Hours before reminiscing about Steve Jobs at a Wednesday night tech conference, Apple CEO Tim Cook led a decidedly on-Jobs-esque unveiling of an updated iPhone.
The 14th version of Apple’s signature smartphone, expected from mid-September to early October, won’t have any of the monumental leaps that Jobs was so pleased with.
Of course, there are several notable updates, including better-performing cameras, better battery life, and a more powerful processor on the more expensive Pro model. But the prevailing wisdom (including that of Jobs’ daughter) suggests that the ongoing update cycle and entrenched buying habits, rather than excitement over technological advancement, will drive tens of billions of dollars in new iPhone sales.
Instead, the iPhone 14 got more headlines for something Jobs viewed as secondary to the product: the price. Despite inflationary pressures and rising supplier costs, Apple has chosen not to charge more for the latest version of its smartphone in the US and China, its two largest markets. (Apple has increased iPhone 14 prices in parts of Europe and Japan, where currency values have fallen in recent months, among other things.)
While the focus on price certainly wouldn’t have thrilled Jobs, it reflects the reality of Apple’s current state of affairs. Under Cook, less of a tech visionary and more of a businessman than Jobs, the balance of Apple’s focus on consumer electronics has shifted somewhat towards quantity over quality.
Part of this adjustment reflects the technological limitations of our smartphones, which feel they have reached almost peak performance. The iPhone already processes at high speeds, takes remarkably clear photos, offers a lot of storage space and fits beautifully in the hand. In recent years, the biggest leaps in iPhone utility have been derived from the software, not the hardware, from Apple’s operations.
But a significant part of the company’s repositioning revolves around Cook’s vision for an expanded Apple ecosystem, one in which consumers own a variety of interconnected hardware (smartphone, personal computer, tablet, watch, headset). If Apple customers get stuck in multiple devices, they think they will have a harder time switching to Samsung or Google products. (Wall Street and tech wonks call this a “moat.”)
The strategy not only boosts hardware sales, but also drives more customers to buy Apple’s service products — an iPhone user is more likely to download apps from the App Store, use Apple’s credit card, or subscribe to the company’s music streaming service. While Apple’s services make up 19% of total revenue, their profit margins are double those of hardware products.
This reality was evident in Apple’s approach to its latest product line.
By sticking to the iPhone price, Cook and Company will earn another portion of customer loyalty — not that they needed much more — and keep more of them within the Apple ecosystem. As Wedbush Securities analyst Dan Ives noted: Apple’s adoption of internally designed iPhone chips allow the company to better absorb any shrinkage in the profit margin.
Meanwhile, Apple can focus on other products that expand its moat. For example, the latest versions of the Apple Watch and AirPods include notable improvements that could bring in additional customers.
The Apple Watch Ultra marks the company’s most ambitious attempt to win over the outdoor audience drawn to Garmin’s wearables. The base Apple Watch SE also got a makeover that boosts processing speed by 20% and includes car accident detection technology, improvements that should help fend off competition from the imminent Google Pixel Watch.
The latest line of AirPods Pro includes better noise-cancelling technology and features that make the small buttons easier to find, significant advances in a wireless headset market that grew 25% in 2021, according to Counterpoint Research.
After the product launch, when Cook took the stage at the Code Conference Wednesday night, the CEO alluded to Steve Jobs’s commitment to product quality over quantity: “He always said Apple should make the best products, not the most.”
Cook, however, continues to try to get it both ways. It has largely succeeded so far, as evidenced by Apple’s record $366 billion in sales last year and rock-solid customer loyalty. The Apple Watch and AirPods, two new product categories introduced during Cook’s tenure, have helped Apple deepen its moat.
But another year of purely iterative iPhone updates makes the balancing act just that little bit harder. At some point, Apple will have to make another technological leap that would make Jobs shine. The iPhone 14 certainly isn’t.
