
Apple R&D Reveals a Pivot Is Coming - rstocker99
http://www.aboveavalon.com/notes/2016/5/11/apple-rd-reveals-a-pivot-is-coming
======
beloch
According to this chart, Apple spent $6B in 2014 and is projected to spend
just over $10B in 2016.

For comparison, in 2014 Volkswagen spent $13.5B, Samsung spent $13.4B, and
Microsoft spent $10.4B. [1]

Apple has, historically, not been a big spender when it comes to research,
tending to favor short-term, tightly focused research over long-term,
curiosity driven research. Over the last few years their research budget has
ballooned, but only in 2017 (projected) are they going to reach levels that
the above companies were spending at in 2014. Has Apple's research focus
changed?

Perhaps we're not seeing some monumental project in the works, although an
autonomous car would be pretty big. Perhaps what we're seeing is Apple
deciding to loosen the purse strings and, instead of stashing away obscene
piles of money, they've loosened their research focus and now have a lot of
people doing whatever the hell they want, much like MS, just because something
useful might someday emerge.

Let's face it, Apple has so much money they could probably launch their own
space program if they really wanted to.

[1][http://fortune.com/2014/11/17/top-10-research-
development/](http://fortune.com/2014/11/17/top-10-research-development/)

~~~
astrodust
Just imagine how much fun Ive would have designing an orbital space station.

What's interesting is how aggressively they're moving into the car space if
that's what's happening. The phone people had no idea, they got blindsided
thinking Apple wouldn't have the guts, would never commit the money.

~~~
simonh
I think the phone industry just didn't think it possible that real ground
breaking innovation in their industry was at all possible. They imagined a
phone must have a physical keyboard, couldn't run a decent web browser and
Microsoft was already selling the best mobile OS it was possible to make.

It wasn't that they doubted Apple's commitment, they just didn't have the
imagination. To be fair to them, Apple timed things perfectly. Even a year
earlier SOCs weren't powerful enough to run something like the early iOS. They
did in software what they did in hardware much later with the 64-bit
transition. They pulled off a superbly executed technological coup just at the
point when it became possible to do it at all, beating everyone else to the
market by years.

If they're planning to do the same with cars, we have interesting times ahead.

~~~
TheOtherHobbes
Cars are a terrible industry to get into. Building cars is massively capital
and plant intensive, heavily dependent on supply chain logistics, and the
market is already extremely competitive. The entire industry is well on its
way to switching to electric and/or self-driving.

Selling cars requires a huge dealer network rollout with huge up-front costs
for training and spares. Doing it DIY would be insanely expensive, and
persuading existing dealers to sign up for a franchise is going to be a tough
sell considering Apple's historical treatment of resellers.

Apple under Jobs certainly had the imagination to make a good phone - but the
phone industry was always fairly crappy, with very clever internals but
mediocre UX.

I don't see much reason to think that Apple under Cook has the imagination to
break open the car industry in the same way. The possible competitive
differentials are much smaller, and Cook isn't the most creative CEO Apple has
had.

If the USP is that Car is electric, looks pretty, and may eventually have some
self-driving features - that won't be anywhere close to enough. It's going to
need to have some wow to get taken seriously, and even if Jobs were alive and
in charge there's limited wow space available.

Of course if it flies and/or teleports, that would be something else.

~~~
simonh
The car industry is about to go through two completely independent revolutions
simultaneously. The move to electric power trains, and self-driving. This is
the perfect time for an outsider to enter the market because the incumbents
have no advantage in these fields relative to a newcomer. In fact as
fundamentally hardware companies they have the same issues with figuring out
how to develop first class software that the phone companies did.

Apple has huge expertise in both these areas. Not electric motors sure, but
electronics design and manufacturing in general and specifically battery
technology on the power train side and software on the self-driving side.

But the key to their potential is software. I think the main reason for
Apple's success is their super high quality OS core, code libraries and
software development tool chain combined with one of the greatest software
engineering culture and talent pools on the planet. They have exploited this
advantage ruthlessly ever since the 90s. It underlies the success of all their
best products - even the iPod if you bear in mind that iTunes was built on
these core advantages. Yes iTunes is a mess now, but it made the success of
the iPod possible.

The key to success in the coming car revolution will be software. Computers
will control and orchestrate every aspect of the internal operation of the
vehicle, and that's before you even get to external operations with self-
driving. Only Microsoft has the depth of software development competence and
the technology platform resources to compete with Apple in this area, but for
whatever reason they just don't seem to be able to get their act together when
it comes to engineering complete product stacks rather than individual
technologies.

~~~
rgbrenner
_the incumbents have no advantage in these fields relative to a newcomer._

Except their distribution network, reputation/brand value, and marketing
reach. And their IP in the non-powertrain components. And their manufacturing
knowledge which makes the cars more reliable.

And they can fund the move to electric (or whatever) using existing profits.
Whereas any newcomer has to raise money and spend time doing all of these
things.

While this is probably the best time for someone to attempt to do those
things.. the incumbents definitely aren't starting from scratch.. they still
have advantages.

~~~
splouk
Except Apple would already have reputation/brand value as well. Perhaps even
more than, say Ford, since they are known as a technology company, and the
cars of the future are electric and self-driving.

------
abalone
It's a car and it's not a "pivot". The Mac, iPod, iPhone, iPad, Apple TV and
Watch are all about apply the same philosophy to new product categories and
then tightly integrating them. At the core of it is fundamentally rethinking
the interface between user and machine.

With cars it makes perfect sense as long as you do one thing first: throw out
everything you've read about fully autonomous cars being right around the
corner. If instead we're facing a future of _semi-_ autonomous capabilities
which still require a human to oversee and guide -- much like the autopilot
controls of airplanes -- then there is a massive opportunity to rethink the
automobile interface from the ground up around this new hybrid approach.

You can be sure that Apple's car will not just be a Jony Ive designed Tesla.
It will involve a rethinking of the user interface. Apple likes to make a 10X
difference when entering product categories and that's been the key element.
Effective autopilot assistance features can plausibly get us to 10X
improvements in safety and convenience.

