Apple R&D Reveals a Pivot Is Coming

http://www.aboveavalon.com/notes/2016/5/11/apple-rd-reveals-a-pivot-is-coming

by rstocker99 • 10 years ago

280 263 10 years ago

aboveavalon.com

draw_down• 10 years ago

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

slantaclaus3• 10 years ago

Fire Tim Cook?

slantaclaus3• 10 years ago

Always and forever negatively attacked. AS IF Removing this guy could cause improvement.

spriggan3• 10 years ago

Fire Tim Cook?

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

slantaclaus3• 10 years ago

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.

bitmapbrother• 10 years ago

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.

sxg• 10 years ago

but I can't really see what they would pivot too.

If a pivot was obvious, then it wouldn't be a pivot. It would just be the next step in the original plan.

epistasis• 10 years ago

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.

petra5• 10 years ago

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.

mozumder3• 10 years ago

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• 10 years ago

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.

mozumder3• 10 years ago

The problem they're facing with the big bets is that they can lose big as well. With iPhone sales dropping 30%/year, they're losing about that much revenue also, since the company's revenue is tied so much to that singular product.

A broad product portfolio will always be more stable over the long term.

Eridrus• 10 years ago

This is exactly the sort of thinking that leads to companies becoming irrelevant; almost nothing can move the needle for them, so they fail to see the next thing coming.

The initial theory of disruptive innovation from The Innovator's Dilemma is about this exact issue and how companies can deal with it.

cookingrobot• 10 years ago

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.

ggreer• 10 years ago

Apple already makes the most popular camera and the most popular gaming device: the iPhone.

carsongross• 10 years ago

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• 10 years ago

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.

BIackSwan• 10 years ago

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.

heifetz• 10 years ago

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!

petra5• 10 years ago

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.

dba7dba3• 10 years ago

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

darawk2• 10 years ago

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.

mturmon• 10 years ago

I guess it's the magnitude of the effort that is not widely appreciated. DF reported on May 4 (http://daringfireball.net/linked/2016/05/04/manjoo-moonshots) that:

"I know The New York Times can’t say that it’s certain that Apple is working on a car, but I can. They are. Of course they’re working on a pay TV service. It would be astonishing if they didn’t have teams hard at work on VR and AR. The difference between Apple and other companies is that Apple will spend tens (or in the case of the car, hundreds) of millions of dollars on a new product and never ship it. They don’t just say no to ideas — they say no to long-in-development projects."

Note, "hundreds" of millions of dollars. Whatever you say about DF spin (and you'd be right!), the facts he leaks are generally accurate.

The analysis in the OP (exhibit 3) would seem to indicate ~$5B on R&D on hitherto-unknown products since 2014. Which is astonishingly large. Because it's based on company reports, this must be common knowledge for serious tech industry analysts.

CPLX2• 10 years ago

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.

steve19• 10 years ago

They seem to frequently fail at software. iTunes is a dog, Mac OS X is getting worse and worse, the Mac App store is horrendous. iCloud is a joke.

They do nice interfaces, and iOS is great. I have no doubt they would produce an amazing luxury car with a beautiful software UI, but I do not see them morphing into a machine learning software powerhouse anytime soon, at least compared to Google. Google Now easily beats Siri and Google Maps beats Apple Maps.

untog• 10 years ago

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.

TulliusCicero• 10 years ago

You can only really do the basics on a test track. If they want to tackle real-world driving they'd have to take it onto real-world streets, and that would probably be impossible to hide.

While obviously Google is historically a web/advertising company, they're showing a lot of strength recently in machine intelligence, like with Google Photos auto-tagging or AlphaGo.

vlehto• 10 years ago

If you say that Apple has more relevant experience, then why doesn't Audi, BMW, Daimler, Ford, GM, Google, Kia, Mercedes-Benz, Nissan, Renault, Tesla, or Toyota beat them both? All of these have more relevant experience than either Google or Apple, because industrial design is not really what car is about.

kamaal3• 10 years ago

>Google is a web/cloud services and advertising company.

