Apple Brings Back HomePod, What Happened?, HomePod Changes (Daily Update)
Hello everyone. Happy Wednesday.
We have surprising news: HomePod is back. Earlier today, Apple unveiled a HomePod 2nd generation.
As a long-time HomePod user with 10 HomePods currently in use around my home (in five pairs), the HomePod has been an intriguing product. An Above Avalon Report from 2022 (available here) was dedicated to the HomePod discontinuation. We have a lot to discuss. Let's jump right in.
Apple Brings Back HomePod
In a surprise twist, Apple unveiled a 7-inch HomePod for the second time in six years. The speaker, which Apple is referring to as HomePod (2nd gen), will sit next to the HomePod mini.
In February 2018, Apple launched a 7-inch HomePod for $349. To avoid confusion, we will refer to that model as the original HomePod. After three years of sales, the original HomePod was discontinued in March 2021. At the time, Apple said they were going to put their focus on the HomePod mini:
“HomePod mini has been a hit since its debut last fall [2020], offering customers amazing sound, an intelligent assistant, and smart home control all for just $99. We are focusing our efforts on HomePod mini.”
The sudden (and surprise) discontinuation rubbed HomePod owners the wrong way.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple Unveils Updated Macs, Mac Mini’s Growing Role, Apple Silicon Optionality (Daily Update)
Hello everyone. This morning, Apple announced three updated Macs via press release. Today’s update will be dedicated to the news including how the Mac mini is being given a bigger role in Apple’s Mac strategy and how Apple Silicon has added optionality to Apple’s Mac line.
Let’s jump right in.
Apple Unveils Updated Macs
Earlier today, Apple issued three press releases related to the Mac. There was an accompanying 18-minute video presentation from Apple Park as well (available here via YouTube).
M2 Pro and M2 Max unveiling. The two SoCs are based on the M2, the second generation of Apple Silicon for the Mac unveiled at WWDC 2022. The M2 is already found in the 13-inch MacBook Pro and MacBook Air.
Updated Mac mini (with M2 and M2 Pro). The last Mac mini update was in November 2020.
Updated 14-inch and 16-inch MacBook Pro (with M2 Pro and M2 Pro Max). The last update for the 14-inch and 16-inch models was in October 2021. Apple updated the 13-inch MacBook Pro at WWDC 2022.
We knew new Macs were in the near-term product pipeline with a likely CY1Q23 introduction, although mid-January is earlier than expected. The absence of new or updated Macs in CY4Q22 (October to December) stood out to some people. In a statistic that will come as a surprise to many, 2022 was the first year to not have any new Macs released in CY4Q in 15 years.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple Introduces Apple Business Connect, Apple’s Play for Small Business, Apple’s Mapping Information Layer (Daily Update)
We kick things off with Neil’s thoughts on Apple Business Connect, a new initiative Apple unveiled yesterday. The discussion then turns to Apple’s broader play for small business. We conclude with a goal Apple has with Apple Maps in terms of creating an information layer.
Hello everyone.
One update to yesterday’s email.
An eagle-eyed member pointed out to me last evening that Eddy Cue’s portion of the Apple Services year in review was changed at some point to include the following (key) paragraph that we talked about yesterday:
“Last week marked my 34th anniversary at Apple, and I’ve never been more excited about what’s ahead. This new year of Apple services will be our most exciting yet — and we can’t wait to share it with you.”
The initial release that Apple put out did not include that paragraph. The Wayback Machine suggests Apple updated the press release roughly ten hours later in the early morning hours of the 11th. My first thought was that this was a simple mistake on Apple's part. An older version of the press release may have been published. There was different paragraph spacing between the two versions as well. Nevertheless, the change may have led to some confusion among members who read the release when it first came out on the 10th and who did not see Cue's hinting of 2023 being a big year.
