Apple’s Butterfly Effect?

The Butterfly Effect (chaos theory) describes how small changes to complex systems can result in large unforeseen consequences over time. The Apple Effect describes how a once struggling computer company completely disrupted a dozen different industries including semiconductors. Apple is now the largest and most influential fabless semiconductor company that everyone else must now follow, absolutely.

Last week’s iProduct announcement held only one surprise for me but it was a really big one that I want to talk about here. Paul McLellan covered the Apple event HERE and he mentioned the lack of the famous Steve Jobs “one more thing” moment. After ending his keynote, Steve Jobs would start to walk away then turn back to the audience with a theatrical moment of forgetfulness and say, “One more thing…” and the audience would go wild as he made another announcement.

The “one more thing” moment at this announcement for me was the iPhone upgrade program, but first a little history. We have been purchasing new phones every two years as the carriers (Verizon, AT&T, etc…) have trained us to do. At first we got free flip phones for signing a contract then we started paying a nominal fee ($100-$200) for smartphones. The nice thing was that we did not have to pay sales tax (9%+ state and local tax in CA) on the free phones and you only had to pay tax on the nominal charge for smartphones. That soon changed so today we pay full tax on the list price of the phone and are locked to a carrier for two years. At the end of the two years we get a text from Verizon saying that we are now qualified for a phone upgrade, my family and I just got ours in fact. I almost immediately got texts from my kids asking when can they go pick out new phones. This has become our new normal.

With the new Apple upgrade program, not only do we not have to pay sales tax, the phone is unlocked so we can play the carriers against each other for the best rate. We can also get a new phone every year, which I already do by paying the full amount. Do I need a new Apple and Samsung phone every year? Of course not but it is nice to stay current and be able to test/debug SemiWiki on the latest Android and iOS devices.

iPhone Upgrade Program
A new iPhone every year and the coverage you want from AppleCare+. From $32.41/month. The iPhone Upgrade Program gives you an easier way to get a new iPhone every year, and the security and protection of AppleCare+. You’re even free to choose the carrier and rate plan that work for you. After 12 installments, you can get a new iPhone and start a new iPhone Upgrade Program. No more waiting for your carrier contract to end. Just trade in your current iPhone for a new one, and your new program begins.

The losers in all of this of course are the carriers, the sales tax collector, and every other smartphone vendor who does not offer this type of program. The carriers are already coming out with competing upgrade programs undercutting Apple (but still locking you in) and other smartphone vendors are sure to follow so there should be a nice butterfly effect here for us consumers. And what will Apple do with the millions of traded in phones? More disruption….

This should also give a financial boost to the fabless semiconductor ecosystem since smartphones and the resulting infrastructure are our life’s blood. In the comment section I will start a list of ways Apple has disrupted the fabless semiconductor ecosystem. Please add to the list if you can.