Apple is not having a good 2024, with legal headaches & obscurity regarding its product innovation, that is causing investors to lose faith. Will it be able to engineer a comeback?
I need to preface this by saying I am *not* an Apple hater. But ... I think the DoJ and European cases against them are reasonable and long overdue. Their refusal for years to support universal standards like USB-C and RCS has been high level not cool. Tim Cook had a "Let them eat cake" level quote on the RCS and messaging subject too - which doesn't help their case.
On the need for an AI specific device, I think Carl Pei (co-founder of OnePlus and founder of Nothing) has the most viable and promising sounding take. He thinks the smartphone will still be our primary device, but says smartphones need a new metaphor.
"I think it needs to slowly augment away the apps. Today, we’re using some really simple, mindless-scrolling apps, right? What if we wanted to accomplish more complicated tasks like 3D modeling or photo editing, or I don’t know what? It’s actually quite difficult to learn how to use these new apps. Maybe we can just tell the phone what we need to do, and it would use those apps for us without the apps even being visible in the foreground."
And he said this back in August of 2023, when I hadn't heard any other person or company frame things that way. I wrote a little about it here:
Mar 29·edited Mar 29Liked by Amrita Roy, Uttam Dey
While I appreciate Apple's move towards adopting standards like USB-C, after years of insistence on their proprietary cables, I have reservations about certain EU regulations. These include mandates for making iOS/iPadOS features fully accessible to third-party developers—a move that has previously backfired on Apple—and the requirement for Apple to support third-party app stores and sideloading.
Apple has indicated that these rules would necessitate creating a separate version of their operating systems for the EU, diverging from the version used by the rest of the world. This approach could be problematic for the EU, especially if the EU-specific version receives updates less frequently. Such a delay could expose EU users to security vulnerabilities that are addressed more swiftly in the primary version of the OS. The primary version, in this context, refers to the one used by the majority of Apple's user base, with the EU representing a smaller segment. The financial burden of maintaining two different versions of their OS and possibly hardware could potentially lead Apple to reconsider its presence in the EU market. This might involve halting the sale of new devices or ceasing updates for existing tools within EU countries.
I'm not sure of the legal implications of this, but is Apple allowed to follow through on their plan to have an EU version of their devices and operating systems, while keeping the "main version" available to the rest of us outside the EU? Does the DMA prevent that? Because if it is allowed to do this, I think it could be a bad thing for EU Apple fans.
So I sat here scribbling out a comment, and realized I was accidentally creating a full-length article... again. So, I am going to post one based on an article of yours - AGAIN - sometime next week.
You do inspire content, Amrita... :-)
As always, insightful, thoughtful, and accessible. Thank you!
Perhaps I am a simpleton or, at least, have a simplistic understanding but my view of the 'attacks' on Apple by governments and their agencies, as well as those by other companies and in the press, are that they are predominantly a case of 'Tall Poppy Syndrome'.
Apple has been its own company from the very beginning. It built its reputation not only on innovation but particularly on quality, a user-centric operating system, and not least, a 'drive it' rather than 'copy it' independence that separate it from countless companies producing nothing more than cobbled together clones using a variety of, (not necessarily fully compatible or reliable), components and a licensed operating system far inferior and plagued with inconsistencies and defects in virtually every iteration.
That independent approach, user focus and high quality is what built the enormous customer loyalty of Apple users and built it regardless of the nonsensical and delusional claims of the 'anti-Apple' cult members.
The notion that Apple's policies have limited competition in the smart phone market just does not stand up to scrutiny. There is one iPhone manufacturer and tens or even hundreds of other smart phone manufacturers. Just as with the personal computer market, those users who want to use something other than Apple have a massive variety of options in both hardware, software, streaming services, and operating systems. Not only that but, as they themselves are fond of pointing out, in the main the hardware options are less costly than those of Apple.
Apple products have always been said to be too 'expensive'. In fact, this is a falsity. It stemmed from the fact that Apple hardware included all necessary components for everyday use whereas its competitors required the addition of cards to provide all manner of utility already built in to Apple hardware. In addition, because of Apple's control of both hardware and software, its integration of the two has always been superior and, as a bonus, Apple has included a suite of most commonly required applications as part of the purchase package. If one bothered to compare the final, operationally ready result, there was little difference in total cost of 'like with like' in terms of the whole caboodle but a significant advantage in the Apple package integration, quality and retention of value over time.