Apple Introduces Apple Business Connect
In a press release issued yesterday, here’s Apple:
“Apple today introduced Apple Business Connect, a free tool that allows businesses of all sizes to claim their location place cards and customize the way key information appears to more than a billion Apple users across Apple Maps, Messages, Wallet, Siri, and other apps.
‘We created Business Connect to provide Apple users around the world with the most accurate information for places to eat, shop, travel, and more,’ said Eddy Cue, Apple’s senior vice president of Services. “Apple Business Connect gives every business owner the tools they need to connect with customers more directly, and take more control over the way billions of people see and engage with their products and services every day.’"
This is an intriguing initiative that has the potential of being both a value-add service for Apple users as well as a development that competitors like Google and Meta need to monitor closely.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Eddy Cue Hints at Big 2023 for Apple, App Store Revenue Growth Slows (Daily Update)
Hello everyone. We kick things off with my thoughts on Eddy Cue, Apple’s SVP of Services, looking back at Apple’s Services business in 2022. Cue made an interesting comment about Apple in 2023. We then look at a key financial metric Apple disclosed regarding the App Store. With this data point in hand, we derive estimates for the amount of overall App Store revenue in 2022 and the amount of revenue Apple reports in its quarterly financial statements.
Let’s jump right in.
Eddy Cue Hints at Big 2023 for Apple
Going back to the mid-2010s, Apple has used the new year to publish a recap of how the App Store performed the prior year. As Apple released additional services over the years, the recap has grown into something of an Apple Services year in review.
This year's release contained plenty of statistics, although very few of them could be used for financial modeling purposes. Typically, the releases included a few select quotes from Eddy Cue and Phil Schiller.
Apple did something different this year. Cue, Apple's SVP of Services and part of Tim Cook's inner circle, penned the opening section of the press release.
“2022 was a groundbreaking year for entertainment. At some point over the past year, you probably discovered a new app, a new song, a new TV show or movie, or game. An experience that made you laugh, taught you something new, or helped you see the world in a new way — and moved you to share it with others.
At Apple, we have the privilege of partnering with creators of all kinds, while building products and services that enable even more creativity. Our mission has always been to enrich people’s lives and to leave the world better than we found it, and we know that takes more than technical skill. It requires leading with our values in everything we do. We believe that our products and services should be made for everyone. We believe that privacy is a fundamental human right, and that our highest obligation to our customers is security. We believe that a culture where everybody belongs can drive innovation, and that we must stand up for the change we want to see in the world.”
Cue made the case that Apple Services aren’t just revenue-generating side hustles that Apple is doing to please Wall Street analysts.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Nikkei Asia Stokes Apple Demand Fears, AAPL Valuation Update, AAPL Stress Test Scenarios (Daily Update)
Hello everyone. In today's update, we will tackle additional questions that came in from members over break. The first topic is related to Nikkei Asia's article on Apple product demand. We will then turn to AAPL volatility. The discussion includes a broader examination of Apple’s current valuation metrics based on both earnings and free cash flow. We also go over various stress test scenarios involving different EPS and forward P/E multiples.
Let's jump right in.
Nikkei Asia Stokes Apple Demand Fears
In an article published on January 2nd, here's Nikkei Asia:
“China's tech supply chain is heading into the new year facing the twin challenges of slumping demand and staffing chaos caused by Beijing's abrupt U-turn on COVID controls.
In a sign of the gloomy outlook for consumer electronics, Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch and MacBooks for the first quarter, citing weakening demand, according to Nikkei Asia's supply chain checks with several component suppliers.
‘Apple has alerted us to lower orders for almost all product lines actually since the quarter ending December, partly because the demand is not that strong,’ a manager at an Apple supplier told Nikkei Asia. ‘The supply chain in China is still trying to cope with the latest abrupt policy turns, which brought a shortage of laborers because of the sharp COVID surges.’”
This article managed to travel quite far last week even though Wall Street was only starting to return to the office following the December break.