Google is actually an AI company.

partiallypro• 10 years ago

Automotive is a low margin, high liability industry. I think Google is approaching this correctly in staying out of the hardware (for the most part.) Apple developing a full car that has to meet x & y regulation from every single different country could end up being a big disaster. Tesla isn't even profitable and has a cash burn that makes a winter furnace seem tame. I don't see how Apple can escape that reality too.

I'm sort of surprised that Microsoft & Amazon are sort of just sitting back, watching. I guess neither of them care so long as the back end is running on their cloud.

elchief• 10 years ago

Tesla makes 25% margin on their cars.

BinaryIdiot2• 10 years ago

Automotive is a low margin, high liability industry.

It's a lower margin for the classic companies that use a dealer model to sell cars. Direct sales like Tesla have pretty decent margins. It's unlikely Apple would use a dealer model. That's pretty outdated and will eventually go away (though not without kicking and screaming from the existing dealers).

Don't forget many Android phones have awful margins but the iPhone? HUGE margins. Apple sells premium products. Ultimately it won't matter what the margins are for any of the existing companies when they move into a new industry.

I'm sort of surprised that Microsoft & Amazon are sort of just sitting back, watching. I guess neither of them care so long as the back end is running on their cloud.

I would be surprised if both companies haven't done some research into this. Microsoft's R&D is pretty famous for working on tons of moonshot ideas, many of which never see the light of day. Amazon seems to move into whatever space they think they can get into. Right now they're kicking ass with their brand new AI initiatives so I think they have their hands full (if I were them I'd shove Alexa into every product I could).

vacri• 10 years ago

Apple has made plenty of turkeys in the past couple of decades. It's just that when they succeed, they really hit it out of the park.

rixed• 10 years ago

Maybe they are working on a non autonomous car? The car industry is somewhat similar to the phone industry at the time it was dominated by Nokia and telcos: not evolving, slow to integrate new technologies, terrible legacy UIs ... There is a lot of room for improvement outside of autonomy. I can hear the press mocking the development of a"manual " car like it's the 20th century again, and being ridiculed by Apple commercial success once again, as happened for the iPhone and iPad. Indeed. Autonomous cars are extraordinary difficult to produce but they may be even more difficult to sell while a radically new design of a non autonomous car may still be a great success. Customers are in average much less interested by Autonomous cars than engineers, in my experience.

darawk2• 10 years ago

Ya if I had to guess i'd say that's exactly it. But do we really need an Apple car? What is there really for them to offer in that space? Better UX? Is there enough of a delta there to warrant entering the space?

I grant though that this is a sort of 'unknown unknown'. By definition, the great new things are non-obvious. I may have said the same thing about pre-iphone phones. But I don't really see what they could offer me that would make me want to pay an apple-style premium for a car (other than full autonomy, of course).

VonGuard• 10 years ago

As with most Apple-related rumors, the truth is probably something a lot less exciting in the end. If Apple is working on a "Car" you can bet it's just s creep of it's current offerings, so, a car that includes iOS and links to your iPhone, has navigation info in the dash provided by Apple Maps, and has iTunes integration in the dashboard.

A self driving car is not just going to magically appear from Apple. It'll take years, and offering a branded in-car experience with someone like Ford or VW would be a lot more Apple's style.

But then, I've been repeatedly wrong about Apple for years. Still, I feel like when they introduce something these days it's evolutionary, not revolutionary.

agumonkey• 10 years ago

So more like an Apple Watch than an iPhone. They don't have the nice systemic headstart ipod and imacs gave them in electronic devices that made the iPhone possible 'all of a sudden'.

tcannon2• 10 years ago

CarPlay? We have that already.

dagw• 10 years ago

Isn't it well known that Apple is working on a car?

Is it? It is well known that they are hiring bunch of engineers with automotive industry backgrounds and are working on something related to cars. However I've also heard from friends in the industry that they're not really hiring people with backgrounds related to building actual car chassis.

I think the jury is still out on whether there will actually be an Apple car (as opposed to an Apple (co-)branded car full of Apple tech).

rdl• 10 years ago

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• 10 years ago

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.

Alex3917• 10 years ago

If their efficiency is decreasing then that's probably more related to having too many products rather than not-smart-enough people. The cost of shipping each new release roughly follows Metcalfe's law, meaning that each existing product/feature you need to support going forward makes the next release exponentially more expensive.

