Category: Think.Tank

Rethinking Apple’s Smart Car Project

I suspect many of Apple’s loyal followers have been watching, with interest, Apple’s rumored secret smart car project. If that is you, then you know that the company has a great deal of interest in the automobile’s future, and perhaps, vehicle transportation in general.

Because it is a secret project, there is a lot of speculation about what Apple is doing. Some think Apple is making an actual smart car and should buy Tesla to jump-start their automotive vision.

Others believe they are interested in re-inventing the dashboard and making it smarter. I just got a new car with many bells and whistles, but I am still amazed at how badly the dashboard is designed. The screen is touch, and all the commands must be done through the smart screen.

While it works OK, it is by no means smart and is distracting while driving. When I need to do something simple like changing a radio channel or even changing the screen data, I need things like mileage, water gauges, etc.. I have to take my eyes off the road to see these extra screens.

Apple Car Play makes this dash smarter to a degree with its voice commands, but even then, I still have to take my eyes off the road at times to see the data that comes back to me via Siri commands.

I have another view of what I believe Apple is doing. As you know, Apple has another secret project in the works around Augmented Reality. They have already shown their hand in AR via the iPhone and iPad. They have primed developers with tools to make AR apps for these two platforms.

The third platform that AR will impact Apple will support will be AR/VR goggles or glasses. These glasses are by far the most personal way to deliver AR, and rumors suggest Apple could release their glasses as early as 2021.

While I am excited about AR glasses, I think Apple has a fourth AR platform in the works that is a vital part of their smart car vision.

I have never thought Apple was doing a car but did consider them making the dashboard smarter had some legs. But I believe that Apple’s big smart car project is more of a marriage of their AR and smart cars’ visions.

In this case, the AR visuals will be built into the Windshield and powered by an Apple computer built into the car to deliver AR-based info and content via the Windshield.

Some time ago, discussed with two automotive glass display executives about AR, and one of their “visions” for Windshields was to not only make them smarter but use it to display AR content too.

Imagine if arrows on the windshield display tell you to turn via Apple Maps are visible on your Windshield. Or if any data you need pops up on the Windshield, so you never take your eyes off the road.

I think it is more than plausible and feasible that Apple’s smart car project is more a marriage of their secret smart car and AR project.

There is one other way to deliver AR to automobiles and trucks without it being in the Windshield.

In a recent article in Digital Trends, written by Luke Dormehi, he interviews Jamieson Christmas of Envisics.

According to the article, “Mr. Christmas believes that he’s found the perfect use case for real-life augmented reality holograms. What Envisics has developed is a headset-free, in-car holography system that aims to transform the way we view the road. How? By giving your car an AR overhaul more in line with the kind of HUD technology you’d ordinarily find in a fighter jet or a commercial aircraft worth many millions of dollars.”

The article goes on to quote Mr. Christmas:

“We really are the Retina-grade display of the automotive world,” he said. “Our devices typically work at three to four times the resolution of the human eye. You’re left with an image clarity far beyond that which you would normally experience in a vehicle. Our displays can work to tens of thousands of candelas of brightness, which enables you to see this in the most extreme environments.”

The first-generation version of the technology, projecting a virtual instrument cluster, is available in current Jaguar Land Rovers. The second-gen version, which will go significantly further, is set to appear in GM’s Cadillac Lyriq, currently set for launch in March 2023.”

I encourage you to read the Digital Trends Article and more of Mr. Christmas’s vision as he goes into a lot of detail on how this works.

Envisics approach would be fascinating because it could deliver this to existing cars, which would be a huge market.

While I suspect Apple is watching what Envisics is doing closely, I am more inclined to think that any Apple smart car AR vision would be more focused on being built into vehicles. Of course, this would need auto dealers and Windshield display manufacturers partnerships with whom Apple already has excellent relations today.

Yes, this could be a more futuristic approach, but Apple plays for the long term. That is why I believe Apple’s smart car strategy is very AR focused and designed to change the way intelligent vehicles are created in the future.

