An iCar? Really? Is Apple smoking its own exhaust?

This morning’s Observer column about the strange fascination that the automobile industry has for otherwise sane geeks:

I remember once being in a British shopping arcade on the day that the local Apple Store opened for the first time. Long queues had formed from the moment the arcade gates had been unlocked that morning. Then came the magic moment: the glass doors opened, a hush fell on the assembled crowd, a group of T-shirted staff walked out, formed a human avenue leading into the store and then clapped rhythmically as the mob surged in. It was a truly extraordinary moment in which the conventional marketing mantra about the customer being king was turned on its head. In the case of Apple, it seemed, the customers felt privileged to be allowed to enter the store.

At the time, I concluded that much of this Apple worship could be put down to the astonishingly charismatic personality of Jobs. He was, after all, the only chief executive in the history of the world to be accorded the kind of adulation normally granted to rock stars and messiahs. Apple was obviously a one-man band and he was the Man. It seemed reasonable to conclude when he died, therefore, that the cult of Apple would diminish or at any rate that its share price would have peaked. An Apple car? Computer firm hires automotive engineers Read more

How wrong can you be? Jobs has been succeeded by Tim Cook, a nice man for whom the phrase “charisma deficit” might have been invented. But the cult of Apple is still going strong…

Read on.

Missing the Beats

This morning’s Observer column:

This time last year Apple paid $3bn to acquire a company called Beats that made overpriced headphones and ran an unsuccessful music-streaming business. This acquisition made Beats co-founder Dr Dre the first hip-hop billionaire at the same time as it baffled many observers of the industry. For example, Benedict Evans, a seasoned analyst, tweeted: “If you think Apple’s lost it, Beats deal is confirmation. If you don’t, it’s… perplexing. Few really convincing rationales.” This columnist was likewise puzzled. Apple normally designs and makes its own kit, and if it wanted to do headphones it would certainly do better than the Beats products. So the conclusion had to be that if Apple didn’t want Beats for the headphones, it had to be the music-streaming service that it craved.

And so it has proved. We have just discovered – in a roundabout way – just how much Apple wants to get into the streaming business…

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Apple: the Toyota of precision manufacturing?

This morning’s Observer column. Excerpt:

Most of the discussion about the watch comes down, in the end, to reveries about Apple’s now legendary ability to design objects that are both beautiful and functional. But in taking this line we are, in fact, overlooking a more important point. Because what is really interesting about Apple is not just that it can design great products, but that it can actually manufacture the things in huge volumes, and deliver them to market on time.

Just to put that point about volumes in context, consider the iPhone 6. It weighs 129g, and its bigger brother, the 6 Plus, weighs in at 172.1g. In the last quarter of 2014, Apple sold 74.5m iPhones, which works out at an average of 846, 590 a day. If we assume that 15% of those sales were of the heavier Plus, then that means Apple shifted 114,676kg of iPhones a day, on average. Just for comparison, the operating dry weight of a Boeing 787-8 Dreamliner is 117, 707kg…

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The process, not the product, matters

Almost all the (mostly feverish) discussion about Apple focusses on its astonishing mastery of product design. But this week’s Monday Note by Jean-Louis Gasseé has made me reflect on what is actually the most remarkable aspect of the company, namely the fact that it has mastered what must be the most complex, large-scale, precision manufacturing process in industrial history.

In his Note, Jean-Louis leans heavily not only on Greg Koenig’s fascinating analysis of the process by which the iWatch is being made, but also on Koenig’s observation that

“Apple is the world’s foremost manufacturer of goods. At one time, this statement had to be caged and qualified with modifiers such as “consumer goods” or “electronic goods,” but last quarter, Apple shipped a Boeing 787’s weight worth of iPhones every 24 hours. When we add the rest of the product line to the mix, it becomes clear that Apple’s supply chain is one of the largest scale production organizations in the world.”

When you think of it in those terms, it’s clear that in our obsession with the beauty of Apple designs we may have been missing the really big picture, which is that the company has been building a production system that could eventually yield astonishing benefits and change the way every tech manufacturer operates.

We’ve been here before, by the way. When the Japanese first began making cars, they were ridiculed by Western manufacturers — for good reasons. They were clunky, ugly and they rusted early. But the Japanese were good at learning from mistakes. They also sussed that if they were to make really good cars, they had to reinvent the process by which cars were made. From this came the Toyota ‘Lean Machine’ production process, which is now how all cars, everywhere, are made.

So the process is often more important than the product. This was also the point made by Steven weber years ago, in his splendid book about open source software. It’s a distinctive way of making incredibly complex products. In fact, it may ultimately be the only way of making really secure software.

Gasseé’s conclusion from his meditations is that it would now be foolish to discount rumours that Apple is planning to manufacture cars. I agree.

So what kind of time will you get from the iWatch?

This morning’s Observer column:

A few months ago I bought a “smartwatch”. I did so because there was increasing media hype about these devices and I don’t write about kit that I haven’t owned and used in anger. The model I chose was a Pebble Steel, for several reasons: it was originally funded by a Kickstarter campaign; a geek friend already had one; and, well, it looked interesting. Now, several months on, I am back to wearing my old analogue watch. The Pebble experiment turned out to be instructive. The watch was well made and well presented. It had reasonable battery life and the software was easy to install on my iPhone. The bluetooth link was reliable. Its timekeeping was accurate, and it could display the time in a variety of ways, some of them humorous. One could download a variety of virtual watch-faces, and so on.