My hope is that the car is a front and they're secretly building arcologies, but in reality they're probably just building some shitty car.

datashovel• 10 years ago

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.

IBM3• 10 years ago

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).

inmyunix2• 10 years ago

Watch.

astrodust2• 10 years ago

When you're trying to get into a new market the last thing you need is for your competition to prepare themselves. Secrecy lets the competition stay complacent. It's a tactical move.

If Google started braying tomorrow about making cars then car companies would respond. They'd have a harder time rolling out their product.

Animats• 10 years ago

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.

IBM3• 10 years ago

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• 10 years ago

    >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"?

serge2k• 10 years ago

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

TazeTSchnitzel• 10 years ago

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.

Mendenhall• 10 years ago

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

inmyunix2• 10 years ago

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

beloch• 10 years ago

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/

astrodust2• 10 years ago

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.

iLoch• 10 years ago

Not nearly as much fun as he'd have talking about how he designed it.

chetanahuja• 10 years ago

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

Unpossible. Space stations need to be displayed against a black background (albeit one punctuated with twinkling dots of light). Ive doesn't do black background.

simonh5• 10 years ago

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.

ArkyBeagle• 10 years ago

To a first approximation, all car companies are extinct.

WalterBright2• 10 years ago

I can't imagine how they could keep a car project secret. Too many people would have to know, and you can't develop a car in a locked room.

DannyBee3• 10 years ago

"Has Apple's research focus changed?"

If it has, honestly, it's because they don't know where to put their money or they've put it all in one thing.

You more or less say the same thing.

"hey'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." (This is we have no idea what to spend our money on).

"Perhaps we're not seeing some monumental project in the works, although an autonomous car would be pretty big." (This is we are betting big on this one thing we think has huge potential).

The other option apple has not been fond of is large investments in a small set of things, each of which may be a potential big future.

The first would be quite concerning. If you have companies with large research budgets, and they have no idea what they should spend money on in order to make the next big thing happen, that does not bode well.

ori_b• 10 years ago

The first would be quite concerning. If you have companies with large research budgets, and they have no idea what they should spend money on in order to make the next big thing happen, that does not bode well.

Why doesn't it bode well? The transistor, the laser, Unix, information theory, and a giant number of other things which form the underpinnings of modern technology came out of Bell Labs, which is the epitome of a place with a large research budget and no specific "next thing to monetize" that the spending was directed towards.

From what I understand of Apple's culture, it's unlikely that it will ever transform towards this, but that's a separate point.

hackaflocka• 10 years ago

Elon Musk launched a space program with less than a hundredth of Apple's cash.

shas3• 10 years ago

You are comparing across industries. Apple is a mix of software and manufacturing. As is Samsung. VW is a car company. Further, a better metric is to look at % of revenue spent on R&D.

simonh5• 10 years ago

You are comparing across industries.

That's the whole point. The argument is that Apple is pivoting into a different industry.

% of revenue spent on R&D would not tell you much here. If a company with $10m revenue spends the same % revenue on R&D as VW, does that mean it's possible for it to bringing out a new line of cars? Setting up to manufacture a car costs a large amount of absolute $, so comparing absolute spend makes sense here.

geekery• 10 years ago

He's not wrong about the car. Apple filed a patent in October for MONITORING A MOBILE DEVICE EN ROUTE TO DESTINATION (20160112837) along with a handful of other image processing/camera related patents.

So maybe they are developing a car, maybe they are just amping up their IP for the impending shift of tides. However, MacRumors mentions an electric car possibility: Project Titan http://www.macrumors.com/roundup/apple-car/ so a physical product makes sense.

tedmiston• 10 years ago

Apple files plenty of IP that never turns into a product.

blktiger• 10 years ago

In 2015 Apple had ~234B in revenue. 10B is only 4.27% of that. If you look at the percentage of R&D vs sales that's still actually drastically less than they spent in R&D up until about 2005. It could just be that Apple has decided to spend a bit more percentage wise and they have expanded the amount of things they are researching instead of indicating a focus on one specific thing.

Inconel• 10 years ago

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.

dba7dba3• 10 years ago

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...

