By Peter Burrows
HALF MEASURE. Already, that's different from the process by which the bulk of tech products are made. Increasingly, tech companies meet with ODMs to see what designs they have cooked up. Then, the ODMs are asked to tweak those basic blueprints to add a few features, and to match the look and feel of the company's other products.
That's where the "design" input might end for most companies. But since it's almost always trying to create one-of-a-kind products, Apple has to ask its own engineers to do the critical electrical and mechanical work to bring products to life.
In the iPod Shuffle, for example, designers cut a circuit card in two and stacked the pieces, bunk-bed style, to make use of the empty air space created by the height of the battery in the device. "They realized they could erase the height penalty [of the battery] to help them win the battle of the bulge," says Carey, whose company did a detailed engineering analysis of the iPod Shuffle.
SCREW-FREE. Even more important, Apple's products are designed to run a particular set of programs or services. By contrast, a Dell (DELL ) or Gateway (GTW ) PC must be ready for whatever new features Microsoft (MSFT ) comes out with, or whatever Windows program a customer opts to install.
But Apple makes much of its own software, from the Mac operating system to applications such as iPhoto and iTunes. "That's Apple's trump card," says one Apple rival. "The ODMs just don't have the world-class industrial design, the style, or the ability to make easy-to-use software -- or the ability to integrate it all. They may some day, but they don't have it now."
Of course, Apple also sets its self apart by designing machines that are also little works of art -- even if it means making life difficult for manufacturers contracted to build those designs. During a trip to visit ODMs in Asia, one executive told securities analyst Jim Grossman of Thrivent Investment Management about Steve Jobs's insistence that no screws be visible on the laptop his company was manufacturing for Apple. The executive said his company had no idea how to handle the job and had to invent a new tooling process for the job. "They had to learn new ways to do things just to meet Apple's design," says Grossman.
TOUGH CUSTOMER. That's not to say Apple is completely bucking the outsourcing trend. All its products are manufactured by ODMs in Asia. Just as it buys chips and disk drives from other suppliers, sources say Apple lets ODMs take some role in garden-variety engineering work -- but not much. "This is an issue for Apple, because the A-team engineers [at the ODMs] don't like working with Apple. It's like when you were a kid, all your dad let you do was hold the flashlight, rather than let you try to fix the car yourself," says an executive at a rival MP3 maker.
In fairness, Apple's reliance on a smaller number of products than its rivals and go-it-alone design means it's always a dud or two from disaster. But at the moment, it's proving that "made in Cupertino" is a trademark for success.
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