Time was, Intel made chips, Microsoft made operating systems and other software products, and HP and Dell made computers and other associated products. Time was …
Those times and the jolly relationships they spawned are gone gone gone.
There’s an old expression in the deal and contract business: all the rules and friendships change when the money hits the table. When you have an exploding market for mobile devices and a potential exploding market for the living room entertainment center with two or more screens in the equation, the money is hitting the table. If you doubt that for one minute, check the smiling faces of the patent litigation lawyers as they drive by in their new Bentleys and McLarens.
Apple wants Samsung’s TV business, ARM wants Intel’s market, Nvidia wants the HPC business, AMD lusts after the embedded business. And Intel wants the mobile market. On top of all that, software suppliers are becoming hardware suppliers. Google’s Nexus 7 and Microsoft’s Surface are certainly going to change the rules. And Intel is funding the creation of an industry to build notebooks just like the one its customer Apple makes.
Calvinball: The rules have changed
When the rules are there are no rules, it’s hard to build relationships. In the past when companies who normally cooperated overlapped on their ambitions a little, it was politely called co-opetition (a concept easier to express than to spell). Now it’s simple annihilation.
The OEMs, the box companies like Dell, HP, Lenovo, Sony, etc., are in a squeeze by their suppliers and partners. And whenever one of the partner/suppliers can leverage something, like an app store, or a brand, they will not hesitate to stomp all over their former customer.
And it’s as nasty as it sounds, with death-threatening competing products leveraging internal and unique developments, backed up by armies of lawyers, and aided by overwhelmed patent offices, and often cooperative politicians or governments.
What are the box companies to do? They can’t go develop operating systems (although HP almost did with webOS), and they shouldn’t go develop semiconductors (like some of them used to do); they might develop application stores, but they will have to commit to someone’s OS if they do.
Apple too is a box builder (for now), and is the most vertically integrated of all the box builders, making the OS, the chips, and running the app store. Microsoft is also vertically integrated and makes chips (Xbox), OS, and is developing an app store and box-building capability (with Surface, Xbox, Kinect, etc.)
Samsung could be the most vertically integrated of all, making chips, displays, and boxes. It has an App store and only lacks an OS, which it gets for free from its newest competitor.
Since the device makers (Amazon, Apple, Google, and Samsung) don’t seem very interested in the PC market (the exceptions to that re Apple’s Mac business, and Google’s Chrome netbooks), the big box builders who make notebooks, desktops, workstations, and servers may be safe for now from further intrusions. However, their incursions into the mobile space are definitely being thwarted. Dell, HP, and Sony are clearly prime examples of companies without a mobile strategy. Lenovo has everything Apple has except an OS.
The other mobile device makers, like HTC, Huawei, RIM, Sony, Nokia, and ZTE, are even more vulnerable to the incursions into the hardware portion of the market from Google and Microsoft. Microsoft, for the time being, has spared Nokia and not announced a smartphone, but it may be just a question of time if the former Finnish giant can’t deliver WinRT devices to the market in sufficient quantities to satisfy Microsoft’s investment in Nokia.
Although Apple and Samsung are the clear leaders, they can’t relax either. Alibaba and Haier jointly developed a smartphone called Haier Zing, recently released in China at $157 and running on the Alibaba’s Aliyun operating system.
The only thing any of the suppliers can rely on is that nothing is consistent in the broad-based computer and mobile markets. Nimbleness and brutal price management are the basic keys to survival. Cleverness, brand, and lawyers are the requirements for leadership.
For a guide on the new arrangement in the industry, go here.
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