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Jacob Timmerman
NEWSWORTHY
Elon has some company. Disney executives were concerned about the prevalence of bots on Twitter’s platform when the entertainment giant explored in 2016 whether to acquire the social media company, former CEO of Disney Bob Iger said Wednesday. The comments may provide some ammunition to Elon Musk, who is trying to pull out of its planned $44 billion takeover of Twitter mainly because he believes Twitter executives have misled the public about the number of bots on the site. Twitter officials have said they are conducting regular tests to estimate the number of bots, although the company’s former head of security recently claimed those efforts were insufficient.
Back on track. Production at Teslathe factory in Shanghai started again in August after upgrades to its assembly lines, allowing the electric car manufacturer to exceed recent output totals, the Wall Street Journal reported. Tesla’s Chinese manufacturing hub delivered nearly 77,000 vehicles last month, better than the monthly average of 61,000 vehicles in the first three months of the year. The Shanghai facility was hampered in April due to COVID-related shutdowns and ran at partial capacity in July as workers completed the upgrades.
Who need new SOS technology. Apple‘s primary data center operator in China warned of a “serious situation” at its facilities in the city of Guiyang, a tech hub struggling to stay online amid COVID lockdowns imposed by the republic’s government, Bloomberg reported. Reviewed in a WeChat post by Bloomberg, the state-backed company Guizhou Cloud Big Data, said workers have been banned from leaving the company premises for about a week due to the restrictions. Guizhou’s server center in Guiyang stores all the data of the hundreds of millions of iPhone owners in China. Company officials have not said whether the lockdown has affected data storage.
A legal whirlwind. Various Tornado Cash Users sued the Ministry of Finance and some of its leaders Thursday, arguing that federal officials overstepped their legal authority when they effectively banned the cryptocurrency service. The lawsuit follows the Treasury Department’s decision last month to sanction Tornado Cash on the grounds that the service, which allows users to exchange and withdraw various cryptocurrencies, has been used to facilitate money laundering and other illegal activities. The claimants, who are backed by crypto exchange Coinbaseargue Tornado Cash is an open-source software code that is not subject to federal sanctions.
FOOD FOR THOUGHT
I do not approve this message. The deluge of political ads before the election is coming to streaming. Protocol reported on Thursday that campaigns are increasingly shifting their ad spend from linear television to streaming services, a long-awaited development that is finally picking up steam ahead of November’s midterm elections. Several streaming executives, including those behind Paramount+ and Peacock, have said they rely on political ads to boost their profits. The spots would help offset the huge costs of building content libraries and marketing platforms, costs that make streaming unprofitable for nearly all businesses.
Of the article:
According to recent estimates from analytics firm Kantar, campaigns from both sides of the aisle are expected to spend $1.2 billion on ad streaming this season. “Connected TV is really the big story in political advertising this year,” said Grace Briscoe, SVP of customer development at Basis Technologies, a Los Angeles-based advertising and marketing software company. “Every campaign we work with, up and down the vote, even small state legislative races [and] mayor races, they are all looking for connected TV.”
That’s a welcome reprieve for the streaming industry, which has seen ad spending slow due to supply chain shortages, uncertainties during the late pandemic and inflationary concerns.
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BEFORE YOU GO
Not really a battle royale. Tensions between video game giants Microsoft and Sony about Duty‘The future of the two keeps getting bigger, though the two rivals remain remarkably polite in their public barbs. PlayStation chief Jim Ryan made a sharp but civil statement Thursday to GamesIndustry.biz, accusing Xbox head Phil Spencer to extend the word “multiple” beyond the common definition. The disagreement stemmed from Spencer’s comments reported by The Verge last week, in which he said Microsoft offered to Duty franchise available on Sony’s PlayStation platform for “at least several years” after the current agreement, which expires in 2024. Microsoft agreed in January to Duty developer Activision Blizzard for $68.7 billion, pending regulatory approval. However, Ryan said the proposal only included a three-year extension. “I didn’t mean to comment on what I understood to be a private business discussion, but I feel the need to set it straight because Phil Spencer has brought this to the public forum,” Ryan wrote.
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