My initial impression reading the article was that there may have been something lost in translation. Having an unnamed source claim “demand [for all Apple product lines] is not that strong” isn’t exactly a compelling or convincing rumor.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple Bows Out of NFL Sunday Ticket Bidding, YouTube Wins NFL Sunday Ticket, YouTube Moves Deeper Into Paid Video (Daily Update)
Hello everyone. Welcome to a new week.
In today’s update, we will circle back to some big Apple news that came out as we were entering the holiday break. The update begins with Neil’s thoughts on Apple bowing out of NFL Sunday Ticket bidding. The discussion then turns to YouTube winning NFL Sunday Ticket, and what the move tells us about Google’s changed strategy.
Apple Bows Out of NFL Sunday Ticket Bidding
In an article published on December 16th, here’s ProFootballTalk:
"The company once regarded as the frontrunner for NFL Sunday Ticket has opted to take a Sunday drive, instead.
Buried in an item on Puck.news from Dylan Byer and Julia Alexander regarding recent changes at the top of Disney is an NFL bombshell: Apple has bowed out of the bidding for the out-of-market package the DirecTV will relinquish in only 23 days.
Here’s the key quote, from Byer: 'I’m now told that Apple, once seen as a frontrunner for the rights, has also backed out of those negotiations - not because they can’t afford it, but because they don’t see the logic. So it’s down to Amazon and Google, and there’s certainly a logic there for both companies: Amazon can use it to drive Prime subscriptions; Google can use it to fuel its YouTube TV business.'"
The fact that this bidding war had lingered into December was a clue that things weren’t going in Apple’s direction. For being the front-runner, ongoing negotiations pointed to the NFL and Apple not seeing eye-to-eye on various fronts. As for those sticking points, here’s The Athletic:
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
iPhone Supply Bounces Back, Sketchy Rumors About iPhone 14 Plus, Amazon's Growing Layoffs (Daily Update)
We kick things off with a look at the latest production news from Foxconn’s “iPhone City.” The discussion then turns to iPhone 14 Plus rumors regarding weak sales and Apple management being “seriously” concerned. The update concludes with Neil’s thoughts on Amazon dramatically raising the number of announced layoffs in its corporate ranks.
Hello everyone. We will jump right into today's update.
iPhone Supply Bounces Back
Here’s Fox Business:
“The world's largest iPhone factory has reportedly been brought back to 90% capacity months after workers in China had shut down the plant over the government's COVID-19 restrictions.
Foxconn Technology Group claims it is operating the factory with approximately 200,000 workers in the central Chinese of Zhengzhou, according to a report from Henan Daily, a Chinese state media outlet. The group is Apple Inc.'s largest production partner for their featured smartphone.
In October 2022, Zhengzhou, also known as iPhone City, came to a standstill after thousands of workers stalled production due to the government's strict zero-COVID policies. The protests disrupted supply chains and cost Apple billions over the last few months.
‘At the moment, the order books look good, and the orders will peak from now until a few months after Chinese New Year,’ said Wang Xue, the deputy general manager of the factory, in an interview with the Chinese outlet.”
If the reporting is true, Foxconn’s iPhone City reaching 90% production capacity at quarter end would be a very positive development for an iPhone business that just went through a tumultuous two-month stretch.
A direct implication found with Foxconn’s primary iPhone facilities operating again at near full capacity, as of the end of December, is
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple’s Transportation Ambition, Tesla 4Q22 Deliveries, Tesla’s Problem (Daily Update)
We begin with some words on Project Titan. Two weeks ago, the newest Above Avalon Report, “Project Titan: Apple’s Transportation Ambition,” was published. The discussion then turns to Tesla. The company reported 4Q22 delivery data. We go over the numbers and what Neil views as a problem for Tesla.
Hello everyone. Welcome to 2023.
If you took time off, I hope it was a good and relaxing stretch. Some people are still away from the office this week, so we will use the next two days to return to a regular routine.