Why PC Vendors are Watching Mac Sales Closely

For many years, Apple’s Mac has had a solid run in customers buying computers from Apple. In the last year, Apple has continued to sell over 5 million units per quarter. On the other hand, Windows PC sales dominated pretty much the rest of the market. In the last quarter, according to Gartner, Lenovo sold 18,310 million units, HP sold 15.446 units, and Dell sold 10.827 million PCs. Thanks to demand during the pandemic, Apple sold 5.513 million Macs in Q3, up 7.3% over the same quarter in 2019.

While the Mac has never been a major threat to the big PC makers to date, they still watch Apple closely, especially for any innovations Apple may add to the Mac that might impact the market and, ultimately, their future designs.

But when Apple announced that they have moved on from Intel’s CPU’s to their own, the PC makers have become even more interested in Apple being a potential threat to their PC dominancy.

The biggest reason is that Apple now controls its processor destiny as well as its cost, to a degree. Conservative estimates for a Core i7 processor from Intel cost as much as $80-$90+ per chip. That, along with Apple’s premium pricing model, always kept the Macs well over the same laptop’s price from computers in the Windows camp using the same processor.

For Windows laptop makers, their sweet spot for most of their profits come from making laptops in the $599-$899 range. While they all make Chromebooks priced mostly under $400, margins are slim to none. That is why most of them try to pack as much technology as possible into their laptops in their sweet spot range and market them aggressively. Of course, they all sell even more expensive laptops, but most of the profits and volume come from products in the $599-$899 range.

Apple recently announced a MacBook Air with 256 gigs of storage for $899, the only MacBook to even touch the high end of the Windows PC maker’s sweet spot. But this uses a low-end Intel Core i3 processor and has only eight gigs of memory. Dell sells at Latitude 3510 laptop with an Intel Core i7 processor and 500 gigs of storage for $899.

Apple has invested a great deal in their processor design. Their new A14 Bionic chip is expected to be on some of their laptops, perhaps before the end of the year. Apple has most likely already amortized some of the costs of their designs and using their processors, and they no longer pay the Intel tax.

This shift from Intel to Apple’s homegrown processor has some Windows laptop vendors more worried about Apple potentially threatening their core laptop business. The two price points they are the most worried about, should Apple decide to be more aggressive, is in the range of $799-$899 and using their most powerful A14 Bionic processor. Note this article from Ben Bajarin analyzing how a lower cost Mac entry point could dramatically increase the Macs PC market share.

There is a sense that should Apple offer a Mac in this power and price range; it could pressure their bottom lines. Apple has a great marketing machine, and they are showing more marketing focus on the Mac these days.

Suppose they make a lower cost/higher performance Mac that broaches on prime Windows laptop territory. In that case, it can impact all of the traditional Windows laptop vendors.

This issue is causing some of the PC forecasters to struggle with 2021 forecasts. Apple has not said when we would get our first Mac’s with an Apple homegrown processor, although there are rumors that Apple might hold another event in November to launch the first models.

A more likely scenario is that they launch A14 laptops in early Q1 and market them aggressively. If so, Apple could increase its Mac’s unit sales and potentially decrease some Windows PC sales in the near future.

I have had many discussion’s with Windows Laptop vendors over the years about Apple. These talks were always about Apple, not threatening their overall market position, especially in corporate markets.

Only in the last three months, since Apple announced they were leaving Intel and moving to their own silicon, have I heard a potential concern about Apple making a bid for what is their sweet spot.

Without knowing what Apple will bring to market with its chips and its pricing, it is hard to forecast Apple’s Mac growth at this time. However, their competition is rightly concerned about an Apple move in its direction and will be watching Apple closer than in the past.

Apple’s Patient Strategy for the Home

Apple’s strategy for the smart home has been one of the areas I’ve been most critical. Mostly out of frustration when I see Amazon and Google flooding the market with options for smart home control centers. At Apple’s fall launch event yesterday, their smart home strategy becomes more clear and quite differentiated.