Apple's functional organization is one of its secret weapons in applying this
philosophy consistently across so many consumer categories and creating a halo
effect. I would be very surprised if they changed that for computers-with-
wheels.

~~~
petra
First, Apple's historic design advantage is probably gone - since the
competition has greatly improved. For example, the watch didn't offer
something significantly different(10x) than other smartwatches.

But i can see your second point being true, maybe full-autonomy will take a
long time. So even if Apple will design a great interface, it would probably
be copied by competitors fast enough, unless there's some big barrier to
copying that interface like the phone had in apps. What could that barrier
possibly be ?

The only exception i can think of:

The addition of radio for most cars was an important invention.

So let's go wild - what if Apple succeeds in making siri a true AI, with a
great personality, someone you'd have great fun driving with, everyday to work
?

~~~
abalone
No, think the fundamental cockpit driving control interface. Not just the
entertainment system (although that will be a nice synergistic element).

Btw I agree about the watch, but it's also early days. The iPod might not have
seemed as radical an improvement on other MP3 players either, at first. In
retrospect the details made the difference between the product category
working for people and not, and blew the category wide open.

~~~
petra
OK, let's talk about interface. The major problem such interface has to solve
- is how keep the driver aware enough of the road at times he needs
to(legally, at all times) , while making it more FUN for him than regular
driving, otherwise, why bother ?

That's why i believe entertainment in some form, is critical.

So maybe that siri personality is also built in such a way to enable all-time
awareness by the driver, effortlessly ?

Or another option: maybe they use some kind of brain monitoring machine like
eeg, and together with music put you in some kind of meditative state fit for
driving, yet very enjoyable ? but doing so in a subtle way ?

~~~
abalone
10X safer and/or less stressful would be more than sufficient to revolutionize
cars. I think the notion that the only thing you can improve on is
fun/entertainment is kind of stuck in traditional car thinking. Making cars
safer and more convenient via autopilot features is where you get a 10X leap.

I doubt there will be anything like a "meditative state" \-- that's dangerous.
On the contrary a goal of the UI would be to keep the driver highly engaged
with the vehicle computer at all times.

------
paulftw
I think median Software Engineer Salary also followed hockey stick graph over
last couple of years, as well as CA real estate prices, so it isn't that clear
that Apple grew headcount at all. When iPhone came out there was no app store
nor 3rd party apps; when apps arrived they had no push notifications; icloud
didn't exist and so on. Products become exponentially more complex, requiring
proportional growth in R&D. There may even be tax incentives to maximize R&D
spending.

Smart home / smart appliances would be a much more logical step for Apple as
it'd be much closer to their area of expertise in electronics. Unlike with
iPod and iPhone, there's at least one company that is already doing all the
right and hard things around cars - Tesla.

TVs, kitchen appliances, even lights are much better understood and
researched. Technology is there, safety/regulatory barriers are lower than
with cars, consumer demand is pretty obvious. Yet existing manufacturers
releasing product after product with laughable design and usability. Just like
used to be the case with Nokia and Windows smartphones.

~~~
ryandrake
Is there any actual evidence showing that median salaries are anything but
stagnant recently? There may be a few outlier people at a few outlier
companies experiencing "hockey stick" growth, but is this true for the median?

------
darawk
Is this a surprise? Isn't it well known that Apple is working on a car?

I think the big question here is not are they working on a car, but can they
deliver a car that represents a significant improvement over what's out there.
And that i'm highly skeptical of, unless they deliver full autonomy. But there
is just no way Apple is going to beat Google to market with that technology.

So, I agree they're working on a car, but I feel fairly confident that it will
be an absolute disaster for them. Though most times that's been said about
their products in the past decade or two has been a disaster for the person
saying it.

~~~
CPLX
> But there is just no way Apple is going to beat Google to market with that
> technology.

Why?

Apple is possibly the world's most effective company at synthesizing
industrial design and software in premium devices sold to consumers. Google is
a web/cloud services and advertising company.

The reason presumably is that you can't see what Apple is doing in public,
while Google has a car that still can't drive itself in the rain that is
occasionally seen wandering around Mountain View. I question the methodology
of that analysis.

~~~
untog
For one because there is no evidence of it. Apple are secretive but at some
point you have to take a car out on an actual road to see how it fares. And
get government permisison to do so. The fact that Apple has done neither leads
me to suspect Google is further ahead.

~~~
2muchcoffeeman
Android was in development and publically known about for years before Apple
unveiled the iPhone. Now all new phones are basically large touch sensitive
screens.

So who knows?

~~~
Niksko
Yes, but the regulatory and development hurdles involved in developing an
operating system are significantly different to those of developing an
autonomous vehicle.

------
Communitivity
I don't understand the confusion on what Apple's next big thing is, they've
laid it out time and again.

Come to think of it, I think I just saw a slide with it right on the single
slide during the Viv presentation. I went back and found it. Here is the video
URL at the time the slide is shown:
[https://youtu.be/Rblb3sptgpQ?t=51](https://youtu.be/Rblb3sptgpQ?t=51)

It's the same thing OpenAI, HARC, and other groups are working on: creating
revolutionary intelligent assistants and possibly achieving strong AI. The
chance to work on that project at Apple, that I might consider a move for.

Applied AI combined with conversational or AR interfaces to create specialized
personal assistants will be the next in the line of game changers such as car,
flight, radio, telephone, computer, rocket, internet, cell phone, the web,
smart phone, tablets, and data mining.

~~~
mcphage
> I don't understand the confusion on what Apple's next big thing is, they've
> laid it out time and again. [...] It's the same thing OpenAI, HARC, and
> other groups are working on: creating revolutionary intelligent assistants
> and possibly achieving strong AI.

I hope so, but given they released Siri in 2011, and only minimally improved
on it since, it doesn't look like they're giving the field much attention. It
doesn't look Apple takes it very seriously, and in the meantime Google &
Microsoft have released their own superior versions.

~~~
eric_h
> given they released Siri in 2011, and only minimally improved on it since

It's quite possible that their iterative loop on Siri and Siri-like
experiments simply doesn't include the general populace. Apple does not have
much of a history of touting beta software and using their customers as guinea
pigs, but internally they definitely do.

~~~
mcphage
It's definitely possible, but I'm not sure why they wouldn't? The data from
millions of users from all over the country / world would be a lot better than
a small number of users in a single place. And they still push it as a sales
feature, so showing real improvement over time sounds like something they
would want.

Still, I hope you're right; I do agree that it's a big part of the future, and
seeing it flounder is frustrating.