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

TillE• 10 years ago

global brand
Verizon

There's definitely something wrong with this.

aetherson4• 10 years ago

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• 10 years ago

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.

aetherson4• 10 years ago

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.

dbcooper• 10 years ago

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

abalone7• 10 years ago

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.

bendbro• 10 years ago

I know people have said this before and been very wrong for it, but I just don't think there's much in those constraints to innovate (read Blackberry). Unless you change the only fundamental aspects of owning a car (driving, parking, and maintenance), all you're doing is polishing a turd.

If Apple is just building the car, and fully autonomous transport is out of the picture, then all they can hope to do is make it electric and install all kinds of shiny gizmos inside. Battery tech won't advance on their doing, so we can't expect their "revolutionary" change to involve any actual gain in commuting, but we can expect to be inundated with a lot of beeps and boops. Oh and maybe your Apple watch will unlock the doors.

abalone7• 10 years ago

You mentioned Blackberry. Pre-iPhone, the world probably would have said there isn't much you can do to innovate on smartphones. They will always need keyboards so the screen has to be small, etc.

With cars I want to underscore what I said about a "10X" improvement in safety and convenience. That is not just polishing a turd. What does it take to actually get to a car that largely drives itself, on myriad roads and conditions? It is wishful thinking to believe cars will do this all by themselves without drivers anytime soon.

Instead, think of a UI that is much more about "mind-melding" with a human driver. Letting them know exactly what it is planning to do, how it intends on navigating that stretch of Highway 1 without driving off the cliff. THAT will probably require fundamentally rethinking the cockpit. You will be mostly focused on "driving by instruments".

If they can achieve that, then we get cars that really do save thousands of lives and make the journey much more relaxing.

iSnow• 10 years ago

Unless you change the only fundamental aspects of owning a car (driving, parking, and maintenance), all you're doing is polishing a turd.

I guess the real disruption in the automotive sector would be a focus on mobility instead of owning a car. Have a smartphone app where you could call a shared car from wherever you are whenever you wanted. It appears 10m later, takes you to your destination and then goes back into the pool.

At least in the big cities, a whole lot of people would forgo car ownership if such a service was available.

petra5• 10 years ago

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 ?

abalone7• 10 years ago

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.

Eerie• 10 years ago

So let's go wild - what if Apple succeeds in making siri a true AI, with a great personality

With human rights?

jernfrost• 10 years ago

Agree, Apple is not going to get into cars unless they can do something fundamentally different. But I do think it is a problem that the car industry already has a sort of Apple Company, Tesla. A lot of what you could have done different has already been done by Tesla. A lot of guys at Tesla are from Apple so that is perhaps not odd.

However do think there are some fundamental differences between Tesla and Apple. Tesla is far more into performance than it is likely Apple ever will be. I think the sporty aspect will not be present with an Apple car. The seating arrangment for kids in the trunk in the model S, is more in line with stuff Apple would have done.

I think Apple will spend a lot of time investigating the current method of controlling and interacting with a car and looking at a way of improving that.

I think Apple will try to make a very pretty car but I can't imagine them going for the almost sports car look of Tesla.

abalone7• 10 years ago

A lot of what you could have done different has already been done by Tesla.

Not at the software interface level. Tesla has done incredible work at the hardware level transitioning to electrics but the UI is still pretty old school. I.e. your parents could step into a Tesla and not know that there was anything different about it. Apart from having to plug it in, which you tell them is a Good Thing. That and some snappy performance.

If you think just a little bit ahead about where the next user-facing innovation is, it's autopilot. And the big thing to "get" is that it's not going to be some switch you hit that makes the car magically fully autonomous and you just sit back and take a nap. Rather to go beyond very limited scenarios and actually function on the real world road network and weather conditions, it's going to be about the human-computer interface.

So what does that look like? Is it just a flat panel screen in the center console next to your big steering wheel? Is that how the car is going to deliver safety-critical information to you that you need to supervise and potentially respond to within seconds? And how are you going to respond to them, through taps on screen dialogs?

Probably not. And there is where Apple will compete with Tesla, in the human-computer interface, as it did with the Mac, iPhone, iPad, etc... Even though they all had great hardware too, it was software that made a 10X breakthrough.

jjuel• 10 years ago

"Effective autopilot assistance features can plausibly get us to 10X improvements in safety and convenience."

