Taking a look back at another week of news from Cupertino, this week’s Apple Loop covers Steve Jobs’ thermonuclear war, iOS 8.2 arriving in April, Samsung building the A9 system-on-chip for the iPhone 7, previewing Photos for OSX, iPad sales to drop, Apple buying back shares, what to do with a sapphire factory, and will there be a February Apple Event?
Apple Loop is here to remind you of a few of the very many discussions that have happened around Apple over the last seven days.
It’s well-known that Steve Jobs was not happy with members of the Android ecosystem who he believed had copied elements of iOS to find success, and in a famous quote he promised to open “a thermonuclear war” on those companies through the courts. With the untimely death of Jobs, we’ll never know just how far he would have taken the cases.
It appeared that Tim Cook closed up the ongoing cases and went about Apple’s business. Perhaps that’s not quite the story. While Apple continued to grow its product base, revenue, and profit, Cook’s strategies in the supply chain, in presentation and marketing, and in understanding how the Android manufacturers thought, allowed him to wage a war on another far more successful front against Android.
And Cook won.
It’s not just this sensor that Apple has control of. Cupertino has made a significant investment in buying up supplies of synthetic sapphire, it hedges DRAM as efficiently as Southwest hedges aviation fuel, it is first in line for touch panels, and even air freight for just-in-time shipping is booked out in advance, forcing competitors shipments onto slower land and sea routes.
If you’re competing against Apple, you’re not going to be allowed to fight with the best components, because Tim Cook reserved them years ago when he was in charge of Apple’s operations. Now he’s CEO, is it any wonder Apple has continued to ruthlessly manage the supply chain?
Android may have market-share, and Google may benefit from the volume of users, but the manufacturers who build the devices are being squeezed. With razor-thin margins, Android has been relegated to a commodity manufacturing game which only rewards volume.
Apple continues to update iOS 8, with the next build of the OS announced. iOS 8 has been in a state of flux since it launched in September, with numerous iterations and updates, but the major bugs initially seen are still present. Forbes’ Gordon Kelly:
Why should we be excited about its launch? Officially the big news is iOS 8.2 will add compatibility with the upcoming Apple Watch, which Tim Cook confirmed in an earnings conference call last week will be released in April.
That said the tweaks for this are minor compared to the changes made in beta 4 and wider user interest lies elsewhere: namely, beta 5 drops hints that iOS 8.2 will finally be the version to address long standing bugs which have made many users angry.
Those bugs include the GMT Calendar Sync bug which we discussed on Apple Loop last week, issues with intermittent Wi-Fi connectivity, BlueTooth compatibility, and battery performance issues. We’ll be keeping a close eye on iOS 8.2 here at Forbes.
Wireless Charging The iPhone 6 (image: Ewan Spence)
One of the changes made in the iPhone 6 and iPhone 6 Plus was the decreased reliance of Apple on Samsung as a chip supplier. Apple moved the majority of its A8 order to the Taiwan Semiconductor Manufacturing Company, but indications from the supply is that Samsung is back to take on board all the orders, and it could be down to its mastery of 14nm fabrication:
One of Samsung’s key advantages in the process is its mastery of fabrication at 14nm (reports Re/Code, citing sources familiar with the matter). This allows more transistors to be packed into a smaller space, all while drawing less power. The attractiveness of those benefits for any smartphone should be clear.
Samsung may be a rival in the smartphone business, but it has continued to supply parts to other manufacturers throughout that period. Apple may design the A9, but for the volume needed it must use third-party suppliers, and in this case Samsung is one of the best options available.
A pre-release build of Apple’s ‘Photos’ app for OSX Yosemite is now available for developers. This build will allow developers to update their apps for the new media manager in OSX, which will be replacing iPhoto. It ties in heavily with the look and feel of Photos on iOS, blurring the lines once more between OSX and iOS apps performing the same function. Naturally iCloud integration and continuous sync is a big feature of the package.
Apple Insider sets the scene:
Photos replaces not only iPhoto, but also Aperture, both of which Apple discontinued last year. However, the new OS X Photos application is not meant to be a professional-grade photo editing application, as Apple has advised pro photographers to transition to Adobe’s Lightroom.
Though development on iPhoto for OS X has ceased, it remains the default photo-editing application on the Mac until OS X 10.10.3 and the accompanying new Photos application are released to the public. Apple has not yet provided a timeframe on when it might launch.
Many OSX apps depend on access to a user’s media library, so a developer build is an important to allow these apps to be updated and be ready for download ahead of the launch of Photos.
Apple’s iPad Air 2 (image: Ewan Spence)
Some interesting thoughts on the fortunes of the iPad in 2015, as Ming-Chi Kuo of KGI Securities believes the tablet is going to see a big drop in sales during the next twelve months – as much as 30% down year on year.
Kuo, of KGI Securities, believes iPad shipments will “struggle to top” 45 million units this year, he said in a new research note on Friday, a copy of which was obtained by AppleInsider. That would result in a 30 percent year over year decline from 2014.
Apple is expected to introduce a new 12.9-inch iPad model this year, and Kuo still believes that larger form factor is on track to launch. However, he doesn’t expect the new model to “contribute meaningfully to shipments momentum anytime soon.”
A drop in sales should be expected as the iPad has a much longer update cycle than was first expected, coupled with the cannibalization of the iPad Mini’s market thanks to the phablet-based iPhone 6 Plus shifting sales from one iOS device to another. Even so, the estimated target of 45 million unit sales would see the iPad continuing to be a profitable product in Apple’s portfolio.
Apple has informed the SEC it will be raising $5 billion of debt with maturities, and the money is expected to be used for a buyback of shares. Forbes’ Chuck Jones looks at the implications of the debt, and how much of a dent this is going to make in Apple’s cash reserves (spoiler, it’s not a lot):
Don’t get excited about $5 billion in additional share buybacks
Since Apple has used its previous debt offerings to buyback shares this will probably what it will be used for. The reason to not get excited is not so much that it represents less than 1% of shares outstanding (42 million shares at the current price of $118 vs. over 5.8 billion outstanding) it is because Apple has awarded between 39.4 and 59.3 million Restricted Stock Units (RSUs) to employees each year for the past five years. Apple needs to spend at least $5 billion per year just to keep the share count flat.
The Apple iPhone Range, Sept 2014 (Image: Apple PR)
The tale of sapphire screens and the iPhone may still have some legal twists and turns, but one part of the story that is coming to a close is the industrial space originally intended for the manufacturing of the synthetic sapphire product. Adrian Kingsley-Hughes at ZDnet reports on the new use for the space:
Apple has announced that it is to convert failed sapphire plant into a data centre… ”We’re proud to continue investing in the U.S. with a new data center in Arizona, which will serve as a command center for our global networks,” Kristin Huguet, a spokesperson for Apple, wrote in an e-mail to Bloomberg. “This multibillion-dollar project is one of the largest investments we’ve ever made.”
There’s a hint in the air that Apple is going to pull a surprise showcase event late in February (Apple Insider, and others). Cupertino certainly has a number of products that could be ready for public unveiling, such as the iPad Air Pro (with a 12.9 inch screen and stylus support), the twelve-inch MacBook Air, the Beats iTunes service, and perhaps a bit more information on the Apple Watch.
So while we would find it an eyebrow raiser, we wouldn’t be surprised if this happens. Given every competing manufacturer will have an announcement at MWC at the start of March, a late February date from Apple would also make for a nice spoiler to capture the news and PR cycle.