------
baron816
I don't like the idea of Apple (or even Google for that matter) making cars.
It seems like such a weird space for a company that makes consumer electronics
parts to move into. It would be almost as weird as them starting to build
houses. And I don't want to buy all my stuff from one company.

Either way, I'm skeptical that any company is going to make huge, monopolistic
profits from selling autonomous cars. It's something that's going to easily
commoditizable. Consumers aren't going to care which company their buy their
autonomous tech from, as long as it's safe and it works.

A better fit (although much, much, much harder to achieve) for Apple would be
a real robot/android. Apple has hundreds of billions in cash to play with and
a steady stream of income on the horizon for the next few years. I think they
should accept that they don't have to come out with the next big hit every
year. They should look 10+ years in advance and try to beat everyone to the
_last_ consumer electronic product.

~~~
bo1024
I don't like the idea of Apple making cars for the same reason I'm
uncomfortable with their phones: you won't own the car you're purchasing, in
most meaningful senses of the word "own". (We have seen this problem with
Tesla already.)

To your second point, I'm not sure that autonomous tech will be easily
commoditizable. Some companies will have much better tech than others and
consumers will prefer them. Think about internet search engines: The easiest
of all industries to compete in, yet (or "thus") full of huge, monopolistic
profits.

~~~
baron816
Search engines are free. Whether you own or hire a self-driving car, you're
going to have to pay for it, but all you really care about is whether it gets
you from point A to point B. It's quite binary--either it works or it doesn't.
There is objective and subjective factors the determine preferences towards
search engines and phone. But if all driverless car tech works the same, then
you're not going to care which one you use as long as it's the cheapest.

~~~
pritambaral
> all you really care about is whether it gets you from point A to point B

If that was really the only reason people bought cars, we wouldn't have as
many variants, manufacturers, models of cars.

------
no1youknowz
According to venturebeat[0]. Samsung has 1m gear VR users. We all know how
apple has a far superior supply chain, creates better software experiences and
does things "right".

So is it that much of a stretch for them to actually come out with a mobile VR
headset?

Think about it.

\- They make the phones.

\- They make the vr software.

\- They already have the eco-system for you to get apps from and the
developers to sell through.

\- They can sell upgrades for face/hand tracking, etc.

What about a version of FaceTime, where 2 people can call each other and play
a game together?

Within a very short time could exceed what Oculus is doing very quickly.

[0]: [http://venturebeat.com/2016/05/11/oculus-and-samsung-
have-1m...](http://venturebeat.com/2016/05/11/oculus-and-samsung-have-1m-gear-
vr-wearing-users/)

~~~
robert_tweed
I came here to say the same thing. I wonder where all these rumours about a
car are coming from? Smoke and mirrors?

Frankly, that idea sounds ridiculous, but the first "good" VR headset is
something that Apple is absolutely capable of delivering and importantly, it
fits the R&D spending figures in the article (a car would cost them a lot
more).

They also happen to have a number of unique strengths such as their own OS,
their own SoC that give them a huge advantage over anyone else in market.

It also makes sense that Apple would not want Facebook to gain any traction
with the Oculus Store in competition to their own App Store, so frankly it
would be a huge strategic mistake for Apple _not_ to release a VR device
within the next 2 years. I just think they won't release anything until all
the user-hostile kinks have been worked out.

Apple is not, as many seem to be suggesting in this thread, about applying
"disruptive UX" to random markets like cars. They are about giving new
technologies mass-market appeal. They take something niche (like MP3 players,
smartphones, or VR) and they make it into something that everyone wants.

------
rdl
The other depressing interpretation is that they're achieving less per dollar
spent on R&D (becoming less efficient); they certainly seem to be achieving
less per release of product now, so it would be consistent. Maybe there was a
time when Apple got the most brilliant people wanting to work there because it
was Apple; if that's no longer true, their efficiency would decrease.

(Arguably the same thing happened in K-12 education; when women were largely
excluded from other professions, teaching positions were filled by the best
women in the workforce; now, many of them would rather be
doctors/engineers/lawyers/etc., so the quality of educators has decreased to
the market level.)

~~~
nikdaheratik
From looking at the numbers, they would need to be spending 10x more to
achieve less per release. It seems much more likely that they're putting their
resources into something else, like a car or some other new category. This
would also partially explain why some of their more mature products aren't
getting anything too interesting, though no one else seems to be moving into
the space either. So it could also be that they're is only so much you can do
with mobile phones right now.

------
bresc
I have to ask: Why cars? Why are Google, Tesla and now Apple supposedly
investing in cars?

From the European point of view cars seem to be a dead end. More and more
people live in an urban area and more and more young people use public
transportation way more often, than cars. Additionally carsharing makes owning
a car in a german city kinda obsolete.

So... why cars?

~~~
sixQuarks
There is a contrarian argument that self-driving cars will actually INCREASE
the demand for vehicles. If a vehicle is self-driving, it can not only act as
a taxi, but also act as cargo transporter, delivery guy, etc.

~~~
aetherson
It's not really that much of a contrarian argument.

Basically, here's the deal:

Right now, the cost to own a car is CO and the value received from owning a
car is VO.

The cost to rent cars from a taxi-like service is CR and the value received
from renting cars in a taxi-like service is VR.

For most people, CO < CR. That is, it's usually much cheaper to own than to
rent. With perhaps some exceptions if storing your car is super difficult in
your locality.

The VO and VR relationship is much more complex. There are advantages of each
model (you can take an Uber when you're drunk, you don't have to look for
parking, but on the other hand you can't leave your crap in it and you have to
wait for it to arrive and you can't take your kid in it).

Based on the CO < CR and VO <?> VR distribution across people, we have a
certain balance where taxi-like services are pretty big, but ownership is the
dominant model.

In the autonomous world, VO > VR almost all the time. That is, you get all the
advantages of current ownership and pretty much all the advantages of current
rental. But the cost of ownership presumably increases (you have to pay for a
sensor package now) and the cost of renting presumably decreases (since you no
longer have to pay for a driver). So the question is how much do those costs
end up changing? Is the sensor package expensive or cheap? How many human
costs can the Ubers of the autonomous world actually cut out, and how much
utilization can they get out of each car? If the CO increase is small enough
or the VO decrease is small enough, you expect to see more car ownership. If
not, more car rental.

------
carsongross
I wish it was possible for Apple to settle in and polish, competently
executing on designs that are already very good and slowly improving their
entire lineup (including, please, monitors!)

It's rather depressing to consider that excellent industrial design can only
be supported on the exponential-looking part of the sigmoid curve.

