Apple’s automotive project, codenamed Titan, is one of those rare private yet public internal projects we are not accustomed to with Apple. With the latest news about a small round of layoffs in the division, I thought it was worth touch on Apple’s automotive initiatives and adding some food for thought around what may or may not be going on with Apple in automotive.
Is Apple Making A Car?
The biggest question I’ve always had around this project is whether or not an end consumer vehicle was ever the goal of Project Titan. I have my doubts, and Apple’s CEO Tim Cook has said that autonomy, in general, is something Apple is interested in. What is clear, for the moment, is autonomous vehicles and the monumental challenges surrounding building autonomous vehicles, it is likely any ambitious project around autonomy should start in cars.
True to Apple’s exploratory engineering strategy, they start with tasking a team to try and solve a problem the Apple way and see if it leads to something management feels is worth productizing. While any perspective on Apple’s ambition in autonomy should be viewed with an extremely long timeline, it seems that the turbulence publicly reported on still suggests Project Titan is early days as an engineering project and has not yielded any harvestable fruit at this moment.
The question of the end goal still remains. For one, I’m not sure any company has a well-articulated vision for the future of individual or family transportation. Will individual vehicle ownership be a thing in 30 years? No one knows. There are many theories around ridesharing, (still something less than 20% of Americans do with any regularity), micro mobility which is the concept of very small personal transportation machines, and thoughts around mass transit that all need to be factored into a vision for the future of transportation. Without such vision, any ambition around autonomous vehicles would seem like a rudderless ship.
While automotive sales are not trivial with ~6 million being sold annually in the US and ~75 million sold worldwide, it is a richly segmented market. For Apple, selling a car at the prices Apple demands and the margins required, they would enter a category with a product only a small percentage of their customer base could afford. This is unlike any other category they have entered today where their range of prices is available to everyone one of their customers. The nature of a car and Apple’s economic structure would be highly likely to exclude the vast majority of their customer base.
We can certainly argue Apple could offer a value priced vehicle, but anyone who studies the current automotive markets knows the wisest strategy is to focus on the higher-end of the market and that seems in line with Apple business initiatives.
If I had to bet today, I’d bet we never see an Apple car see the light of day. I know that will disappoint many, in the same way, many wish we would see an Apple TV set, and that is similarly not something I’d bet on. If Apple is looking at the next 100 years of their company and believes autonomy is worth exploration, my gut is that it would have more to do with personal robotics than it does with automotive. But that is just my hunch.
Apple Watch and Market Share
News was generated with Strategy Analytics released their market share for smartwatch report. Here is the bulk of their data bits:
According to the data, Apple shipped 9.2 million Apple Watch units during the fourth quarter of 2018. That’s up from 7.8 million in Q4 2017. In total, Strategy Analytics suggests Apple shipped 22.5 million Apple Watch units during 2018. For comparison’s sake, that’s up from 17.7 million in 2017. In total, 45 million smartwatches were shipped in 2018, with Apple accounting for half.
Those shipment numbers put Apple at the top of the smartwatch industry, with Fitbit in a distant second at 5.5 million units shipped in all of 2018. Samsung is in third with 5.3 million units shipped, followed by Garmin at 3.2 million.
As is generally the case, the data is a bit misleading. I’ll remind everyone these trackers from analyst firms are only looking at sell in, not sell out data. Meaning the numbers do not represent sales to end customers but sales to retailers. We can generally take Apple’s sales numbers as sell-through because Apple consistently has the highest sell-through of any technology brand, and there is some transparency in how they manage their channel inventory levels. Other brands sell to channel and get stuck with a load of unsold products with a fair bit of regularity.
Apple easily, sold through more than the Strategy Analytics market share number of 51%. Based on our smartwatch sales model, SA is also a bit low in Q4 shipments but relatively close in annual sales of 22m for Apple Watch. No matter whose numbers you use, Apple Watch had its strongest year in 2018, and I expect 2019 sales to be even better.
According to several research reports I’ve read, the leading smartwatch brands in consumers minds is only Apple and Samsung. Both Fitbit and Garmin, while having products that qualify as a smartwatch, do not have smartwatch mindshare in consumers minds according to multiple survey studies. Our firm is doing a wearable study later this year, and we will have a lot of our own data to fill out this analysis. But from the recent surveys I’ve seen, and the few we have done over the last few years, not much has changed in the market.
Overall, the smartwatch category seems to be growing. And notably Samsung within it, who I think had the second highest sell-through after Apple. Thanks to Qualcomm’s latest 3100 product line, it already seems more fashion and luxury brands are entering the smartwatch market in 2019, and it seems reasonable to assume the market will grow even more this year.
The smartwatch market may not be a hyper-growth segment, yet, but it does remain one of the more steady and consistent growth markets on an annual basis. I liken it to a slow-moving snowball. But, the work being done in wearables will be valuable in the next phase of mobile computing. So keeping an eye on the market and the brands leading the charge is relevant for the future.
