The problem other manufacturers have is that they cannot compete. They are doing the best they can, but to start with, their operating systems are fractured. You have several versions of Android, WebOS, and more coming. Several manufacturers will be second guessing using Android for concerns about taking a back seat to Motorola. Then add the problem of trying to dent Apple's market share. Apple is associated with the tablet market and has the top reputation for style and performance. The average user wants exactly what Apple is producing.
Even if the other manufacturers catch up, it will be hard for them to compete on price. With 80+% of market share, their patent portfolio, and their cash reserves, Apple has the bargaining power to get the top components at very low prices. Enough so, that they can make huge profits at prices where the compettion is losing money. Anyone that has worked on cars, knows that when you suffer an accident or breakdown, It does not take much for the sum of the repair parts to be more than the value of the vehicle. Every car shares as many parts as possible, not only among other vehicles by the same manufacturer, but among different manufacturers. That is because it can cost as much for 1000 units as 1,000,000 units. With any product you have three cost factors. Fixed costs which are there for any amount of product. You take the cost of your capital expenses and divide by number of units. The more units, the lower the price. Then you have material cost which will be the same for every unit. Then you have labor/equipment costs which are both types of expenses.
An example of that is looking at a small plant system. You have a manager, secretary, and foreman. If one employee produces 250 units per month, and you have an order for 1000, you need 4 trained employees. With 5000 units ordered, you can managed with 20 employees. However, at some point you have to overstaff your employees to cover time off for vacations and sick leave. So for every 10 employees, you have to hire a spare. However, all these can be managed with one manager, secretary and foreman. After 22 employees, you may need to go to a second foreman. Eventually you may need to hire more secretaries, etc. So production efficiency will be a series of ups and downs according to demand. The equipment needed to produce the equipment will also be a variable. The more production, the more equipment to produce them. Eventually, a new factory may be needed, adding more capital expense. And it takes years to build a new factory, so what happens in the meantime? Will there be a market when the new factory is completed? The public wants now, not when available.
Even if the other manufacturers catch up, it will be hard for them to compete on price. With 80+% of market share, their patent portfolio, and their cash reserves, Apple has the bargaining power to get the top components at very low prices. Enough so, that they can make huge profits at prices where the compettion is losing money. Anyone that has worked on cars, knows that when you suffer an accident or breakdown, It does not take much for the sum of the repair parts to be more than the value of the vehicle. Every car shares as many parts as possible, not only among other vehicles by the same manufacturer, but among different manufacturers. That is because it can cost as much for 1000 units as 1,000,000 units. With any product you have three cost factors. Fixed costs which are there for any amount of product. You take the cost of your capital expenses and divide by number of units. The more units, the lower the price. Then you have material cost which will be the same for every unit. Then you have labor/equipment costs which are both types of expenses.
An example of that is looking at a small plant system. You have a manager, secretary, and foreman. If one employee produces 250 units per month, and you have an order for 1000, you need 4 trained employees. With 5000 units ordered, you can managed with 20 employees. However, at some point you have to overstaff your employees to cover time off for vacations and sick leave. So for every 10 employees, you have to hire a spare. However, all these can be managed with one manager, secretary and foreman. After 22 employees, you may need to go to a second foreman. Eventually you may need to hire more secretaries, etc. So production efficiency will be a series of ups and downs according to demand. The equipment needed to produce the equipment will also be a variable. The more production, the more equipment to produce them. Eventually, a new factory may be needed, adding more capital expense. And it takes years to build a new factory, so what happens in the meantime? Will there be a market when the new factory is completed? The public wants now, not when available.
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