~~~
tim333
I imagine they'll keep polishing the existing stuff as they have for a while.
It's just they seem to be working on a car too. I'm not sure launching a new
product is really a pivot - that term is usually used when junking the old
business plan.

------
mangeletti
I have long thought that Apple was working in secret on a consumer robot;
perhaps something on the order of $1-5k price point. It was just a hunch.

I've now begun to think that the increase in what everyone is calling "R&D" is
just Apple become too large to any longer be efficient. Perhaps they've
crossed that point mentioned in the Mythical Man Month where gains in team
size decrease productivity.

------
JustSomeNobody
>After analyzing the three preceding possible explanations for Apple's R&D
increase, we can conclude the only one that actually makes sense is the third
choice: Apple is looking to pivot.

Can we really conclude that? Good geez.

------
datashovel
I think the ideas presented appear somewhat contradictory. I may be missing
something here because the following 2 ideas seem contradictory to me.

1) Apple's secrecy 2) Apple's pivot

If they're pivoting, why be secret about it? One of the reasons provided was
that being public about new products could hurt current product sales.

If it's an entirely new product line (ie. car), I have a hard time believing
someone will think twice about buying an iPhone because Apple is coming out
with an electric car.

Instead being secret seems it may hurt more than help. If I'm in the market
for a new car, and there's a real release of an affordable Tesla that has
already happened, while at the same time I have no idea what Apple is doing or
if they're even going to do it or what kind of timeline the project is on, I'm
probably going to buy the Tesla.

Otherwise if I'm somewhat certain that Apple may be coming out with a new car
within a year or two, I may decide to hold off with my purchase of the Tesla
for the time being in order to consider buying the Apple iCar when it comes
out.

~~~
IBM
Apple doesn't pre-announce things or do concept videos (the only exception I
can think of in recent memory was announcing the Mac Pro at WWDC). Things get
announced when it's a product ready to be sold. It's tough to say this is the
wrong strategy considering the success they've gotten because of it. And there
are plenty of counter examples from their Silicon Valley rivals who like to
generate PR for blue sky research or things that will never come to market for
years (if ever).

~~~
inmyunix
Watch.

~~~
comex
Yeah, 7 1/2 months was a pretty huge announcement-to-launch delay for Apple
(though the original iPhone went 5). But that's nothing like a "concept video"
or "blue sky research" \- it was announced as a final product design with the
same look and feature set it shipped with (though not with a price), and was
probably delayed due to manufacturing issues. The car, on the other hand, is
still years out.

------
reissbaker
Apple was once considered extremely innovative despite its secrecy because it
regularly shipped ground-breaking new products like OS X, its breathtakingly
high-design computers in the late 90s and early 2000s, the iPod, and of course
the iPhone.

Apple hasn't shipped a successful new product line since Steve Jobs' death,
and sales of its last successful major product — the iPhone — now seem to be
slowing. Their cloud efforts are famously flailing, and their software is
increasingly stale: who here has a folder full of unused Apple apps, with
better third-party replacements on their home screen or dock? Almost everyone
with an Apple device.

I sit here writing this on a Macbook, unironically. Their hardware
manufacturing capability is best in class, and they've managed to hone their
existing products' hardware increasingly close to perfection. But innovative?
You can't be innovative just by spending money on R&D. You have to ship new
products. And for now, Apple seems like it can't.

~~~
cstross
> Apple hasn't shipped a successful new product line since Steve Jobs' death

I disagree.

The Apple Watch is only "unsuccessful" using a yardstick calibrated to the
scale of existing Apple product lines -- in its first year it appears to have
achieved sales revenue on the same order as Rolex ($4.7Bn, per Forbes).

(Apple's secretiveness makes it hard to tell how many Watches they've sold,
but the _low_ estimates are in the millions, and the high end estimate -- 12
million shipped through 2015, per Canalys -- would put them in the same league
as the market leading luxury watch manufacturer, if not ahead.)

If any other company had released a product that _replaced the century-old
industry-wide #1 luxury brand within a single year_ it would be seen as truly
disruptive and a major breakthrough. But the wristwatch industry is small by
Apple standards, and the nascent smartwatch market is still embryonic compared
to smartphones, so the scale of sales doesn't match onlookers' inflated
expectations of an Apple product.

(As for Project Titan, I expect a bit more than just an electric car, given
that scale of investment. Possibly an attempt at redefining how we do
intraurban and suburban personal transport, the Apple way. But they'll have an
uphill struggle to supplant the automobile with something better, because of
all the built infrastructure and regulatory constraints, so at least at first
it'll _look_ like "just an electric car".)

~~~
bane
> and the high end estimate -- 12 million shipped through 2015

What's interesting is that if you think of the Watch in terms of it being a
computing platform, 12 million devices shipped might be considered a bad sign.

Sega had two back-to-back systems that shipped in that League (the Saturn
shipped 9.26 million and Dreamcast shipped 9.13 million) and both systems are
considered massive commercial failures, so bad that they nearly sunk the
company forcing Sega to pull entirely out of the hardware market.

~~~
glenndebacker
I think that Sega executives would have done backflips for the kind of revenue
that Apple receives from those Apple watches... .

I personally find for the price and the (personal taste) ugly design the Watch
exceeds the expectations. It's not because something is not pulling the same
frenzy like there was with the iPhone and iPod, that it's automatically a
failure.

------
jimmytidey
Isn't it basically impossible for Apple to surprise us with a driverless car?
Surely all of the process to make a driverless car legal would be in public?

Surely the production line for any kind of car at all would be almost
impossible to organise covertly, all the factory space, tooling etc?

~~~
mrcwinn
I remember the "iPhone" being a topic of rumor for literally years. Leaked
photos (some more accurate than others) and a steady drip of information.

Looking back, it was still a big surprise once the details were known. So, a
car? Build a roof, sign some NDAs, and do your best.