Several members emailed me over the break about Apple topics and developments that popped up in the news (China, stock price volatility, demand issues, risks in 2023). We will get to those topics, including my broader thoughts heading into 2023.
For today, we will focus on a topic that was initially not going to be on my “key discussion topics” list for 2023: electric vehicles.
Let’s jump right in.
Apple’s Transportation Ambition
Two weeks ago, the newest Above Avalon Report, “Project Titan: Apple’s Transportation Ambition” was published. You can find the report in your inbox – it was sent out December 22th at 10:48 pm ET. To those members who recently joined, you can access the report via the archive here.
Having a report dedicated to Project Titan has been on my to-do list for some time. It had become difficult for members to go through dozens of updates to piece together the history and motivation behind Project Titan.
Over the years, the Project Titan topic has become unwieldy at times. Periodic reporting has had a very short-term perspective, rarely providing readers the big picture. One is typically left with the impression that Titan is a revolving door within Apple with management constantly changing long-term objectives. That’s not reality.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Project Titan: Apple’s Transportation Ambition (Above Avalon Report)
An examination of Apple’s electric car R&D project.
Written by Neil Cybart – December 22nd, 2022
Since 2015, dozens of Above Avalon daily updates have been dedicated to discussing the latest developments involving Project Titan, Apple’s electric car R&D project. This report serves as both a summary of Titan developments to date as well as an examination of Apple’s path forward in transportation.
Rethinking Cars
What is an automobile?
How does one use an automobile?
Why do automobiles look the way they do?
Anyone who has owned or driven an automobile has formed answers to these questions over the span of their driving experiences. Ask the same questions to someone who has never driven an automobile, and the answers would be enlightening. Driving an automobile is not natural. We need to teach ourselves the art of navigating a heavy machine composed of thousands of little parts.
Is the driving learning experience focused on suppressing intuition in order for the user to adapt to a machine that hasn't changed much in decades?
Is it possible to make an automobile more intuitive so that someone with no driving experience can hop in and get to where they want to go in a much more enjoyable way than that which exists today?
Henry Ford had a very simple goal with the Model T: Set the world free.
An Above Avalon membership is required to continue reading this report. Members can read the full report here. An audio version of this report is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Reports are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Updates are sent via email and go over current news and developments impacting Apple, its competitors, and the industries Apple plays in (or will play in). Approximately 200 daily updates are published throughout the year. Sample daily updates can be viewed here, here, and here.
Receive Exclusive Reports. Members have access to Neil’s reports, which are in-depth examinations of Apple's business, product, and financial strategy.
Access Private Podcasts. Members have the option of attaching a podcast add-on to their membership in order to receive the daily updates and reports in audio form.
Access Neil’s Earnings Model. Members have access to Neil’s working Apple earnings model (an Excel file that also works in Numbers). The model is fully functional and adjustable and provides the ability to alter earnings drivers.
Email Priority. Receive priority when it comes to having email questions and inquiries answered. Neil personally answers all inquiries, including customer service matters related to your membership.
Archive Access. Read 1,200+ daily updates and reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
Member Forum Access. Join other Above Avalon members in an active forum containing in-depth discussion and debate. Neil moderates and participates in the forum. The forum is run through Slack and can be accessed here.
Virtual Meet-ups. Talk with Neil about Apple and other related items in virtual meet-ups held via Slack throughout the year.
Above Avalon Support. Play an active role in supporting Above Avalon as an independent source of Apple analysis. Above Avalon is fully sustained by its members.
Apple Year in Review 2022 (Financial Strategy) - Daily Update
Hello everyone.
Happy Tuesday.
Reports. A new Above Avalon Report will be published on Thursday – December 22nd. Keep an eye out for it in your email inbox. Those with the podcast add-on will see the new episode appear in your podcast players shortly thereafter.
