Don’t mistake the fact that Apple is highlighting services as some kind of indication that Apple sees service revenue as being able to pick up the slack for the iPhone. While it may be true that their services are growing as a business, the guys at Apple are too smart to believe that it will ever replace hardware growth. They recognize that, unlike Google, their service business is an outgrowth of their hardware sales.
Wow, India just announced that Apple is exempted from their local production requirements for foreign retailers. Don’t let the magnitude of this announcement pass you by. It means that either there is a huge crack in the dam that is the Indian bureaucracy or Apple’s power is just shy that of a world superpower. Either way, this is enormous.
Since Apple reported it’s Q2 earnings yesterday, I keep hearing the question “What’s next for Apple” come up over and over again. It’s as if Apple is the first company to have a break-out product plateau. They aren’t. I suspect Apple will do the same two things that every other company in this situation has done.
Call me crazy, but, doesn’t the word “laptop” denote using something on your lap? Sitting in your living room, on an airplane, or maybe even a taxi. What do all of these situations have in common? The fact that you’re not going to be plugged into Ethernet, external monitors, etc. The very definition of the name “laptop” means that it’s not intended to be used at a desk as a workhorse. That’s what desktop computers are for.
Everybody has been so busy conjecturing on whether or not Apple is going to build a car that nobody is asking whether or not they should. The invention of the automobile changed the world. But the world has changed.
And so it begins. Google just reported their first earnings miss to Wall Street and even now the pressure to increase earnings starts to mount.
Google faces a simple equation.
1. Advertisers are always screaming for more detailed market information.
2. Google is sitting on a treasure trove of its users personal data.
As I've written recently, it's only a matter of time before Google starts chipping away at their self-imposed wall of privacy and starts selling more data. Water only wants to flow downhill and unused inventory only wants to be converted into cash. It's the natural order of things.
Google makes more money from iOS than Android
Profits over Privacy? Go Android!
I’ve been fascinated by the ongoing war in the software development world between upfront and subscription pricing models. I was thinking about how I’d approach this pricing issue if I was an App Store developer and wanted to use my tried-and-true manufacturing cost analysis. Manufacturing physical objects is nothing like developing software, but the basic principles of time, value of money, and cost allocation still apply.
Non-financial types are fond of bringing up the fact that Apple just has one income statement for all of their products. The insinuation is that Apple doesn’t get too worked up about gross margins on individual products because they are more concerned about margins as a whole. This couldn’t be further from the truth.
The Coolest Cooler was a Kickstarter phenomenon. The public went crazy for the concept and just kept sending them money. But the company was better at advertising a concept than they were at actually manufacturing and delivering products at a profit. The only difference between the guys at Coolest Cooler and Tesla Motors is that Tesla has investors who top up their bank account every time it drains down to zero. But eventually even these guys will turn off the spigot and cut their losses.
One of the things that I thought I’d miss on my Apple Watch coming from the Pebble was having the buttons on the side of the watch. Since the Pebble didn’t have either a microphone for dictation or a touch-sensitive screen, the buttons were crucial for all interactions.
But Apple made those buttons obsolete through better software and hardware. It was a brilliant move that made me appreciate why I’ve gravitated towards Apple devices. Apps have access to either a long-press or a force touch to signal two different kinds of responses. No need for an up-and-down button on the side. It would be a huge mistake if Apple decided to make the Force Touch be the same as a long-press as some are suggesting. This would be like removing a physical button.
Now pressure-sensitive touch has arrived on the iPhone, and I’m thrilled at what developers are able to do with it. It needs to be as separate and distinct an action to the long-press as a dot is to a dash in the Morse code. Apple is creating a new language not unlike sign language or Morse code, and capitulating to the path of watering down the Force Touch would be a huge mistake.
Does having separate and distinct types of physical presses add complexity? Yes it does. But language interfaces by necessity are complex. There are 26 letters in the alphabet. Sign language has thousands of hand symbols.
Apple is on the cusp of creating a new type of touch language and it should grow more complex. That means greater power for the user without having to resort to typing things out or needing buttons. Apple needs to stay the course and not water down their new touch language for a short-term gain.
So the Nikkei Asian Review is reporting that a seasonal slowdown is triggering production cutbacks.
This is exactly why I think the iPhone SE will be updated with the latest components each year. Right at the time that the flagship phones starts to tail off, the newer SE would begin production which would allow more of those component assembly lines to keep humming along. This would help justify the millions upon millions that Apple's suppliers invested in tooling for the latest chips, camera, etc. I'm sure these guys are coming to Apple saying "You twisted our arm to setup for your peak volumes, now help us keep the plants running year round".
I would be on-board with the idea that Apple was going to update the SE every other year if Apple was actually designing new components specifically for the SE. But they are not. This is a parts-bin phone. The idea that Apple would update every other year only makes sense if no other product line shares the capital costs.
Also, in the past, Apple's seasonal swings were somewhat mitigated by the iPhone's meteoric growth curve. As the world reaches saturation, these swings are going to be come more severe. Apple is trying to be proactive and minimize the damage by staggering the iPhone and iPad release schedules.
I don't think it was an unfortunate set of circumstances that led to the iPad Pros staggered release schedule. The 13” iPad Pro was released in the fall of 2015 and then this spring the 10” iPad Pro came out. Due to its later release, the newer iPad Pro was able to leapfrog its larger sibling in a few areas. This is by design and it will be the new normal.
I keep hearing a lot of chatter that Apple’s new 4” iPhone SE won’t be updated on an annual basis like the flagship iPhones. From a financial perspective that doesn’t make any sense to me.
Apple likes to tout the wonderful work of creatives who use their iPads to illustrate the point that these magical devices aren’t just for consuming media. But I always get frustrated that Apple isn’t making a bigger play for the business market. Seriously, how many astronomers and movie makers are there? If you want to talk some real numbers, let’s discuss clerical and warehouse workers. Glamorous it isn’t but the volume is huge.
Manufacturing and distribution analysis since 1993.