So why is it not still on my wrist? Well, basically most of its “features” were of little or no actual use to me; and for much of the time, even apps that I would have found useful – such as having the watch vibrate when a text message arrived – turned out to be flaky: sometimes they worked; more often they didn’t. Which of course led to the thought that if anybody can make the smartwatch into a successful consumer product that “just works” it would be Apple. And indeed it was amusing to note how many people who, upon seeing the Pebble on my wrist, would ask me: “Is that the new Apple Watch?”

Well, now the Apple Watch is here and we will find out if the world really was waiting for a proper smartwatch to arrive…

Read on

So should it be called Apple Phone Inc?

Once upon a time, Apple was called Apple Computer Inc. This was partly because the Beatles had a lock on ‘Apple’, but it was also an honest description of the company.

But now? Well, the company still makes computers. (Some very nice ones too.) But consider this:

In the period that ended Dec. 27, Apple sold $51.2 billion worth of iPhones. Those sales comprised nearly 69 percent of the company’s total sales for the quarter — a record portion by a long shot. Indeed, Apple was so successful at selling iPhones during its first fiscal quarter that if it had sold nothing else — no iPads, no Macs, nothing — its total sales would still have been the third highest it had ever recorded.

The commentariat is busy opining that there are dangers in being a one-trick pony — which if course there are. Still, it’s one hell of a pony.

Why the iPhone is such a big deal

In theory, Apple is a computer company. In practice, its most important product is a handheld computer called the iPhone, as this NYT piece makes clear.


Toni Sacconaghi, an analyst at Sanford C. Bernstein, says the gross profit margin for the iPhone is close to 50 percent. Because the iPhone is Apple’s most popular product — with more than 39 million sold in the last quarter — it accounts for a disproportionately large percentage of Apple’s overall profit, somewhere between 60 and 70 percent, Mr. Sacconaghi said.

“Apple is now so big that it takes a lot to make it grow appreciably,” Mr. Sacconaghi said. It’s producing an impressive interrelated ecosystem of products and services, including its forthcoming digital watches, its new digital payment system, its revived Mac line, refreshed iPads and new software operating systems. Even if all of its ventures succeed, none are likely in the next year or two to rival the financial impact of the iPhone. “The iPhone is the core of Apple right now,” he said.

In a sense, it’s the core of the stock market as well. Apple is the biggest company, by market capitalization, in the world. Apple accounts for about 3.5 percent of the weighting of the Standard & Poor’s 500-stock index. And, through Thursday, because its stock has performed magnificently while the overall market has not, Apple accounted for 18 percent of the entire rise of the S.&P. 500 index this year, according to calculations by Paul Hickey, co-founder of the Bespoke Investment Group. And the engine driving Apple shares is the iPhone.

The phablet controversy


Wading through the throng in an Apple store the other day, I had a look at the new iPhones. The iPhone 6 didn’t seem much of an advance on my 5s, but the even-bigger one, the 6 plus, seems odd. It’s far too big to be a credible phone, but too small to be a useable tablet. So why, one wonders, will people buy it?

One answer, I suppose, is that people buy preposterously large Samsung phones, even if they do wind up holding something the size of a dinner plate to their ears. (Or making calls surreptitiously, using headphones.)

Ages ago, I bought an iPad Mini with a SIM card for writing on the move, and kept my phone for texts and the occasional voice call. The Mini has turned out to be one of the most useful gadgets I’ve ever owned. Just big enough to be useful; just small enough to slip into a jacket pocket. The new iPhone isn’t a persuasive argument for abandoning that system. It ain’t broken, so I won’t be fixing it.

So is it good to talk… again?

This morning’s Observer column.

To the technology trade, I am what is known as an “early adopter” (translation: gadget freak, mug, sucker). I had a mobile phone in the mid-1980s, for example, when they were still regarded as weird. It was the size of a brick, cost the best part of a grand and exposed me to ridicule whenever I took it out in public. But I didn’t care because the last Soviet president, Mikhail Gorbachev, used the same phone and he was cool in those days. Besides, it had always seemed absurd to me that phones should be tethered to the wall, like goats. I still have that Nokia handset, by the way: it sits at the bottom of a drawer and I sometimes take it out to show my grandchildren what phones used to be like.

Over the decades since, I have always had latest-model phones – just like all the other early adopters. And of course I used them to make phone calls because basically that’s all you could do with those devices. (Well, almost all: one of mine had an FM radio built in.) And then in 2007 Steve Jobs launched the iPhone and the game changed. Why? Because the Apple device was really just a powerful computer that you could hold in your hand. And it was a real computer; its operating system was a derivative of BSD, the derivative of Unix developed by Bill Joy when he was a graduate student at Berkeley. (Note for non-techies: Unix is to Windows as a JCB is to a garden trowel.)

The fact that the iPhone could also make voice calls seemed, suddenly, a trivial afterthought. What mattered was that it provided mobile access to the internet. And that it could run programs, though it called them apps…

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Apple Pay’s revenue stream

Further to my Observer column yesterday, this from Bloomberg.

Apple Inc. (AAPL) will reap fees from banks when consumers use an iPhone in place of credit and debit cards for purchases, a deal that gives the handset maker a cut of the growing market for mobile payments, according to three people with knowledge of the arrangement.

That’s a small cut on millions of daily transactions. Adds up to a formidable revenue stream.