~~~
coredog64
I was at On Semiconductor in 2007, and it was an open secret around the office
that Apple was getting into the phone business. We knew because management
kept touting the fact that we had $4-5 worth of the overall BOM in the iPhone
and that was going to be awesome for us.

~~~
scottmf
iPhone was announced Jan 2007

------
fblp
I wonder if this could also be some smart accounting. The US and other
countries have tax incentives that encourage R&D expenditure.

------
boznz
Assuming its a car..

Cars are not phones and I don't see the massive factory/production line being
prepared to build the cars nor the investment in battery production that would
be required (assuming an EV not an ICE) so unless they buy BMW (LOL!) or
another car manufacturer then it will be 3 years minimum from them showing a
car to us being able to buy it.

~~~
varjag
Apple definitely can tear apart the status quo in dashboard/driver
UI/entertainment console automotive market. They don't have to make a complete
vehicle. Even with semi/fully autonomous cars there's a huge potential for a
quality OEM software/sensors package.

Remember aside from the biggest car conglomerates there's a dozen smaller 2nd
tier makes who can't afford building self driving car from the ground up. Even
the biggest ones invest into it more out of necessity than internal
motivation.

------
aetherson
The idea that Apple is going to "pivot" is fatuous.

Are they working on some non-phone products that they hope will be big? I'm
sure they are.

Could they conceivably find that one of those products achieves massive
traction and overshadows the iPhone (especially as the market for smartphones
cools)? Sure, though I'd bet against it actually playing out like that.

Is Apple making a big planned play to radically deemphasize smartphone sales
in a desperate gamble to become a car company? _Of course they aren 't_.

Even if the smartphone market's high-water mark was 2015, Apple has a hugely
successful, almost grotesquely profitable product that will -- assuming they
don't do something absurd like pivot away from it -- be the source of
incredible value for at least a decade and probably much more. On the back of
the iPhone, Apple has grown to a market cap that -- even after recent losses,
and despite a weirdly low P/E -- is massively higher than the _combined_
market caps of the top five auto companies.

~~~
cageface
There are no guarantees that the iPhone will generate anything like the
profits of the last several years indefinitely. There are a number of strong
headwinds including the end of carrier subsidies, market saturation, a weak
global economy, increasingly mature competition at much lower price points
etc. I don't think they're in crisis but they do have a real problem on their
hands.

Of course they have a lot of room to slash margins to compete so I'm not too
pessimistic but the iPhone was really a once in a generation kind of product
and I think they've taken most of the easy profits off the table already.

~~~
aetherson
Nothing is indefinite. And, basically, I agree with you. If 2015 wasn't the
high water mark of the smartphone market, then some near-future year will be.

But smartphones are also clearly not going to crash and burn. Even if people
don't replace them like clockwork every year or two years, there is going to
be a healthy market for iPhones for a long, long time. There are still people
without smartphones, there are still large markets with low Apple penetration,
and they have an enormous install base and developer support -- and, as you
say, positively absurd profits to cut into eventually.

Does Apple dream of another product that will be as big as the iPhone, but is
yet in its infancy, with its growth ahead of it instead of behind? Well, of
course they do. How could they not? Will they launch new products? Of course
they will. Might one of them be a car? It might. If the stars align for Apple
again, might we in ten years say that they are not the iPhone company, but
rather the X company? Yes, that is possible.

But:

1\. There is no possibility that Apple is planning to _pivot_ in any
meaningful sense of the word. "Pivot" does not mean "launch a new product and
hope it takes off." Pivoting is simply not something that the most valuable
company in the world does in the face of some cooling of demand. Pivoting is
what desperate start-ups do.

2\. If the leaders of Apple are basically cool-headed people who do not
entirely buy some kind of superheroic mythology of what Apple is capable of,
they are probably aware that the iPhone was a literally _singularly_
successful product in the history of, like, the world, and that the odds that
lightning will strike twice and they will have another product _that_
successful or even more successful are lower than the odds of lightning
literally striking the same person twice. It is possible that Steve Jobs was
not a basically cool-headed person. I think that Apple's current leadership
is.

3\. And specifically, the product that makes us forget the iPhone just
straight up _can 't_ be a car. There is just no demand for a car that can
support an Apple-in-2015 type valuation, especially at iPhone-like profit
margins, double-especially in a world in which autonomous cars makes any
meaningful jump in the utilization of each car. And PS: approximately 0% of
Apple's current employee base would be useful in Apple-as-a-car-company.

~~~
petra
I partially agree with your thesis, but:

>> There is just no demand for a car that can support an Apple-in-2015 type
valuation

Assuming transportation is on demand and automated, the revenues of that
industry will far eclipse the phone industry revenues. Add that with the fact
that automated cars are really hard, brand might mean life and death(in the
mind of people) and moving people in shared vehicles on-demand has pretty
strong network effects - there's a possibility for a bigger business than the
iPhone.

But from that to Apple winning that business ? that a low probability bet, so
maybe pivot is the wrong word. But Apple can allow itself to try that bet,
money is of almost no concern to them

------
brandonmenc
They are not working on "just a car."

They are trying to become a mass transit provider by owning and operating a
large fleet of those self-driving cars, renting them out on a per-ride basis.

That is, if they're smart.

~~~
estefan
Yeah the future of cars is not owning one. Cities don't need more individual
car ownership.

~~~
Toenex
> Yeah the future of cars is not owning one.

I think it is more "The future of cars is not _everyone_ owning one." The
point is that most cars spend most of their time sat, parked waiting for a
single user who is also usually the owner. This is inefficient. I'd rather the
car I owned was out earning money while I'm sleeping/working and available
just when I need it.

Uber has the right idea, and those that own cars will become part of their
network.

Two other industries I see impacted; car parks - my car doesn't need to remain
near me; home delivery - thanks, I'll send the car to pick it.

------
Animats
Apple may be developing automatic driving technology, but actually making cars
seems unlikely. They mostly outsource manufacturing, after all.

Apple might be working on something to take a bite out of Facebook or Google
Search or Amazon's Echo. The next big thing is likely to be "you just talk to
it and it does the right thing". Siri with common sense.

~~~
IBM
Facebook and Google Search are ad businesses, and looking at those businesses
they're very small compared to Apple. There's also tons of competition there
already and it's outside of the skillset of Apple.

Apple is making a car not self-driving technology. They may develop self-
driving technology, but the business will be making a finished product that
they sell to customers, not licensing technology to others (which is what
Google is doing).

~~~
jbigelow76

        >Facebook and Google Search are ad businesses, and looking at those businesses they're very small compared to Apple.
    

FB maybe, but Google? Back in February Google was larger than Apple in terms
of market cap. As of right now Apple is back on top, $506B to Google's $491B,
explain again how Google is "very small compared to Apple"?

