(25) Apple never ships MPVs; What goes up must go down (NVIDIA); Twitter's future is easy to see, hard to implement

The Chinese market will be lost to local companies; it's just a matter of time. The only advantage companies will have over there will be related to artisanship and high-end machinery & devices.

Jun 08, 2023

After a one-week holiday break, the #onStrategy newsletter is returning with new insights and updates. So, let’s call this week “the Apple week”.

Onto the update:

Strategy

Apple vs. The rest of the world
If you are reading this newsletter on a weekly basis you know by now that Apple is a product company. Everything else comes on top. The exact opposite is for Google, for example.

10 years have passed since their latest release - the Watch, which had shy sales in the first years but with the third iteration the product become compelling. Now, the Watch generates more revenue than the entire Swiss watch industry (!)

So, I have 10 points to make regarding the epic Vision Pro launch:

1/ The normal product launch is the following: basic —> PRO → Ultra. With the Vision we already have the PRO. What will be next? Vision Air? Or Vision Ultra? O both?

2/ Everybody (and I mean it) looked for guidance from Apple. So, these two things will happen in the next 6 months: (a) Samsung will do their own Android version and (b) all Chinese companies will release similar products at half the price

3/ Completely immersive is not a solution. I tried META’s Quest 2 and it has many flaws, from resolution to weights

4/ Going B2B. I’ve said multiple times that iPhone was the only device that got real traction and popularity in the B2C market. Everything else was B2B. I’d say that someone willing to pay $3,500 just to watch movies and/or play will not move beyond the Innovators.

I feel pity for META: just look at how each company envisioned the future of the workforce

5/ The price - having into consideration the tech it has, I’d say the price is correct. The device has two chips that take inputs from 12 cameras, five sensors, and six microphones. In Europe, the price will be around EUR 4,200.

Second, if we adjust prices to inflation here are the prices of Apple’s past releases:

Apple 2 (1977): $6,500
Mac (1984): $7,400
Powerbook (1991): $5,500

6/ Design - building great products is really hard. Apple sold 6m iPhones in the first year and it took at least 5 years of pivoting to get to the “Early majority”

We can see from the demos that they used multiple inventions from other products: Digital Crown, M2 chip, the mesh from AirPod Max, multiple sensors and cameras from the iPhone, etc.

7/ Battery. Vision Pro will have a 2h battery life. Here I have two takes:

(i) First iPhone was announced with 5h of battery life but launched with 8h battery life. I expect this will happen to this device too

(ii) An additional cable (3m long) will probably be sold separately

8/ From creating to connectedness to consumption.

Apple closed the loop in its product range:

with a Mac you can create
with an iPhone you can connect
with Vision Pro you can consume

9/ no AI - is this the first event in 2023 that there is not even one mention of AI? I think the company understood very well what can happen if you abuse something you don’t control (e.g. 5G)

However, the next evolution of the Vision ecosystem is to power Siri with AI. We’ll see if they will acquire a new company or develop these capabilities internally.

10/ Cinema - you will have a real cinema experience at work. Especially compelling for 3D movies. But how will work when two people want to watch the same movie?

Overall, I remain bullish about the company’s future. LINK

Post-pandemic changes

“Half of big multinationals plan to cut office space in next three years” - FT

1/ This trend was starting to emerge long before the pandemic

2/ AI (Chat GPT) just accelerated this trend

3/ For many jobs is better to work from home

4/ The demographics have also an impact on this

NVIDIA joins the “1 trillion $ club”
With $26bn in sales, the company trades at 38x and 200x earnings. I’ve never seen this price-to-sales ratio for a company of this size.

Mercedes in China
Geely-Mercedes venture launched Smart EV in China. I have seen this kind of partnership with other companies (including VW with SAIC). This is what will happen: after the knowledge transfer Geely will start developing their own products and outselling Mercedes, both in quantity and quality. Ask VW how they are doing in China with its 3 factories…I mean 2 now 😉 LINK

Source: Geely / Mercedes

Twitter’s valuation
Twitter is now worth only $15 billion, nearly a third of the $44 billion that Elon Musk paid for the platform in 2022, according to Fidelity. LINK

To reach the acquisition price the company should deliver, but here are the main takeaways:

1/To deliver with the people that didn’t deliver for more than a decade is a challenge at best; you need new, fresh people

2/Subscriptions won’t be enough. (not at this adoption rate)

3/The ad business is at 20-30% at the pre-acquisition and Elon can't convince the publishers to spend more

So, the only’s hope for Twitter is to really become a Super-App.

Digital Transformation as a Service. LINK

LinkedIn Newsletter

Artificial Intelligence

Exploring opportunities in the generative AI value chain. LINK

AI drones are already here and ready to execute. LINK

Marc Andreessen has a long and insightful post on how Ai will save the world. LINK

Is the an AI bubble? Wharton’s Jeremy Siegel professor thinks that is not the case. LINK

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