So, this is a case of, 'if you can't beat them - defame them, criticise them, propagandise against them and lobby as much as possible to see that they are torn down, not least by making them operate in the same way and to the same, (usually lower), standards as every other company which hasn't got the where-with-all to compete on merits.
These suits against Apple are a case of drag everyone down to the bottom - the common denominator - one size fits all. They will not improve creativity, innovation, quality, value for money or anything else.
The only real crisis period in Apple's history was when its ex soft drink company CEO chose to open it up to third party licensing of its software. It was a disaster and so were the products created by those third parties, probably without exception. This type of scenario is exactly what its competitors want.
Envying, criticising and demonising the genuinely successful, i.e. those that have actually put in the thought, innovation, effort and vision to create good quality offerings, is ubiquitous. However, it is neither desirable nor productive and its result is inevitably a lowering of standards and a loss, rather than a gain to consumer and industry.
I am not a fan of capitalism or big business or materialism. I have never had 'wealth' as an aim. However, I live in a capitalist world and have to operate within it. I therefore respect those businesses which operate responsibly and with customer focus and which do so through their vision and collaboration of excellent staff. What we need in this capitalist, generally 'rip-off' system is not to attack Apple but to see the creation of more companies with their ethos.
Really good article! Interesting thoughts on Apple and a unique way of looking at the company. Something that makes a lot of sense to me is how Apple hasn’t jumped into AI. They haven’t said anything about it, and the stock is down 8% this year; we’ll see what happens.
I buy all my products from Apple: Mac, Phone, Watch, and iPad. I personally really like Apple. But now they will release the new iPhone soon.
And as you said, what will be different? Just the camera? As a consumer, I am expecting way more maybe something with AI, so we’ll see what happens!
I agree with the points about Apple the company. Apple the stock had its cycle disrupted by the pandemic and stimulus checks. It still needs time to shake off those negative effects.
Although not anywhere near as all the important factors you spoke about above, I'm actually most excited/interested to see what they do with all the progress they made towards the EV. Apple has never started a big project and not monetized from it. I can't see that happening with the EV.
Apple is going through classic innovator's dilemma.
The main reasons sales stall is that Apple products are so good that Apple struggle to make better ones with the existing technology and users also don't see any reason to upgrade because their iPhone still works perfectly after 4 years.
I still use my old iPhone 11, it works perfectly I don't see any utility in upgrading to iPhone 15.
Solution? Apple may come with a disruptive innovation that will make iPhone redundant or remake the iPhone but it can't know whether it will be as successful as iPhone which has 1.5 billion installed base across the world.
The closed software ecosystem has been really good to Apple. I think if you would find a way for users to easily move their stored iMessages and photos to another phone or device consumers probably would do so since most people in my opinion don't really care that much or benefit from any hardware adjustments from Apple in the last few years.
Love this as usual. I wonder what your thoughts are on Apple being the canary in the coalmine in terms of regulatory headwinds? Especially with the EU AI act coming up soon too
In the mega cap tech world, lawsuits come and go. Companies with deep pockets like AAPL will settle the suits, pay the fine, make some changes and move on to their next set of product launches. As an investor, debates on who is right or wrong are fruitless. Unless there is some egregious fraud, we investors look for such opportunities to buy low and then sell higher.
As a consumer, we are an all Apple family and could not be happier. The seamless ecosystem works when my daughter is airdropping pics and videos to my wife and me and vice versa. Our profiles and air pod connections instantly work as we shift from one device to the other. And we have not had any problem (touch wood) with viruses and spamware on our apple devices.
BTW - I love your chart of AAPL's recent AI related acquisitions. Thanks for an interesting and thought provoking writeup.
I have used nothing but Apple computers and phones. Although for a short time I enjoyed blackberries, and still think they were the best. I noticed their products have diminished in quality. The geniuses at the Apple stores are more interested in up-selling then they are helping you with your computer issues. If I were an investor I would consider pulling out.
