Apple Creates Its Own Ecosystem Based on iPhone
In the smartphone market, Samsung Electronics quickly caught up with Apple with a fast-follower strategy. As a result, in terms of sales volume, Samsung has maintained the No. 1 spot since 2011. However, unlike Apple, which expanded into other smart devices, such as the iPad, the MacBook and the Apple Watch, based on the iPhone, Samsung Electronics is having difficulty expanding into other areas.
In terms of shipments, Apple is widening its gap with Samsung Electronics in all of its smart device product lines. In 2021, the iPad’s share in the tablet PC market stood at 34.2 percent, nearly double that of Samsung Electronics' 18.3 percent. In the market of wireless earphones, Apple's 25.6 percent share dwarfs Samsung's 7.2 percent.
Experts point to Apple’s strategy of mass-producing a few models per device as the main cause of the sales gap between the two companies. When Steve Jobs returned to save Apple on the verge of going bankrupt in 1997, he reduced Apple’s laptop models from dozens to just four. Even now, more than 20 years later, Apple still has four basic laptop lines. The iPhone deviated from the one single model strategy after the death of Jobs, but Apple still sells four to five iPhone models a year. It is a stark contrast to other smartphone makers such as Samsung Electronics and Xiaomi, which have dozens of models across the whole range. Apple is employing a similar strategy for other products such as the iPad and AirPods.
Apple does not stop at simply reducing the number of models. Sharing multiple parts is also an important strategy. Apple’s latest iPhones, the iPhone 13 series, and the budget iPhone SE released in 2022, both are powered by the A15 Bionic, an application processor (AP) of Apple’s own development. The iPad uses the same chipset as the iPhone. Samsung Electronics uses chipsets from different companies for smartphones at different price levels.
Apple’s A15 Bionic is superior to competing products such as Qualcomm’s Snapdragon 8 Gen1 and Samsung Electronics’ Exynos 2200. However, since it is applied to all iPhone models, the cost can be lowered through mass production.
Apple even sticks to the strategy of unifying chipsets for its computers. Apple had used Intel chipsets in its computers since 2005. However, in order to expand the ecosystem and internalize parts, they parted ways with Intel and started developing their own chipsets. The result of this move was the PC chipset M1 released in October 2020. It is known that Apple has internalized the technology by actively acquiring companies with semiconductor technology since 2012 in order to develop its own chipsets to replace those of Intel.
The M1 is a system-on-chip (SoC) based on the A14 Bionic, with a CPU, a GPU and RAMs mounted on one single board. Since the MacBook is based on the same design as the iPhone and the iPad, connectivity between devices has been boosted, making it possible to use iPhone apps on the computer. Apple expanded the use of high-performance iPads by loading the M1 into them as well.
Following the introduction of the M1 Pro and the M1 Max which increased the transistor integration by increasing the size of M1 for high-performance work, Apple took the wraps off the M1 Ultra for products for professionals in March. Instead of using a new board, two M1 Max chips were connected to boost performance.
Bold R&D investment has been making Apple’s unique ecosystem possible and sustainable. Apple invested US$21.9 billion (about 27 trillion won) in R&D in 2021. It doubled from US$10 billion in 2016 (about 12 trillion won) in five years. Although Samsung Electronics’ R&D expenses reached 22.6 trillion won 2021, experts say that it is difficult for the Korean tech giant to catch up with Apple in terms of scale considering the fact that it has to engage in other fields such as semiconductors and electric home appliances.
“Apple does not directly produce products, but has close to 20,000 R&D personnel who develop parts,” a high-ranking Samsung official explained. “Apple dwarfs Samsung Electronics with 1,500 R&D personnel by more 10 times in terms of human resources.”
Industry insiders expect that Apple will further expand its product ecosystem into augmented reality (AR) and electric vehicles by using the unified chipset design as a stepping stone. “Apple is the only company in the world that has built a huge ecosystem by developing both hardware and software on its own,” one of them analyzed.