The Wall Street Journal, which this article acknowledges has had a somewhat adversarial relationship with Elon Musk and Tesla, reports that at least some Model 3 cars being produced in the company’s factory last month were still being assembled by hand rather than on the automated production line built for that purpose. That’s indicative of problems finalizing the automated line, which may be what Elon Musk’s comments about production bottlenecks referred to earlier this week in reporting low Model 3 production and deliveries. That, in turn, is indicative of the rush to get the Model 3 out the door at Tesla to meet overly ambitious targets. One of the reasons Musk has criticized the Journal is arguably that it’s one of the few publications that has regularly called out his failure to meet targets even as others fawn over Musk and Tesla’s notable achievements. Tesla refused to respond to the specific reporting in the article, and certainly didn’t deny its core assertions, suggesting that it’s likely accurate. I continue to be very skeptical that Tesla will get anywhere near its target production for the Model 3 anytime soon. Meanwhile, Elon Musk has been tweeting about various other things, including scheduling the Tesla Semi launch event for November 16th, and sending batteries to Puerto Rico.
Tesla today released its customary quarterly update on car production and deliveries, for Q3 2017. The overall number of cars produced was 26 thousand, just 5% up on last year’s total for the quarter, with just 220 Model 3 cars produced relative to the 1500 the company had projected. The company delivered to customers slightly fewer cars, including 260 Model 3s, indicating that it’s still a very long way from the mass production of these cheaper cars which it’s been forecasting. Tesla’s statement on the lower than expected Model 3 production is worth quoting in full: “Model 3 production was less than anticipated due to production bottlenecks. Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at high rate, a handful have taken longer to activate than expected. It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.” All of this is classic Tesla – in effect: we fell short of our targets, unexpectedly, but we’ll still be able to meet our previously stated targets in the end. Past experience shows Tesla does generally recover from such setbacks, but not usually enough to deliver on original goals – something that’s been pointed out repeatedly by me and by others, but which still seems to engender remarkably little skepticism about its public pronouncements by many investors.
LG and Apple Said to Invest in OLED Manufacturing Capacity (Jul 25, 2017)
★ Apple Makes First iPhones in India (May 17, 2017)
KGI Reports High-End 2017 iPhone Production May Be Delayed (Apr 24, 2017)
I’m on record as being very skeptical that Tesla can achieve its production targets for the Model 3, given both its patchy track record on meeting such targets in the past and the massive ramp the Model 3 production schedule entails. This report from Reuters suggests that Tesla is banking in part on an unusual strategy for manufacturing, under which it will move straight to ordering and installing the final assembly line tooling, rather than testing the manufacturing process with “soft tooling”, which is easier and cheaper to replace if something’s not working. That skips a stage in the production ramp, which should accelerate things, but will only work if Tesla’s computer modeling is effective in helping it get the tools order right first time. So it’s definitely a gamble, and one which could either pay off in a big way and allow Tesla to get to its target production more quickly, or actually delay production or lead to defects in the cars. Even with this approach to manufacturing, it’s still not clear to me that Tesla can accelerate its output fast enough to meet its targets. So while there’s some upside in that it may get somewhat closer to meeting its goals, the downside is potentially much bigger if things go wrong. What’s crazy here, of course, is that all these challenging deadlines are entirely self-imposed – it’s Tesla that insists on promising so much and then underdelivering.
This isn’t good news for Fitbit, at a time when it was supposed to be recovering from a tough year and getting back to profitability and eventually growth. As I’ve said before, I suspect its push into the smartwatch market will be more of a distraction than a help to the company’s overall performance – it puts it head to head against Apple in a category Apple currently dominates and takes it out of the sweet spot it’s historically done well in. If it’s also unable to produce a decent product in accordance with its own internal timeframes, then that bodes even worse for the further push into this category following the Blaze launch last year. Another big question not addressed by this article is to what extent Fitbit will be able to integrate some of what it acquired from Pebble and Vector over recent months in this new product – so far, it looks like it’s more of an iteration on the Blaze than something completely new.
via Yahoo Finance
Tesla is now worth more than Ford after delivering a record number of cars for the quarter – Recode (Apr 3, 2017)
There are two things here: firstly, Tesla’s Q1 delivery number, and secondly what’s happened to its share price since it was announced. Stock valuations are interesting, but far from definitive as indications of what companies are worth or who’s “winning” in any meaningful sense. Tesla’s stock price is all about trajectory, and an unusual (perhaps even unwarranted) amount of investor confidence and enthusiasm that the company which is currently very small and unprofitable compared to its legacy peers will quickly catch up on both fronts. That, in turn, requires believing in Tesla’s manufacturing projections, which require a massive increase in its growth rate, from 56% annual growth in the past year to something much faster to hit its 500k target for 2018, which would be a six-fold increase over its 2016 numbers. Long-term, it seems very likely Tesla will reach that kind of scale, but given its track record, there’s every reason to believe it will hit this and other related targets later than it has projected. On that basis, then, the valuation seems that much less justifiable on the basis of any near-to-medium-term results.