I was turned off to Apple products, iPhone mostly, when they *never* included a MicroSD card slot in their phones. This forced users to upsell to more expensive phones if they wanted more storage. Also annoying was the media aspect of having to load media through iTunes--PC or Mac. Moving to Android (Samsung) I could add more MicroSD card storage and do a "plug & dump" of all my media files onto the MicroSD card from my PC and use VLC to sort it all out...not so much though anymore as I've got my own Asustor Plex Server for streaming video and streaming audio with PlexAmp.
Didn't Apple used to *BRAG* that they were a "green" company???--recycling and whatnot? Green to me is designing a single awesome phone that is user upgradeable for storage instead of three flavors that all have soldered in non-upgradeable storage.
Another insane annoyance I experienced was setting up Apple devices for printing in a corporate type environment. Yes, you could load the driver and do a *few* basic settings through the "Control Panel" BUT when you wanted to do something such as set a print driver to "duplex" (print both on sides of the paper) or default print to Black & White well, that option wasn't available in the standard Control Panel. To access these settings, you had to open Safari and in the URL field type in "localhost:631" which is the port to the CUPS interface (CUPS=Common Unix Printing System). If CUPS interface wasn't enabled, you'd have to go into Command Line to enable it...even though with security updates it got disabled, only to force you to re-enable if you needed to change a CUPS print driver option.
If Apple were "smart", they'd be using this AI that they're developing to auto-config and make the Internet-of-Things painless, seamless and integrated. This means make scalable it so a person can roll their own distro for whatever piece of kit or hardware that they want to run it on. De-hackify the "Hackintosh" process!!!
I was one of the leads on the Vision Pro/technology development team at Apple.
It’s kind of disheartening to know that you can work on designing and launching the most complex consumer hardware product ever and still have your stock price fall haha.
Especially given how difficult it is to scale physical products.
I need to preface this by saying I am *not* an Apple hater. But ... I think the DoJ and European cases against them are reasonable and long overdue. Their refusal for years to support universal standards like USB-C and RCS has been high level not cool. Tim Cook had a "Let them eat cake" level quote on the RCS and messaging subject too - which doesn't help their case.
On the need for an AI specific device, I think Carl Pei (co-founder of OnePlus and founder of Nothing) has the most viable and promising sounding take. He thinks the smartphone will still be our primary device, but says smartphones need a new metaphor.
"I think it needs to slowly augment away the apps. Today, we’re using some really simple, mindless-scrolling apps, right? What if we wanted to accomplish more complicated tasks like 3D modeling or photo editing, or I don’t know what? It’s actually quite difficult to learn how to use these new apps. Maybe we can just tell the phone what we need to do, and it would use those apps for us without the apps even being visible in the foreground."
And he said this back in August of 2023, when I hadn't heard any other person or company frame things that way. I wrote a little about it here:
https://pjordan.substack.com/p/visionary-words-on-the-primary-device
While I appreciate Apple's move towards adopting standards like USB-C, after years of insistence on their proprietary cables, I have reservations about certain EU regulations. These include mandates for making iOS/iPadOS features fully accessible to third-party developers—a move that has previously backfired on Apple—and the requirement for Apple to support third-party app stores and sideloading.
Apple has indicated that these rules would necessitate creating a separate version of their operating systems for the EU, diverging from the version used by the rest of the world. This approach could be problematic for the EU, especially if the EU-specific version receives updates less frequently. Such a delay could expose EU users to security vulnerabilities that are addressed more swiftly in the primary version of the OS. The primary version, in this context, refers to the one used by the majority of Apple's user base, with the EU representing a smaller segment. The financial burden of maintaining two different versions of their OS and possibly hardware could potentially lead Apple to reconsider its presence in the EU market. This might involve halting the sale of new devices or ceasing updates for existing tools within EU countries.
David's article offers insightful perspectives on this issue: https://world.hey.com/dhh/could-apple-leave-europe-76441933
However, the likelihood of Apple exiting the EU market entirely seems slim, as highlighted in this piece: https://abcnews.go.com/Technology/wireStory/apples-regulatory-battles-europe-foreshadow-us-antitrust-suit-108356677
I'm not sure of the legal implications of this, but is Apple allowed to follow through on their plan to have an EU version of their devices and operating systems, while keeping the "main version" available to the rest of us outside the EU? Does the DMA prevent that? Because if it is allowed to do this, I think it could be a bad thing for EU Apple fans.
