Company / division: iPhone
Sprint’s Virgin Mobile Goes iPhone-Only in Relaunch (Jun 22, 2017)
This is exactly the kind of speaking out of turn that Apple suppliers absolutely know not to engage in, so it’s baffling that Wistron’s CEO would have been so careless. Wistron, of course, is the vendor Apple is using for its first foray into manufacturing in India, and this is the kind of thing that tends to jeopardize those relationships. It’s not a huge revelation – Apple joined the consortium that manages the Qi wireless charging standard which it already uses in the Apple Watch a while back. But it’s one of a number of new hardware features that are likely to make it into the next iPhones – certainly not the headline feature, but one of a checklist of features that will be used to drum up demand. On the other hand, I remain skeptical of the value of mat-based wireless charging – though there’s some appeal to just putting your phone down to have it charge, that really requires several chargers in different places around your home and/or office to be useful, and it’s actually more limiting than traditional plugged-in charging for things like making phone calls or typing on your phone, where you might want to hold it while it’s charging. I’m still most curious to see whether Apple has made any advances in this regard and how it will both approach and sell wireless charging as a feature.
via The Verge
I’ll start with my usual caveat on so-called “gigabit” wireless services: though theoretical throughputs on devices with the new modems being discussed here can reach gigabit per second speeds, the real-world experience is going to be a fraction of that. In other words, even if the reporting in this article is correct, Apple isn’t going to be missing out on true gigabit speeds any more than the other device vendors will have them. The second caveat is that even the more realistic speeds will only be available where carriers have upgraded their networks to support them, which will be far from everywhere for the near future. With those caveats out of the way, though, Apple will be one of the few device vendors out there without these faster modems in its devices over the next year. However, as the article rightly points out, Apple has rarely been willing to put cutting edge new modem technology in its devices at the same time as others, generally preferring to wait for the technology to mature before deploying it, as it notably did with both 3G and LTE. There is, of course, this time also the added complication of Qualcomm being the only supplier with a gigabit modem ready to go, and the fact of Apple’s very adversarial relationship with Qualcomm and its decision last year to introduce Intel modems. I’m inclined to believe the reporting here is accurate, but I’m not sure it’s really all that significant – in real-world experience, there will be very little difference for many customers over the next couple of years, and Apple will almost certainly jump on the gigabit modem bandwagon next year, likely through Intel.
Apple has been in battles with various states over so-called “right to repair” legislation in recent months, and one of its key arguments against proposed new laws is that its devices have to be repaired in special ways in order to ensure the continued integrity of the Touch ID sensor and the secure enclave attached to it. Replacing an iPhone screen with a damaged Touch ID sensor, it argues, is something that can only be done by official Apple technicians with the ability to certify the integrity of those components. That, in turn, means that not all screen repairs can be conducted by any run of the mill repair center. Predictably, critics have argued that Apple merely wants to preserve what they see as a lucrative repair business given that Apple often charges more for such repairs than mall kiosks. All that is by way of context for this news that Apple is planning to put a couple hundred of its proprietary screen repair machines into third party repair centers in the next little while, with another two hundred coming by the end of the year. This puts some weight behind Apple’s argument that it’s intent on preserving security of devices and not merely its revenue streams, given that it’s now opening up access to those machines, albeit mostly through big partners like Best Buy. Given that there are still states with no Apple Stores at all and other parts of the US where people would have to travel long distances to one, it makes sense to spread availability of the repair technology more broadly, and Best Buy already hosts mini Apple stores within its stores to help meet these needs. But I don’t think any of this is going to neutralize the calls for Apple to open its repair processes more broadly, which is a great illustration of how narratives form around what are at root fairly complex subjects. It’s far easier to claim that Apple is somehow acting against its customers’ interests in this area than to explain the complexities involved in repairing a Touch ID sensor with all the security implications that has.
