Rumors are starting to circulate that Apple may actually be about to update the MacBook Air line of laptops. On the surface, this is surprising, because with the introduction of the new Retina-screen MacBook you’d be forgiven for asking, “Why update the Air?”
From a manufacturing standpoint, there are some logical reasons to kill the Air line in favor of the MacBook.
So why update the MacBook Air if there are good reasons to replace it with the simpler-to-produce MacBook? Because of the only reason that matters in business. Sales are good. That and the fact that the manufacturing machinery and equipment are paid off. The MacBook Air is sitting in that sweet spot where depreciation charges have gone to zero but sales are still strong. Usually this golden period doesn’t last long, because customers will move on to something better. But if they’re asking for it, keep giving it to them.
And not all updates are equal. Swapping out a part that is easily substituted on the manufacturing line isn’t the same as Apple committing engineering resources to make substantial design changes. It’s one thing for assembly line workers to simply reach for a different chip SKU and another thing for engineers to redesign the battery shape to accommodate a different logic board.
The transition makes perfect sense from a cost perspective. If Apple had priced the MacBook starting at $999 right out of the gate, it would have had more demand than it could have fulfilled. And this demand would have been on sales units that were much less profitable than the MacBook Air. Why shorten the Air’s golden profitability period? And why sell the MacBook at low margins in the beginning when early adopters can immediately get you into the fat margin territory? As tooling costs come down, Apple can lower the price on the MacBook and keep their margins right where they want them.
When I was working at Gateway and my friends would ask me why we moved our laptop production to Asia, I always had the same answer. Our customers made these decisions for us. If we had American-made laptops selling at a $50 premium compared to Dell’s Asian made laptops, many customers purchased Dell’s instead of ours. Then we had no choice. We had to move our production to Asia. The same principle of customer choice applies to Apple here. If Apple has both MacBooks and MacBook Airs sitting on the shelf, at what point does Apple lower the price on the MacBook and kill the MacBook Air? Easy answer. When their customers stop buying the MacBook Air. The customers make that decision for Apple. At that point, Apple will proactively start lowering the price on the MacBook to fill the vacuum, and they’ll recoup margin through greater volume.
Again, not all updates are equal. I would be surprised if Apple did update the MacBook Air this late in the life cycle. But strong customer demand can greatly alter the cost-to-benefit ratio. It’s the same reason I think that Apple may update the specs on the iPhone SE every year. If there is still strong demand for an old form factor, low-hassle updates can have a big return on investment.
- Moving to one 12" size versus a forked line of 11.6" and a 13.3" is huge. The benefits of this are going to be felt in lower component costs, less inventory on hand, less manufacturing tooling required, etc. There are less SKUs that need to be ordered and there will be better freight pricing on incoming shipments. I spent years analyzing the relative profitability scenarios of laptop manufacturing at Gateway, and this item alone would have had me excited if I were working with Apple.
- Less ports means less cost. When you are dealing with highly automated manufacturing, speed is the name of the game. You essentially need to spread the millions of dollars for your machinery over every unit it produces. So if you are only drilling one port versus three you could be boosting your parts per hour by a huge percentage. That means everything takes a significant price drop. Not only that, when I was at Gateway, a huge number of our warranty claims were related to ports. Less ports equals lower warranty costs. Also, the assembly cost of the logic board is going to be reduced significantly by omitting extra ports.
So why update the MacBook Air if there are good reasons to replace it with the simpler-to-produce MacBook? Because of the only reason that matters in business. Sales are good. That and the fact that the manufacturing machinery and equipment are paid off. The MacBook Air is sitting in that sweet spot where depreciation charges have gone to zero but sales are still strong. Usually this golden period doesn’t last long, because customers will move on to something better. But if they’re asking for it, keep giving it to them.
And not all updates are equal. Swapping out a part that is easily substituted on the manufacturing line isn’t the same as Apple committing engineering resources to make substantial design changes. It’s one thing for assembly line workers to simply reach for a different chip SKU and another thing for engineers to redesign the battery shape to accommodate a different logic board.
The transition makes perfect sense from a cost perspective. If Apple had priced the MacBook starting at $999 right out of the gate, it would have had more demand than it could have fulfilled. And this demand would have been on sales units that were much less profitable than the MacBook Air. Why shorten the Air’s golden profitability period? And why sell the MacBook at low margins in the beginning when early adopters can immediately get you into the fat margin territory? As tooling costs come down, Apple can lower the price on the MacBook and keep their margins right where they want them.
When I was working at Gateway and my friends would ask me why we moved our laptop production to Asia, I always had the same answer. Our customers made these decisions for us. If we had American-made laptops selling at a $50 premium compared to Dell’s Asian made laptops, many customers purchased Dell’s instead of ours. Then we had no choice. We had to move our production to Asia. The same principle of customer choice applies to Apple here. If Apple has both MacBooks and MacBook Airs sitting on the shelf, at what point does Apple lower the price on the MacBook and kill the MacBook Air? Easy answer. When their customers stop buying the MacBook Air. The customers make that decision for Apple. At that point, Apple will proactively start lowering the price on the MacBook to fill the vacuum, and they’ll recoup margin through greater volume.
Again, not all updates are equal. I would be surprised if Apple did update the MacBook Air this late in the life cycle. But strong customer demand can greatly alter the cost-to-benefit ratio. It’s the same reason I think that Apple may update the specs on the iPhone SE every year. If there is still strong demand for an old form factor, low-hassle updates can have a big return on investment.
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