So I sat here scribbling out a comment, and realized I was accidentally creating a full-length article... again. So, I am going to post one based on an article of yours - AGAIN - sometime next week.
You do inspire content, Amrita... :-)
As always, insightful, thoughtful, and accessible. Thank you!
Perhaps I am a simpleton or, at least, have a simplistic understanding but my view of the 'attacks' on Apple by governments and their agencies, as well as those by other companies and in the press, are that they are predominantly a case of 'Tall Poppy Syndrome'.
Apple has been its own company from the very beginning. It built its reputation not only on innovation but particularly on quality, a user-centric operating system, and not least, a 'drive it' rather than 'copy it' independence that separate it from countless companies producing nothing more than cobbled together clones using a variety of, (not necessarily fully compatible or reliable), components and a licensed operating system far inferior and plagued with inconsistencies and defects in virtually every iteration.
That independent approach, user focus and high quality is what built the enormous customer loyalty of Apple users and built it regardless of the nonsensical and delusional claims of the 'anti-Apple' cult members.
The notion that Apple's policies have limited competition in the smart phone market just does not stand up to scrutiny. There is one iPhone manufacturer and tens or even hundreds of other smart phone manufacturers. Just as with the personal computer market, those users who want to use something other than Apple have a massive variety of options in both hardware, software, streaming services, and operating systems. Not only that but, as they themselves are fond of pointing out, in the main the hardware options are less costly than those of Apple.
Apple products have always been said to be too 'expensive'. In fact, this is a falsity. It stemmed from the fact that Apple hardware included all necessary components for everyday use whereas its competitors required the addition of cards to provide all manner of utility already built in to Apple hardware. In addition, because of Apple's control of both hardware and software, its integration of the two has always been superior and, as a bonus, Apple has included a suite of most commonly required applications as part of the purchase package. If one bothered to compare the final, operationally ready result, there was little difference in total cost of 'like with like' in terms of the whole caboodle but a significant advantage in the Apple package integration, quality and retention of value over time.
So, this is a case of, 'if you can't beat them - defame them, criticise them, propagandise against them and lobby as much as possible to see that they are torn down, not least by making them operate in the same way and to the same, (usually lower), standards as every other company which hasn't got the where-with-all to compete on merits.
These suits against Apple are a case of drag everyone down to the bottom - the common denominator - one size fits all. They will not improve creativity, innovation, quality, value for money or anything else.
The only real crisis period in Apple's history was when its ex soft drink company CEO chose to open it up to third party licensing of its software. It was a disaster and so were the products created by those third parties, probably without exception. This type of scenario is exactly what its competitors want.
Envying, criticising and demonising the genuinely successful, i.e. those that have actually put in the thought, innovation, effort and vision to create good quality offerings, is ubiquitous. However, it is neither desirable nor productive and its result is inevitably a lowering of standards and a loss, rather than a gain to consumer and industry.
I am not a fan of capitalism or big business or materialism. I have never had 'wealth' as an aim. However, I live in a capitalist world and have to operate within it. I therefore respect those businesses which operate responsibly and with customer focus and which do so through their vision and collaboration of excellent staff. What we need in this capitalist, generally 'rip-off' system is not to attack Apple but to see the creation of more companies with their ethos.
Take care. Stay safe. ☮️
Really good article! Interesting thoughts on Apple and a unique way of looking at the company. Something that makes a lot of sense to me is how Apple hasn’t jumped into AI. They haven’t said anything about it, and the stock is down 8% this year; we’ll see what happens.
I buy all my products from Apple: Mac, Phone, Watch, and iPad. I personally really like Apple. But now they will release the new iPhone soon.
And as you said, what will be different? Just the camera? As a consumer, I am expecting way more maybe something with AI, so we’ll see what happens!
I agree with the points about Apple the company. Apple the stock had its cycle disrupted by the pandemic and stimulus checks. It still needs time to shake off those negative effects.