Apple GPU Supplier Imagination Tech Says Apple Plans to Build its Own GPU in 1-2 Years (Apr 3, 2017)
This already feels likely to be one of the biggest news items of the week (incidentally, you can now use the Like button below to vote for this post if you agree – the posts that get the most votes are more likely to be included in my News Roundup Podcast at the end of the week). There have been ongoing reports that Apple would like to build more of its own in-house technology, and GPUs have seemed at least a candidate given that Apple was said for a while to be mulling an acquisition of the company, and has been bringing Imagination Tech employees on board since the deal didn’t go ahead. The GPU obviously has a number of existing applications, but GPU technology has increasingly been used for AI and machine learning, so that’s an obvious future direction, along with Apple’s reported investment in AR. Apple’s ownership of its A-series chips (and increasingly other chips like its M and W series) is a key source of competitive advantage, and the deeper it gets into other chip categories, the more it’s likely to extend that advantage in these areas. This is, of course, also a unique example of Apple making a direct statement about a future strategy (albeit via a third party): as Apple is IMG’s largest customer, it had to disclose the guidance from Apple because it’s so material to its future prospects – the company’s share price has dropped 62% as of when I’m writing this.
Intel “Sets the Record Straight” on Moore’s Law (Mar 28, 2017)
Intel is having a technology day today at which it’s talking up its manufacturing capabilities and offering evidence that not only is Moore’s Law alive and well but that Intel is ahead of its competitors in driving innovation in chip making. Intel obviously has a very strong incentive to argue that Moore’s Law isn’t – contrary to recent claims and reporting – dead, both as the originator of the idea and as perhaps its biggest corporate beneficiary. The reality is that we continue to see many of the benefits of Moore’s Law playing out, even if it isn’t necessarily playing out at exactly the same speed and in the same way as in the past (though Intel argues that it is still doing those things). Intel’s claim to be three years ahead of its competitors in process technology would certainly be disputed by major competitors and I suspect most analysts too – that’s hyperbole which isn’t supported by the reality. But Intel does lay out some interesting evidence to back its claim that there’s plenty of headroom left in Moore’s Law.
I almost didn’t bother commenting on this news story, because it’s essentially identical to all the stories that were doing the rounds at several earlier times (see this previous comment, for example, from a month and a half ago). I honestly don’t know why the Journal published this story today, because it adds nothing to the earlier stories – same unnamed government sources, same details about Wistron being the manufacturer, and the same absence of on the record comment from anyone involved, least of all Apple. It’s entirely possible (even likely) that Apple is indeed planning to manufacture phones in India, but the fact that it hasn’t announced those plans yet suggests either that the plans aren’t fully baked yet or there’s some sticking point, which makes me curious what that is.
Another big tech company starts looking into US manufacturing in the wake of Donald Trump’s election as president. There’s no official statement yet, and Samsung hasn’t been the target of direct attacks from Trump in the same way Apple has, but it’s apparently feeling the heat regardless. It’s interesting to see even non-US tech companies start to respond to Trump’s calls for more US manufacturing – we’ve seen this already in the car industry, but now we’re seeing it with LG and Samsung too. This is a sign of just how unpredictable US government policy has become over the last few weeks compared with the relative stability of prior years.
via Business Insider
I haven’t seen any big US news outlets report this yet, and there’s been no official word from Apple, but several Indian publications are reporting that Apple has told officials in Karnataka that it intends to begin manufacturing iPhones through its partner Wistron in Bengaluru (Bangalore), in the province. Local manufacturing would help overcome some of Apple’s challenges in India, though certainly not all. They would help reduce prices by avoiding the import tax, and would allow Apple to permanently overcome the government’s ban on local retail for companies whose products aren’t made largely in India. That still leaves low incomes, tendencies towards thriftiness and favoring local brands, and other challenges for Apple in India, but it would be meaningful progress.
via Hindustan Times