Monopsony is great for consumers but can really suck for suppliers, whether yo work with Apple or compete

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Apple Inc. A8X iPad chip causing big problems for Intel, Qualcomm, Samsung and Nvidia
[Via AppleInsider]

Apple’s A-series Application Processors that power iPads–including the latest and greatest A8X in iPad Air 2–are inciting billion dollar losses for Intel and threatening major problems for rival tablet chips from Qualcomm, Samsung and Nvidia, along with all the companies that depend upon those vendors for their mobile chips.

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Monopoly is when there is only one seller and can be very harmful to consumers, especially if that product is a necessary one.

Monopsony is when there is only one buyer and refers to suppliers feeding materials to the commercial entity. This can be great for the consumer because the copany gets its materials for much less.

But, as we have seen with GTAT and the sapphire screens, the supplier had better have all its costs figured out to the nth degree before it signs a contract. Because it has little leverage to change things afterwards.

And, as this article shows, trying to compete in the market against Apple simply has not worked in the tablet space, resulting in just about every maker leaving, resulting in extreme losses for many suppliers.

So now Apple just has to worry about the market being whittled down to just a few suppliers who then regain leverage if they make critical parts.

Which is probably why Apple brought chip design in house. It is a win-win: they can advance the hardware to fully support the software without worrying about other clients; and, they remove any possible leverage over critical areas.

Smart. Now this really just applies to tablets. There are plenty of other areas for the suppliers to sell without dealing with Apple. But it partly explains why Apple has such a hold on the market – suppliers cannot ignore Apple here and buyers get a better tablet for the price than any other manufacturer.