For as far behind as Apple has seemed in the home, the caveat in our analysis was always that Apple owned the pocket more than Amazon, and even Google to a degree. I always felt if Apple could better leverage its end computing devices, mainly the one you have with you at all times, they could catch up quickly. I use these words catch up somewhat lightly because, in Apple’s mind, they were never behind, but that’s a different story.

The broader picture Apple painted was how much stronger their HomePod + all other devices strategy could come together now that a $99 HomePod is an option, and you can have one in many rooms of your house. Where this story came together was with Apple’s Intercom feature, where when you want to send a message to your family, it can play on not just the HomePod/HomePod mini in the house but any device, including AirPods.

This image demonstrates Apple’s ability to leverage the numerous other devices in the home and outside the home and glue them together with the presence of a smart speaker. What this highlights again is Apple’s ability to integrate and how a solution can cleanly tie together the more devices you own. Many of the voice assistant products from Amazon and Google feel more like island experiences where the device does what it does, and that’s it. Largely that is because Amazon and Google may have an Echo in a room in the house, but they don’t own all the other common endpoints most consumers care about used daily.

The elephant in the room for this strategy is, of course, Siri. And while I admit Siri is still weak in many of the areas where Alexa and Google Assistant are strong, the more consistent parts of the Siri experience that do shine are the ones where you don’t have to talk to Siri.

Overall, Apple’s positioning of Siri was telling. While I blatantly disagree with calling Siri a world-class assistant as they did, Siri is, for now, a mostly competent assistant for what it is designed for. Apple gave examples of Siri in use cases I’ll bucket as automation, facts, and anticipation.

For automation, I’ve long argued that is all people do with smart assistants mostly anyway. Things like to set the alarm, play music, set a timer, or simply turn off a light. All you are doing is using your voice to complete an action you would have otherwise had to use your fingers for. This is easily the dominant use case for voice assistants today, and Siri is competent here.

Facts had traditionally been Siri’s weakness, and even study after study we did on how people use smart assistants, we did not find facts or general information to be a top use case for any assistant other than Google’s. While it is nice Apple added more facts to Siri’s knowledge base, it is unclear to me if there is much value here for Apple/Siri.

Anticipation is the most interesting category for me. This is where Apple owning the pocket of its customer can reveal the most value in Siri. And most interestingly, the best examples of this today show up in situations where you don’t talk to Siri. Siri suggestions in things like contacts, mail, apps, and others are looking at behavior and attempting to limit steps you need to take to get to the desired action. These are the powerful areas where Apple can press on their advantage of owning the pocket and do more than Amazon can and Google to a degree.

We are beginning to see more of Apple’s home category start to take shape. When they created a subcategory for home out of “other” from a revenue standpoint is indicated they had more products and services than just HomePod in the pipeline. The smart speaker market is a relatively large one with estimates of the current installed base being ~280m smart speakers worldwide. Amazon having the largest chunk of that, and an interesting question is how loyal will current iPhone owners are also Echo owners be to the product when they see more of the ecosystem value and price of HomePod mini. A study we did months after HomePod was released showed price as the major barrier for people to purchase one and the vast majority (54% of people saying they would be very interested in a lower-priced HomePod mini. A note I read from Morgan Stanely indicated the lower-priced HomePod Mini increases Apple’s total addressable market by ~4x.

The lack of Spotify could be an interesting problem for Apple, although I do hope Apple works with Spotify to support the service as it will greatly aid in the value proposition. Other areas to watch are ways Apple can tie HomePod nicely into Apple TV and perhaps even with things like AppleTV+ with unique audio experiences. Another angle for Apple to drive up HomePod’s base is to offer the Mini as a bundle with other hardware via promotions.

Ultimately $99 is a much more aggressive price for the Mini and a key strategy for the home for Apple in my opinion, and HomePod Mini should help Apple gain ground against Amazon and Google and lay a deeper foundation for Apple’s ecosystem.