Above Avalon Gifts - DEADLINE. The final day to gift an Above Avalon subscription is Saturday (December 24th). The gifting page will be taken down on December 24th at 10 pm EST. While all gifted subscriptions will officially begin on January 4th, 2023, your gift recipient will be able to use their subscription as soon as they are informed of the gift. This means gift recipients will have access to the member archive, and the daily podcast / Inside Orchard if that is their purchased gift, over the holiday break.
Thank you to those of you who have already purchased gift memberships this holiday season. Gifting volume has already exceeded last year’s volume. A big thank you to those members who purchased gifts. More information on Above Avalon Gifts (and payment forms) is available here.
Let’s jump into today’s update.
Apple Year in Review 2022 (Financial Strategy)
For Apple, one way of recapping the past 12 months is to look at the company from two perspectives: products and financials. In yesterday’s update, we looked at Apple's product strategy. Today, we will look at Apple's financials.
(For today’s discussion, we will look at FY numbers, which reflect September 2021 to September 2022 trends. If there are significant differences between FY22 and CY22 results, additional mention will be made.)
Due to the pandemic and the resulting impact on shipping logistics, supply chains, and component availability, it’s been a few years since we had a clean look at Apple’s growth fundamentals. Strong revenue growth in 2021 (33%) as a result of an easy year-over-year contributed to slowing revenue growth across the board in 2022 (8%). Backing out FX impact, Apple would have seen double-digit revenue growth.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple Year in Review 2022 (Product Strategy) - Daily Update
Hello everyone. Happy Monday.
Many of you are likely beginning your holiday break. I hope it’s a safe and enjoyment one. There are a few housekeeping items to go over as we quickly approach the end of the year.
Above Avalon Reports. My plan is to publish a new Above Avalon Report on Thursday – December 22nd. This will mark the fourth report published in the past six months.
Above Avalon Gifts - DEADLINE. The final day to gift an Above Avalon subscription is Saturday (December 24th). The gifting page will be taken down on December 24th at 10 pm EST. While all gifted subscriptions will officially begin on January 4th, 2023, your gift recipient will be able to use their subscription as soon as they are informed of the gift. This means gift recipients will have access to the member archive, and the private podcasts / Inside Orchard if that is their purchased gift, over the holiday break.
Thank you to those who have purchased gift memberships this holiday season. Gifting volume has already exceeded last year’s volume. More information on the various gift options (and payment forms) is available here.
Let’s jump into today’s update.
Apple Year in Review 2022 (Product Strategy)
As we close out 2022, there is value in taking time to recap the past 12 months. For Apple, one way of accomplishing this is to look at the company from two perspectives: products and financials. It’s logical to look at Apple's product strategy first as the financials will inevitably follow product successes and failures.
In going through approximately 180 daily updates published this year, the following two paragraphs from our WWDC 2022 review (the update is available here) did the best job of summing up Apple’s product strategy in 2022:
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Paid Video Streaming’s Future, A Problem With Live Sports and Streaming, China Rethinking Its Tech Relationship (Daily Update)
We begin with an examination of Jason Kilar’s piece in the WSJ regarding the paid video streaming industry. After co-founding and leading Hulu, Kilar went on to lead WarnerMedia but was forced out when AT&T spun off WarnerMedia and combined it with Discovery. The discussion then turns to one problem that has become apparent with live sports programming impacting Apple and Google. We conclude with continuing developments in China impacting the tech sector.
Happy Thursday. Let's jump right into today's update.
Paid Video Streaming’s Future
Earlier this month, the WSJ published a series of year-in-reviews focused on various tech, business, and financial subjects. The articles were highlighted in today's print edition. One was written by Jason Kilar and dedicated to video streaming.
After co-founding and leading Hulu, Kilar went on to lead WarnerMedia but was forced out when AT&T spun off WarnerMedia and combined it with Discovery.