So similar to the autopilot feature that Tesla already has in their cars? Plus it isn't going to up safety until there is 100% acceptance in this autopilot feature. Sure your car might be driving safer, but the other people who don't have these features will still be a danger to you.

illumin82• 10 years ago

Tesla's autopilot can and does increase safety even with unsafe vehicles on the road. Look at this video of a Model S moving out of the path of a truck changing lanes into it's space. The car moved before a human driver might have even had time to react.

https://www.inverse.com/article/14393-elon-musk-shares-video...

mulcahey• 10 years ago

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.

abalone7• 10 years ago

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.

fblp• 10 years ago

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

davesque• 10 years ago

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.

exabrial3• 10 years ago

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• 10 years ago

It does. It has two of them in fact.

Daneel_4• 10 years ago

...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.

exabrial3• 10 years ago

Touche sir

zargath• 10 years ago

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.

boznz• 10 years ago

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• 10 years ago

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.

brandonmenc• 10 years ago

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• 10 years ago

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

Toenex• 10 years ago

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.

Corrado• 10 years ago

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• 10 years ago

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

B1FF_PSUVM• 10 years ago

Apple will do it with lapel pins.

(Sorry, Jony.)

raverbashing• 10 years ago

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)

paulftw• 10 years ago

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• 10 years ago

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?

kukabynd• 10 years ago

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.

herghost• 10 years ago

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• 10 years ago

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.

reissbaker• 10 years ago

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• 10 years ago

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• 10 years ago

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.

lr• 10 years ago

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

no1youknowz• 10 years ago

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...

sametmax• 10 years ago

We all know how apple has a far superior supply chain, creates better software experiences and does things "right"

"We all know" ? The starting point for your whole desmonstration is assuming general agrement of one of the biggest source of troll of all time ?

robert_tweed• 10 years ago

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.

bobbyi_settv• 10 years ago

We all know how apple has a far superior supply chain, creates better software experiences and does things "right"

Um, what? I assure you that "we all" don't agree with your favorite ice cream flavor, rock band or "software experience". In terms of "software experience", Apple aren't showing much hope of catching up to Android on mobile, much of their desktop application software is abysmal (iTunes, Quicktime, etc.), and their desktop OS experience, while decent, gets less "right" with every version.

JustSomeNobody• 10 years ago

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.

jimmytidey2• 10 years ago

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• 10 years ago

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.

coredog642• 10 years ago

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.

Joeri• 10 years ago

The iphone needed to be fcc certified too, they just announced it 6 months prior to selling it to keep the element of surprise.

jimmytidey2• 10 years ago

Getting a phone certified is surely quite a bit different from an autonomous car ready for consumer use?

Communitivity2• 10 years ago

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

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.

mcphage5• 10 years ago

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• 10 years ago

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.

jamesrcole• 10 years ago

Do you think that's the only major thing they're working on?

Communitivity2• 10 years ago

You're right, I think it's definitely not the only thing, but Apple seems to do one main thrust and lots of smaller thrusts. I suspect wearables and the car may be smaller thrusts (which would still be huge expenditures compared to other smaller players), but their AI thrust will be 5-10x the investment of one of the smaller thrusts.

Grue3• 10 years ago

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?

mangeletti• 10 years ago

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.

nickpeterson• 10 years ago

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?

justaman• 10 years ago

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.

baron8163• 10 years ago

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.

murukesh_s• 10 years ago

"the last consumer electronic product" - loved that part..

manmal• 10 years ago

Do you believe that we will have robots as shown in movies, now that Moore's law is grinding to a halt?

baron8163• 10 years ago

I don't know if it's possible to build a robot like that. Or if will take a hundred years for the technology to evolve to get to the point that will make it possible. I know currently it's not even really possible to get a robot to do a simple task like folding a towel. It'll undoubtably be extremely difficult to make something that's useful and functional. But I think Apple needs to look to something that big if it wants to grow at a fast pace again.

bo1024• 10 years ago

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.

baron8163• 10 years ago

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.

swalsh• 10 years ago

I wouldn't be surprised if the "car" part is a commodity, and the interior/exterior are where Apple builds a better vehicle. The qualcomm chipset that powers an iphone is pretty much the same thing powering an android phone.

vlozko• 10 years ago

Not correct. Apple designs their own SoCs. Samsung and TSMC manufacture them. Really, the only thing in common is that they're both using ARM as the instruction set.

kamaal3• 10 years ago

>It seems like such a weird space for a company that makes consumer electronics parts to move into

Actually if you think of a car as a consumer electronic device, it doesn't seem weird at all!

wwweston• 10 years ago

A better fit (although much, much, much harder to achieve) for Apple would be a real robot/android.