Apple today upgraded its iPad Pro lineup and announced a new version of iOS with big changes for the iPad as well as support for AR. The major theme in both the hardware and software aspects of the iPad announcements was productivity, where Apple continues to push the iPad Pro as a potential laptop replacement. The hardware changes improve performance across the board while specifically tweaking the ratio between screen and device size for the smaller iPad Pro in a change that likely foreshadows what Apple will do in a more dramatic way in the Fall with the iPhone. Just as the Mac lineup became more powerful with today’s announcements, so the iPad is becoming more powerful as a potential computer replacement, and the iOS changes specific to the iPad further that message, with support for a much wider range of multitasking scenarios and other more sophisticated features. For the first time, the iPad version of iOS feels like it’s gaining a truly distinct identity that’s really optimized for heavy-duty productivity tasks, and it will be interesting to see how the OS feels on the iPads not designed for pro use, because a number of user interface elements and conventions will change as a result. However, the other big change in today’s iOS announcements is support for AR through ARKit for developers, which is Apple’s first foray into AR. Notably, whereas the VR support in the Mac is primarily aimed for today at creation of VR content, Apple’s AR push is much more end-user centric, and will enable developers to quickly and easily create a range of AR apps and games for the iPhone and iPad. Whereas smartphone-centric AR today is very photo- and video-centric and dominated by companies like Snapchat and more recently Facebook, Apple’s platform approach could dramatically expand the use of AR in smartphone apps and move smartphone-based AR forward significantly in terms of mainstream adoption.
★ Apple is Developing a Dedicated AI Chip (May 26, 2017)
Apple Launches Website for Android Switchers (May 22, 2017)
A little under two years ago, Apple launched its first Android app, “Move to iOS”, which was designed to help Android users make the switch to an iPhone. Now, Apple has a new section of its website up which is designed explicitly to help (and help convince) Android users switch to the iPhone. Given that almost every buyer of an iPhone in mature markets is going to be an existing smartphone owner, the two key drivers of iPhone sales in those markets are switching from Android and upgrading from earlier iPhones, and both have been a consistent theme on recent Apple earnings calls. So targeting that audience of Android switchers specifically makes perfect sense. The site focuses on a few aspects of buying and owning an iPhone: ease of use, ease of switching, camera quality, speed, privacy and security, iMessage extensions, support from Apple people, and environmental responsibility. Out of all the possible things Apple could emphasize, that’s an interesting list – design, for example, isn’t one of them, though the word appears in other contexts three times on the site, and all the things highlighted here are functional rather than aesthetic. In fact, other than one oblique shot of an iPhone at the top, there isn’t a single full shot of an iPhone or any shot with the screen on until you get to the “buy” section at the bottom. Given how central the design message and product shots have traditionally been to Apple promotional material, that’s an interesting departure and likely reflects research on why people switch from Android. It’s also worth checking out a set of five short videos Apple has made to go along with the site.
92% of US iPhone Users Plan to Buy Another (May 19, 2017)
We’ve seen some of these stats before, and they bounce around a little from survey to survey, but it’s always good as a reminder of just what makes the iPhone installed base so valuable: the combination of very high loyalty to the platform and the ability to sell a variety of other devices and services to iPhone users. This Morgan Stanley survey released this week says that 92% of current iPhone owners plan to stick with the iPhone when they buy their next smartphone, among the highest levels MS has seen, while Samsung comes second at 77% and other Android vendors score considerably lower. That means that even if smartphone upgrade cycles are lengthening, nearly all of the 100 million or so US iPhone users will eventually buy another, many of them likely this fall with what’s expected to be a big upgrade. With iPhones roughly two thirds of Apple revenue, that’s already tremendously important to its future prospects, but the other key part of this is that those iPhone buyers are likely to buy apps and content from the App and iTunes stores, subscribe to Apple Music, iCloud storage, and so on, and also buy other Apple devices like Watches, iPads and Macs. One of the challenges Apple faces, conversely, is that this loyalty rate isn’t as high in every country, with China one notable exception. Though I’ve only seen one survey referenced on this topic, and I’n not convinced the absolute numbers are right, it certainly seems to be the case that iPhone loyalty has been lower in China recently, with at least some iPhone owners shifting down to a cheaper Android phone from rising stars Oppo and Vivo. If Apple can turn that trend around with this fall’s phones, of course, that could lead to a massive rebound in growth in China.