~~~
IBM
Google's business is 90% ads and they did $16.35 billion in profit in the last
year compared to Apple's $50 billion (from Yahoo Finance). Should Apple focus
their efforts to get a chunk of the ad $ out there or focus on a business that
utilizes their competencies?

------
exabrial
All I want is an Ethernet port on my MacBook Pro. Please stop the maddening
war on ports.

Edit: sorry I meant Macbook pro

~~~
emdowling
It does. It has two of them in fact.

~~~
Daneel_
...via dongle, at US$29 each, thank you very much. Want to connect an external
screen at the same time? Too bad.

I'll take built in ethernet and two display connectors on my lenovo instead.
Want to add another network port? Well, there's USB3 gigabit, or simply USB-C.
If you need native PCIe adaptors, then Dell XPS range comes with Thunderbolt 3
via USB-C.

Sorry, I have to agree with the parent that the port war is growing tiring.
Unless there's a plethora of USB-C ports on the laptop we still need our
connectors.

~~~
realityking
Are you thinking of MacBooks? Because the grandparent talked about the Mac Pro
who has two normal RJ45 ports: [http://www.apple.com/mac-
pro/specs/](http://www.apple.com/mac-pro/specs/)

~~~
Daneel_
...yes. Yes I am. Egg on face.

The point still stands though, it's such a shame seeing the minimisation of
ports on all systems these days. I can understand using standard ports (usb-c)
for peripherals, but essentials such as Ethernet, display and several USB
ports (whichever format) should remain built in.

~~~
shoyer
There's a simpler reason for the lack of an Ethernet port. Compare the size of
an Ethernet port to a USB port on the Mac Pro and then look at the side of
your MacBook Pro. The Ethernet port would not even fit.

~~~
SyneRyder
I bought a 2012 MacBook Pro (which Apple still sells in stores) instead of a
2015 model partly because it still has an Ethernet port. Apple could
definitely make laptops with Ethernet, they're just choosing not to in their
desire for ever thinner machines.

I also feel the keyboard and trackpad quality has deteriorated on the thinner
devices. I _much_ prefer the snap of the click on the 2012 MacBook Pro
trackpad to the Force Touch simulated click.

------
nickpeterson
Has anyone mentioned that maybe Apple just doesn't have the focus (Jobs) at
the top telling it where to spent R&D? How much did Apple spend on R&D under
other CEO's when Jobs left?

------
stevewilhelm
I don't think Apple would necessarily have to build their own cars from
scratch or solve the alternative fuel issue or deliver a self-driving car to
have a significant impact on the automobile industry.

For example, I would personally love a Subaru that had its information and
entertainment systems designed and built by Apple and licensed to Subaru. It
would also be cool if Apple's designers helped with the overall exterior and
interior design.

~~~
gomox
Ha. If anyone can make a Subaru pretty and user-friendly it's the guys that
originally made Unix work as a desktop OS.

------
serge2k
Is the car before or after the TV they were definitely going to release a few
years ago?

~~~
TazeTSchnitzel
The TV did come to fruition, but they made a set-top box rather than a fully-
integrated product. They made a Mac mini instead of an iMac, if you will.

------
zargath
Apple snatched a few Tesla employees and a few people has said that Apple are
working on a car. Seems obvious.

Has anybody considered that it might be other form of transportation? Maybe an
electric motorcycle or some other cart? All their devices is very personal,
could be a personal transportation device?

Apple's mission seems to be to create the best products they know how to
build. But environmentalism is pretty highly valued at Apple, so it seems
likely that they will move towards things that they think will benefit not
only their costumers but also the environment.

But Tesla's mission seems to be about accelerating the adoption of electric
cars. They need "everybody" to produce electric cars, so it is in Tesla's best
interrest that they build a car. It will be interesting to see if Apple picks
up on Tesla's R&D, with the opensource patents and maybe even a Tesla
Gigafactory.

But very interesting to follow, hope they make a car and hope they make it
great. But I am afraid they lost their cocky edge a few years ago, so it will
probably just be a nice new car.

------
herghost
Why not financial services?

There's a handful of small players testing the banking regulations now (like
Mondo) to get authorised as basically "iPhone banks" \- modern, mobile,
without the legacy and technical debt.

With Apple Pay (and their $billion reserves) Apple could conceivably sweep in
and buy up these newly regulated challenger-banks and buy their way into FS
overnight.

~~~
tomelders
Thanks to all those banks that have seeded Apple Pay with more customers than
they could possibly have hoped for.

I don't know if Apple are thinking along these lines, but I do know that it's
a great idea either way.

------
woodpanel
The author is correct that Apple is haunted by the iPhone's success. My 2
cents:

1) The car business delivers lower margins than the iPhone. Even if you
compare them to those of premium car companies (like Range Rover, Audi,
Mercedes, BMW or Lexus).

2) The iPhone didn't had comparable brands to compete against, when it entered
the phone market. It came with a hefty price tag. A sum that was never even
considered mass-marketable before. The iPhone created the premium sector for
phones. It raised the share of income people considered plausible for
cellphones.

The author is also right in that apple is very good at applying their business
model to new markets. But

3) to become premium in the car business either means

\- lowering their margins

\- producing cars that aim at a smaller/niche market (Porsche to
Ferrari/McLaren),

\- lowering the costs of the supply chain currently in use by other premium
car makers.

The last one would be doable, certaintly by Apple. Certaintly with EVs. But I
doubt it would be doable without any information leak other than this article.

4) More plausable for apple's margin territory would be an attempt at the user
interface of cars. Like appleTv is for television sets or the healthKit-API.

The problem with cars is not the getting-from-a-to-b-part, not the status-part
or the comfortable-interior-part. The problem with cars is the user interface-
part, it's the outdated-touchscreens-part or the connecting-and-charging-and-
holding-your-phone-part. It's the car's software that sucks. And for some that
sucking software includes the driving-yourself-part. Reaching out to current
premium car-makers also points into this UI/API-direction.

5) Also there are a lot of lower hanging fruits out there, easier to tackle
than building a premium car. Like VR or building physical television sets,
home automation, healthcare - or wait, software.

------
Corrado
I think I would be more excited if Apple were researching ways to remove the
cell phone completely, at least in a physical sense. Think about it, with the
rise of things like AR/VR for output and Viv for input, what need do we have
of a handheld device? Everybody is concentrating on the next iPhone, but what
if it is a set of contact lenses and headphones? I think that would truly blow
people's socks off.

Sure, Apple could be (and probably is) working on an automobile of some sort,
but that seems like it would be difficult to really make a 10x improvement on.
Especially with all the rules and regulations about what can be considered a
car; it must have mirrors, steering wheel, pedals, etc. The prospect is so
limiting. Besides, I think Tesla is rocking the automotive world and Apple
would probably be better teaming up with them than going alone.

Just my $.02 worth.