Either autonomous vehicle is a real robot (and not a bad place to start, given that moving things around is a great task for a robot), or I'm not sure the word has a lot of meaning.

It isn't approaching an android until it's something like KITT, but that's something else.

stevewilhelm• 10 years ago

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• 10 years ago

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

bresc• 10 years ago

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?

rco8786• 10 years ago

public transportation

because private companies don't generally dabble in public infrastructure :)

I think at this point it's less about cars or electric cars, but more about self-driving cars(that happen to be electric). In the U.S. at least, we have a MASSIVE roadway infrastructure that's not going anywhere for a long time. Utilizing that probably looks like a much easier path to automated transportation than does building up the rather sparse network of railways.

gmarx• 10 years ago

Imagine this future in Europe: pretty much no one owns a personal car. When you want to go somewhere you order a car on your phone and within 10 minutes a driverless car arrives and takes you to your detination. Your music plays through the sound system. The back seat is comfy and you have plenty of room to work or surf the internet. The trip could be to the hardware store, or hundreds of miles to visit family.

potatolicious2• 10 years ago

I feel like OP understands this - the questions is that why do any of that when the younger generation is rapidly urbanizing, in which case "order a car on your phone, wait 10 minutes" seems silly compared to "walk out front door, onto train, be at destination even sooner".

The self-driving utopia is primarily a suburban-centric dream, in many European cities (and a small handful of American ones) it's likely to be less efficient than what already exists.

Around here for example, the subway runs every 2-3 minutes and moves faster than cars - perhaps even self-driving ones. Trips are generally short enough that being able to work/surf the internet is a pretty marginal benefit, and the hardware store is so close that it would be nonsensical to use any vehicle to go there. All of the above pre-supposed long travel times and having to take a vehicle for even mundane every tasks - this is untrue for many cities, where cars (self-driving or otherwise) will likely be strictly inferior to the utility offered by walking or mass transit.

sixQuarks• 10 years ago

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.

aetherson4• 10 years ago

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.

dzlobin• 10 years ago

The future seems likely to involve a fleet of autonomous vehicles that we use on-demand -- why not own and operate the fleet? Not to mention owning the technology powering the autonomous cars.

simonh5• 10 years ago

It's because the car industry is about to experience two fundamental revolutions simultaneously. The move to electric drivetrains which will completely change the technical architecture of the hardware, and the move to self-driving. The incumbents have no built-in advantage in either of these areas, which makes it ripe for disruption on two different axes at the same time.

If a move to a new manufacturing process such as carbon fibre gets thrown into the mix, that's three simultaneous revolutions.

mindslight• 10 years ago

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.

It is this. What you're missing is that in the whole wide US, the number of European-density cities where most people can choose to forgo routine use of a car can be counted on one's fingers. The common layout here is a few walkable commercial blocks "downtown", that generally serve as single-destination stops for drivers who live further out.

Self driving is what's required to make the car sharing frictionless and on-demand in less-dense areas. Currently this role is being done with human owner/operators; replacing the humans with software will reduce prices and consolidate ownership of capital equipment. (Interestingly enough, it will also decrease the stickiness of supply. Instead of needing to slowly recruit driver mindshare for a new intermediary, a straightforward investment in a fleet of cars suffices)

That being said, I think this article is a bit hokey. Apple "pivot"? mm hmm.

anamoulous• 10 years ago

Search engine.

samsonradu• 10 years ago

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

woodpanel• 10 years ago

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.

prawn• 10 years ago

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.

thbb• 10 years ago

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.

Apple R&D Reveals a Pivot Is Coming

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