Although not anywhere near as all the important factors you spoke about above, I'm actually most excited/interested to see what they do with all the progress they made towards the EV. Apple has never started a big project and not monetized from it. I can't see that happening with the EV.
Apple is going through classic innovator's dilemma.
The main reasons sales stall is that Apple products are so good that Apple struggle to make better ones with the existing technology and users also don't see any reason to upgrade because their iPhone still works perfectly after 4 years.
I still use my old iPhone 11, it works perfectly I don't see any utility in upgrading to iPhone 15.
Solution? Apple may come with a disruptive innovation that will make iPhone redundant or remake the iPhone but it can't know whether it will be as successful as iPhone which has 1.5 billion installed base across the world.
Beautifully written. Quality work, as always!
We are all waiting for the next big Apple move :-) I'm in the team that says "since Steve passed away, the same happened with Apple's innovation"
The closed software ecosystem has been really good to Apple. I think if you would find a way for users to easily move their stored iMessages and photos to another phone or device consumers probably would do so since most people in my opinion don't really care that much or benefit from any hardware adjustments from Apple in the last few years.
Love this as usual. I wonder what your thoughts are on Apple being the canary in the coalmine in terms of regulatory headwinds? Especially with the EU AI act coming up soon too
In the mega cap tech world, lawsuits come and go. Companies with deep pockets like AAPL will settle the suits, pay the fine, make some changes and move on to their next set of product launches. As an investor, debates on who is right or wrong are fruitless. Unless there is some egregious fraud, we investors look for such opportunities to buy low and then sell higher.
As a consumer, we are an all Apple family and could not be happier. The seamless ecosystem works when my daughter is airdropping pics and videos to my wife and me and vice versa. Our profiles and air pod connections instantly work as we shift from one device to the other. And we have not had any problem (touch wood) with viruses and spamware on our apple devices.
BTW - I love your chart of AAPL's recent AI related acquisitions. Thanks for an interesting and thought provoking writeup.
I have used nothing but Apple computers and phones. Although for a short time I enjoyed blackberries, and still think they were the best. I noticed their products have diminished in quality. The geniuses at the Apple stores are more interested in up-selling then they are helping you with your computer issues. If I were an investor I would consider pulling out.
I was turned off to Apple products, iPhone mostly, when they *never* included a MicroSD card slot in their phones. This forced users to upsell to more expensive phones if they wanted more storage. Also annoying was the media aspect of having to load media through iTunes--PC or Mac. Moving to Android (Samsung) I could add more MicroSD card storage and do a "plug & dump" of all my media files onto the MicroSD card from my PC and use VLC to sort it all out...not so much though anymore as I've got my own Asustor Plex Server for streaming video and streaming audio with PlexAmp.
Didn't Apple used to *BRAG* that they were a "green" company???--recycling and whatnot? Green to me is designing a single awesome phone that is user upgradeable for storage instead of three flavors that all have soldered in non-upgradeable storage.
Another insane annoyance I experienced was setting up Apple devices for printing in a corporate type environment. Yes, you could load the driver and do a *few* basic settings through the "Control Panel" BUT when you wanted to do something such as set a print driver to "duplex" (print both on sides of the paper) or default print to Black & White well, that option wasn't available in the standard Control Panel. To access these settings, you had to open Safari and in the URL field type in "localhost:631" which is the port to the CUPS interface (CUPS=Common Unix Printing System). If CUPS interface wasn't enabled, you'd have to go into Command Line to enable it...even though with security updates it got disabled, only to force you to re-enable if you needed to change a CUPS print driver option.
If Apple were "smart", they'd be using this AI that they're developing to auto-config and make the Internet-of-Things painless, seamless and integrated. This means make scalable it so a person can roll their own distro for whatever piece of kit or hardware that they want to run it on. De-hackify the "Hackintosh" process!!!
Read: https://distrowatch.com/
Just have people pay a simple license fee!!!
I was one of the leads on the Vision Pro/technology development team at Apple.
It’s kind of disheartening to know that you can work on designing and launching the most complex consumer hardware product ever and still have your stock price fall haha.
Especially given how difficult it is to scale physical products.