~~~
collyw
Google glass seemed to be the first step in that direction, but it hasn't
proven so popular.

~~~
B1FF_PSUVM
Apple will do it with lapel pins.

(Sorry, Jony.)

------
raverbashing
No what I think is happening is this:

\- Apple is investing more in ancillary services (iCloud, Siri, Maps, new Arm
processors, etc)

\- More investment into manufacturers to get the latest tech (retina, etc)

\- Some of it is lacking focus and spending a lot of "R&D" money in irrelevant
stuff (like most big companies do)

------
BIackSwan
Great post.

A keyword is missing - __autonomous __car - maybe the first couple of versions
will be manual but they can be relevant in the long term only if they are
working on bringing autonomous cars to the market as fast as tesla /google.

------
thbb
Apple certainly does well in investing in R&D and looking towards some amount
of pivoting.

However, this quasi-exponential growth in spending reminds me of a pathetic
moment at a EU commission meeting I attended, on research and innovation
public funds in 2010.

The EU commissioner basically complained that Europe had no Unicorns like the
GAFAs, but wanted to be reassuring: this is about to change. We will prevail,
_because_ we'll spend more on R&D (through tax money) than all of these do
together.

With the implicit assumption that the more you spend, the bigger the returns.

------
inmyunix
Car seems likely, yes, but I would place bets on an augmented reality play as
well.

------
draw_down
Maybe not a huge mystery- they're working on a car, at the very least.

------
Mendenhall
Maybe apple is moving into weaponry, now that would be a pivot!

------
mulcahey
I really wonder how they will differentiate themselves from Tesla's offerings.
Tesla represents the very cutting edge of innovation in the automotive
industry being the leaders in autonomy, EVs, battery production, the chargin
network, etc.

I wonder if Apple will partner with Tesla to use their Gigafactory batteries
and charging network. If not they would have a lot of ground to make up.

~~~
abalone
Tesla's made enormous strides in core automotive engineering but to answer
your question you have to ask, what would make a 10X difference in a product
category? That's Apple's rough criteria for entering a space. It's not just
moving to electrics.

The answer, at least for Apple, has always been in user-facing software. The
hardware is a "pretty box" (to use Jobs' phrase) and certainly there is
impressive core engineering there. But the 10X difference comes from
fundamentally re-envisioned software platforms and user interfaces.

So this doesn't make much sense for cars if we only think in terms of
traditional automotive engineering or "merely" shifting to an electric
platform. Tons of incredible feats of engineering, but not a 10X difference in
user experience or opening of a new landscape like the Mac, iPhone, etc.

BUT if we look to the (semi-)autonomous future then it's a huge wide-open
landscape of innovation. And it's all about the software smarts and user
interface. It's critical to understand that the user interface is essential,
i.e. that we will not simply jump to fully autonomous cars. They will be cars
that interface with human drivers for quite some time. So that's where Apple
will compete with Tesla.

And yes getting the underlying (electric) automotive hardware and production
right is a huge challenge in and of itself, but ultimately technically
feasible. The software layer on top of it is more of a proprietary
differentiator in the long run.

------
kukabynd
Since there was talk about Apple Watch, there also was a lack of wow effect
people had expected from it. Considering Apple’s human power, there is
something going that takes time. Might be a car, might be something else.
Smartphones have plateaued, so they’ve been working on something greater long
before growth had slowed down. Time will show.

------
lr
Has this car thing in relation to Apple been confirmed? Nothing about the word
Titan makes me think of cars.

------
dbcooper
Perhaps some of this is that they are accounting more expenses as R&D for tax
reasons?

------
Grue3
What are the margins in car industry? iPhone margins are enormous, so how do
cars really compare? Is it even worth pivoting into this industry when you're
already a big player in a more valuable industry?

------
justaman
They are working on a "next-gen" operating system. Something entirely unlike
what we have come to know as a GUI.

I just thought I would leave this comment here so in a few years someone will
find it.

------
prawn
I suspect the Titan codename is a trick and they're actually working on
single-occupant vehicles.

HMD and transport are the obvious markets to tackle.

------
mozumder
There's so much Apple could be doing that are a more natural progression from
their existing product lines. They could take inspiration from some of their
previous consumer efforts to target entirely new product lines, such as a
camera (QuickTake), printer (LaserWriter), or game console (Pippin). A modern
version of all these would sell out.

Or they could reintroduce their enterprise/business products, such as XServe.

The electric car idea really won't be ready anytime soon, due to limits of
neural-net learning speed.

~~~
traskjd
One of the biggest challenges that Apple has, is what would actually be
meaningful? I loved a comment I saw recently that highlighted that a 10 digit
revenue item can be counted as largely insignificant to a company the size of
Apple.

So, if you start looking at product spaces that have:

1\. A meaningful market size (ideally all consumers) 2\. A price that is
significant 3\. Enhances the brand image as chic/cool 4\. Is global

You don't really discover too many spaces to play in. They're not going to
move the needle with a new printer.

Frankly, if I was Tim Cook, I'd just buy Tesla and be done with it. Goodness
knows they have the cash, and Elon has signalled previously that he'd be
interested in handing over the reigns once the original strategy was
delivered.

~~~
cookingrobot
I'd like to see them get into construction. They could build residential or
office space with amazing attention to detail. I'm imagining the level of
design that usually goes into a car interior applied to a home or hotel. There
are already builders in China exploring mostly prefab highrises - so imagine
if Apple started building a few thousand luxury buildings a year and were able
to get the costs down.

------
Inconel
I’ve read a number of articles about the prospect of an Apple car but most
have still left me with more questions than answers.

