost their followup proprietary X86 IP to AMD in a bad legal situation. Intel's granting large volume discounts, kick backs, was unfortunate but AMD's, DOJ and EU self richeous response was purely pathetic. Same for Microsoft and DOJ and EU lawsuits over IE integration and source code disclosure. Competitve hypocrisy.

  • Report this Comment On October 07, 2011, at 12:54 PM, techy46 wrote:

    I suppose Apple took the high road in the Microsoft lawsuit over PARC GUI? NOT.

  • Report this Comment On October 07, 2011, at 3:43 PM, mtechac wrote:

    What..??!! After 20 years of being Apple's technology fan and after Apples release of the mediocre IPhone 4, I bought a spanking new Samsung Galaxy SII, which frankly beats the IPhone 4S and the IOS IPhone usability.

    Apple made a huge mistake with the IPhone 4, which is why is trying to smothered Samsung with lawsuits. They can't compete with Samsung SII devices. Samsung's have better screens, have faster downloads of 21 mbps while IPhone 4S has 14 mbps, the Samsung OS works very efficiently, has replaceable batteries, etc.

    Intel was saved by AMD's having trouble with one of their chips thanks to Global Foundries problem with one of the chips fabrication. Intel made a big mistake and sub-estimated AMD's fusion, which still can wipe out Intel because they still lack high end GPU's and Crossfire/SLI technology.

    In my opinion, Apple made a mistake and Intel made a mistake that are going to cost them a lot of their business.

    I will repeat. Apple will lose business with the mediocre IPhone 4S against Samsung's higher end Samsung SII, and Intel will lose business because of AMD's new fusion architecture, which has taken the first baby steps this year, but will reign in the future.

  • Report this Comment On October 07, 2011, at 6:42 PM, TMFNewCow wrote:

    Great points, Anders.

    -- Evan

  • Report this Comment On October 07, 2011, at 9:09 PM, baldheadeddork wrote:

    No, I'm sorry. This is a painfully, embarrassingly bad piece.

    At the center of the analogy fail, is comparing a consumer product sold in large part on design and status with a component used in a huge range of finished products.

    An Intel processor is to an iPhone what a fuel pump is to a car. Consumers don't care about the technology of the former as long as long as the latter works. And if Intel designs a new CPU that looks just like the old one, the number of people in the world who care about it could fit in a phone booth. Try saying that about the iPhone without bursting into laughter.

    But sticking with this car theme, there is a much better analogy in the car business to the iPhone 4S. It's called the mid-cycle refresh. Developing a truly new car can cost more than a billion dollars so you can't do that every three years. But the market wants something that at least looks different more often than the 7-8 product cycle, so every three years or so manufacturers do a mild restyling and may incorporate some new hardware.

    This isn't always a bad thing. The Ford Fusion didn't hit its stride until the 2010 refresh, and a mid-cycle refresh on the Mustang last year brought a pair of terrific new engines. The iPhone 4S is a mid-cycle refresh of the original iPhone. It's got a new processor, a couple of new features, but it's still the iPhone 4.

    But - and this is really important - it only works in the car business because everyone does it. If Nissan or GM started releasing all-new models every 3-4 years while everyone else was doing a refresh, it would make their products more desirable. In phones and cars, consumers are drawn to fresher products, even spending more and choosing poorer quality.

    That's why the bad thinking in this story has nothing on the mistake Apple made with the 4S. Apple doesn't have just one competitor doing new product cycles in the time it takes the rest of the industry to do a refresh. All of them are doing new models faster than Apple does a refresh. (Okay, all except Blackberry. Happy?)

    Try to imagine this in any other field. A car company that only came out with new models every sixteen years instead of the eight that's the standard for the industry. Or a clothing designer who only put out new lines every other year. I can't think of a single consumer product where this kind of strategy works.

    What about the 3G and the 3GS? A lot of people have held that up as proof that the 4S will be a huge hit. But there's one big problem: The 3G and 3GS had two years to dominate because there was no serious competition. The first Android phone didn't hit the market until four months before the launch of the 3GS. Android didn't begin to find its stride until a year later, but once it did it devoured market share even faster than the iPhone had.

    Apple didn't steal a weapon from Intel. They're continuing a product strategy that will doom them in this market. Either they adapt to the product schedule of their competitors and continue to make great product, or they will get crushed.

  • Report this Comment On October 07, 2011, at 9:39 PM, memoandstitch wrote:

    I think he just ran out of ideas for an iphone article.

  • Report this Comment On October 07, 2011, at 9:41 PM, memoandstitch wrote:

    Why don't you steal from other blogs? That might make you a better writer.

  • Report this Comment On October 08, 2011, at 7:45 PM, godofbiscuits wrote:

    Do you even realize how embarrassingly bad you're demonstrating that your research abilities are? Xerox PARC? Seriously?

    Stay in your own wheelhouse, however small that is, Fools.

    You don't know anything about technology. Clearly the Street *still* doesn't know how to deal with the singleton that is Apple.

    And that must chap your Foolish asses.

  • Report this Comment On October 08, 2011, at 7:49 PM, godofbiscuits wrote:

    Dear Baldheadeddork:

    The car analogy doesn't hold.

    Android is the new featurephone replacement.

    Apple still sells the iPhone 4 and the 3GS. Sprint is a brand new market for the iPhone.

    "Free" is a new market for Apple.

    Siri is not just "voice command, like Android has had for a long time now".

    Apple products have never been just a box full of features, like, say, I dunno, a CAR.

    Funny, neither have cars, for many people, for that matter.

    Simple really. Just not *simplistic*.

  • Report this Comment On October 08, 2011, at 11:04 PM, AdamChew wrote:

    @mtechac

    Does it matter, Apple is making boatloads of money and can I say the same for you.

  • Report this Comment On October 10, 2011, at 5:09 PM, mtechac wrote:

    @AdamChew, technology, and boatloads of money, runs in cycles. Apple almost didn't make it until it got the IPods/IPhones, which was better technology than what other companies had at that time.

    Unless the IPhone 5, and the IPad 3, are revolutionary in it's UI usability, hardware, and performance compared to all the other companies products, Apple will fall into a plato, too, like they are falling with the IPhone 4 and IPhone 4S.

    I have been a fan of Apple for almost 30 years. I don't like the IPhone 4S since technologically is below the Samsung SII and other devices. Another thing is I don't like Apple suing other companies for bringing better technology and products to the market. It just shows that they are really afraid of what companies are coming with adn afraid that they cannot catch up, otherwise they will not go that route. Will Apple become a stagnant Intel/Microsoft? Well if Apple don't deliver something extremely usefull, they will begin to lose business in the same way Mircosoft and Intel are.

    In reality, Apple technology is based on common 3rd party suppliers and the real magic is how to put the parts together together in an elegant and very usable and practical form.

    Lately, many companies have learned how to build higly estetic looking devices and have learn the importance of good hardware and good performance. Apple have been taking shortcuts to maximize profits: soldered-in memory, no replaceable battery, mediocre bluetooth hardware, etc. And as a very long time Apple IOS user, the IOS have very annoying usability issues that now other devices don't have and now the other devices programs/GUI work a lot nice than the current IPhones.

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