★ Apple Makes First iPhones in India (May 17, 2017)
Counterpoint Says Apple has 80% Share of Premium Smartphones in China Despite Overall Fall (May 4, 2017)
Counterpoint, which I’ve referenced previously here as a solid source on smartphone market share and so on, especially in Asian markets, has an update on Q1 smartphone performance in China. The headline is that Apple, Xiaomi, and especially Samsung saw their shipments drop significantly year on year, while local companies Oppo, Vivo, and Huawei did better, in a market that grew just 4% year on year. The Apple drop is worth noting because China performance has been a major talking point on its recent earnings calls (including this week) and there are lots of explanations flying around about why it’s struggling there. I linked to this piece a while back, and Ben Thompson had an interesting piece this week on Stratechery about the role WeChat plays in China and how that impacts Apple. But it’s worth noting the details on the premium market in China in this Counterpoint post. It argues that Apple’s performance in China (as elsewhere) is highly cyclical, but that it consistently takes 80% of the $600+ market. In other words, Apple’s share remains very strong in the segment where it competes, but much of the activity in China is at lower levels where Apple doesn’t compete. In that sense, there’s nothing new here, and the growth of the sub-premium segments is to be expected in a maturing market that’s reaching lower income tiers of the population. But if the premium segment is actually shrinking in real terms rather than just relative terms, that’s more problematic because it would indicate consumers who could afford iPhones are nonetheless choosing to buy the cheaper alternatives. So far, I’ve seen little evidence of that, but it’s worth watching future numbers from Counterpoint and elsewhere to see if that pattern starts to emerge. For now, I’m still more inclined to read what’s happening in China as part of a cycle which is already starting to correct and should do so more meaningfully later this year.
Apple’s results for calendar Q1 (its fiscal Q2) were out today, and they largely continued the trends from the December quarter. Revenue growth continued and actually accelerated despite the lack of the extra week which made last quarter’s numbers slightly harder to parse, but the connection between iPhone growth and revenue growth was broken as iPhone shipments dipped slightly (though a change in inventory patterns from last year eliminates some of the dip). Notably, Tim Cook said Apple is starting to see a pause in iPhone buying ahead of a big anticipated upgrade this Fall, which is bad news in the short term but potentially feeds the super-cycle narrative that’s become so popular lately if Apple is able to deliver. Other things worth noting: continued rapid iPad declines, though entirely in the Mini size (revenues from the rest of the lineup grew); strong Apple Watch sales, up nearly double year on year (likely around 3.2-3.5m), with total wearables (Watch, AirPods, and Beats sales) likely around $6 billion for the last four quarters combined. Services continues to be the strongest growth driver by far, up 18% for the second straight quarter driven by 40% App Store growth and likely strong Apple Music revenue growth too. Overall, this is a solid quarter for Apple, with nothing out of the ordinary or too unexpected – all the existing trends are ticking over nicely, with the iPhone roughly flat (up slightly on revenue, down slightly on shipments), and some of the growth drivers delivering well, while the iPad and China continue to be a drag. Next quarter’s guidance is going to be fascinating because it will have to address the issue of what new devices will launch, when, and at what prices without explicitly mentioning any of that!
via Apple (as usual, I live tweeted earnings with tons of charts which you can see in this thread, and I’ll have my earnings deck on Apple up for Jackdaw Research Quarterly Decks Service subscribers in the next little while)
In commenting on Qualcomm’s recent earnings report, I mentioned that if Apple and its suppliers continued to hold back royalty payments as part of their dispute, Qualcomm would be affected more severely in future quarters than in Q1, and that has now proven to be the case. In Qualcomm’s original guidance for this quarter, it had said that its guidance range didn’t include a scenario where it received no payments at all from these companies, but it now appears that’s the scenario that’s playing out. Apple has said it won’t make any payments until the dispute is resolved and new royalty rates set, which is a great way to put pressure on Qualcomm to either settle quickly or at least move the court case along swiftly, but means Qualcomm will be severely impacted in the meantime. It’ll be very interesting to hear Apple’s commentary on all this on its earnings call next Tuesday because it will have to set aside at least some of the amounts due as a contingency, and I’m curious to see how that affects its reported costs and margins.