My main questions regarding an Apple car are the following:

1\. Apple seems reluctant to chase market share at the expense of profit. The
automotive industry is very well established and from my understanding
operates on razor thin margins. Apple seems to be a master of the supply chain
but much of this has to do with the fact that they ship such large numbers of
very similar hardware. Apple doesn’t ship the most smartphones in the world
but they do ship the most of a single model and this allows them to put
incredible pressure on their suppliers. Does anyone expect Apple to be able to
move so many cars that they would be able to put more downward pressure on
suppliers than the traditional automakers?

2\. If the strategy isn’t to dominate the market and thus assert downward
pressure on suppliers then I would assume the strategy would be to sell a
premium car that carries higher margins. Apple obviously has a well deserved
reputation as a premium product within the computing/electronics space but is
it a given that this would translate to the automotive market as well? I don’t
particularly care for a brand’s prestige but I know this does inform many
consumers’ decision making. Apple might be viewed as a premium brand compared
to Samsung/Moto/Lenovo/HP/etc, but would most consumers be willing to pay a
premium for an Apple car compared to a BMW or Mercedes?

3\. Is there any reason that Apple’s prowess in the electronics supply chain
may not translate well to the automotive supply chain? These two industries
seem very different to me.

4\. Apple, like almost everyone else in the tech industry, uses outsourced
manufacturing for the majority of their products. While there are similar
contract manufacturers in automotive, they are not nearly as large nor their
use as wide spread, to my knowledge at least. Foxconn was already one of the
biggest electronics manufacturers even before they started building iPhones
for Apple, I don’t think a Foxconn equivalent exists in the automotive world.
I would imagine this may present problems for someone like Apple that doesn’t
plan on actually building their own cars, or do they?

5\. There is considerable risk when launching a car model, even for the
established players, I would assume the potential risk for a newcomer would be
even greater. Newly introduced cars seem to suffer from more serious and more
widespread problems than newly launched smartphones/computers do, although
those often suffer problems as well. Does the potential exist that problems
encountered with a newly introduced Apple car may carry over to negative
perceptions about the broader Apple brand? It seems enormously perilous to me
to risk your brand reputation on one specific product line that traditionally
tends to be both very low margin and suffer from frequent defects.

I’m curious what others may think of my concerns or if anyone knows of
articles that have gone into more depth with regards to my concerns.

~~~
dba7dba
_Apple might be viewed as a premium brand compared to Samsung /Moto/Lenovo/HP_

Samsung is in #2 spot in global brand valuation. Google, Microsoft, and
Verizon round out top 5.

[http://www.digitaltrends.com/mobile/apple-is-the-most-
valuab...](http://www.digitaltrends.com/mobile/apple-is-the-most-valuable-
global-brand-in-2015-followed-by-samsung-and-google/)

EDIT: Upon a bit more research I find different valuations but still Samsung
is up there.

~~~
TillE
> global brand

> Verizon

There's definitely something wrong with this.

~~~
dba7dba
Well Microsoft is up there too so ...

------
samsonradu
Until the next big thing comes, AAPL shares just hit 2year low so people might
be losing their trust/patience.

------
bitmapbrother
Apple's not going to pivot. I'm sure they'd like to, but I can't really see
what they would pivot too. Instead they'll just throw their hat into the usual
next big thing everyone else is chasing - VR / AR and electric cars - of which
I don't think they'll have a lot of success in. Their bread and butter will
always be the iPhone and they'll ride that wave until it comes crashing to the
shore.

~~~
epistasis
If we're going to go on history, it's quite likely that whatever Apple pivots
to, lots of people will say "yeah, whatever Apple, that's a tiny market and
there are already like four players in there and they're all more serious than
you." Then within three years Apple will have taken what seemed not so
consequential, completely dominated, expanded the market by several orders of
magnitude, and left everybody in their dust.

That's what a successful Apple pivot looks like.

VR, electric cars?! Maybe, but extremely unlikely. Those are obvious things
that everybody in Silicon Valley is thinking about and has overhyped to death.
Apple would probably take some smaller category that people hadn't thought
could hit the big time. IMHO, it's obviously _not_ going to be VR, that's been
completely overhyped, sounds cool to nerds but completely impractical and
practically useless, and will have basically no impact on the majority of
lives out there.

~~~
petra
This mythic story was true in the past, but with the Apple watch, they didn't
introduce something that different from the competition - most of their win
there was because of their brand, their loyal customers and the watch being a
fashion item.

~~~
rahoulb
I'd say the watch is similar to the iPod; there was competition out there but
the general public didn't really care. Then the iPod was released and
commentators complained it was less capable and more expensive than its rivals
(insert famous slashdot quote here). But the people who bought it loved it and
Apple iterated on the design. (With the watch there are a number of studies
that say that tech people don't like it but non-tech people love it -
personally I sold mine and won't get another till the screen is on constantly
and its thinner).

The question is whether the watch repeats the iPod trick of dominating and
expanding the market two iterations on. With the iPod this happened when it
was no longer tied to the Mac, maybe with the watch that will happen when it's
no longer tied to the iPhone?

------
davesque
Even if Apple is working on a car, I can't imagine that it will cost any less
than $50,000. I've always felt the amount of money people spend on luxury
vehicles is obscene.

------
anamoulous
Search engine.

------
slantaclaus
Fire Tim Cook?

~~~
spriggan3
> Fire Tim Cook?

Why do you want him fired? who do you think can replace Cook? I don't see
anybody.

~~~
slantaclaus
Some guys were talking about buying out TSLA and placing Musk at the helm.
Honestly anybody else. Somebody else deserves a chance. The idea that this guy
is the BEST candidate for CEO of the largest company in the world is
preposterous.

------
heifetz
Apple needs a visionary. Google, Amazon and Facebook all have founders who are
visionaries and drive the focus of the company. Tim Cook could be a great CEO,
but he is not a visionary and does not drive products. Who is driving the
vision at Apple? It's not Jony, I have no idea who is doing that. That is also
something you can't do by committee. Apple seems to be really floundering and
does not have any great visions for new products or focus to make people
excited! People have certainly slowly lost interest in the iPhone. Apple needs
to spend its cash and bring Elon Musk onboard!

~~~
petra
Apple can find visionaries as it did in the past, when fadell outside of Apple
started pitching the idea of the iPod and Apple recruited him and let him
manage that division.

~~~
dba7dba
And even the idea of allowing 3rd party apps on iPhone was pretty much forced
upon Apple by popular demand from what I recall.