There continues to be varying opinions surrounding Kilar’s leadership style and broader views on the media space. My stance has tended to be more supportive than where consensus is found. Kilar’s decision to release all Warner Bros films in 2021 on HBO Max on the same day as in theaters, a decision partially driven by the pandemic, did not make him many friends.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple Planning for iPhone and iPad Sideloading in EU, Thinking Through Sideloading Implications, The Absurdity Known as the Digital Markets Act (Daily Update)
The update is dedicated to discussing the latest regarding Apple and the Digital Markets Act (DMA). The EU regulation targeting Big Tech was signed into law in September. We go over the differences found between Apple allowing sideloading and alternative app stores on iPhones and iPads. The discussion also covers how Neil thinks Apple can go about offering sideloading. The update concludes with why Neil thinks the DMA is one of the most absurd pieces of tech regulation that has existed.
Hello everyone. Today's update will go over the latest regarding Apple and the Digital Markets Act (DMA). The EU regulation targeting Big Tech was signed into law in September. Let's jump right in.
Apple Planning for iPhone and iPad Sideloading in EU
Over at Bloomberg, here’s Mark Gurman:
“Apple Inc. is preparing to allow alternative app stores on its iPhones and iPads, part of a sweeping overhaul aimed at complying with strict European Union requirements coming in 2024.
Software engineering and services employees are engaged in a major push to open up key elements of Apple’s platforms, according to people familiar with the efforts. As part of the changes, customers could ultimately download third-party software to their iPhones and iPads without using the company’s App Store, sidestepping Apple’s restrictions and the up-to-30% commission it imposes on payments.
The moves — a reversal of long-held policies — are a response to EU laws aimed at leveling the playing field for third-party developers and improving the digital lives of consumers. For years, regulators and software makers have complained that Apple and Google, which run the two biggest mobile app stores, wield too much power as gatekeepers…
The changes underway within Apple are being led by Andreas Wendker, a longtime software engineering vice president who reports to Craig Federighi, the company’s top software executive. Jeff Robbin — Apple’s top engineering manager for its services, who reports to head of services Eddy Cue — is also involved.”
There is a lot of detail missing from Gurman’s piece.
At the beginning of his article, Gurman says that Apple is preparing to allow “alternative app stores” on iPhone and iPads in response to the Digital Markets Act (DMA). A few sentences later he merely says Apple will allow users to “download third-party software” to iPhones and iPads. Those two things may sound similar to each other, but they can lead to dramatically different outcomes for both developers and users.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
FTC Sues Microsoft Over Activision Deal, Console Gaming Competition, Games vs. Video Competition (Daily Update)
The update is dedicated to discussing the FTC suing Microsoft over its proposed Activision Blizzard acquisition. We focus on Neil’s thoughts regarding competition in gaming and the areas where the FTC faces its steepest challenges in going after Microsoft. The discussion concludes with a look at differences between games and video when thinking of competition and U.S. antitrust.
Hello everyone. Happy Tuesday. Let's jump right into today's update.
FTC Sues Microsoft Over Activision Deal
“The Federal Trade Commission Thursday sued Microsoft Corp. to block its planned $75 billion acquisition of Activision Blizzard Inc., taking one of its biggest shots under the Biden administration at halting a merger of technology giants.
The lawsuit sets the stage for a court challenge over the deal as Microsoft agreed as part of negotiations with the ‘Call of Duty’ publisher to defend the acquisition against a government lawsuit.
The law enforcement agency said the deal is illegal because it would give Microsoft the ability to control how consumers beyond users of its own Xbox consoles and subscription services access Activision’s games. The company could raise prices for people who don’t use Microsoft’s hardware to access the games, or even cut off access entirely, the FTC said.
‘Microsoft has already shown that it can and will withhold content from its gaming rivals,’ said Holly Vedova, director of the FTC’s bureau of competition, in a statement. ‘Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.’
Microsoft said it continues to believe the deal, which it values at $68.7 billion after adjusting for Activision’s net cash, would expand competition and signaled it plans to litigate with the federal agency.
‘We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC,’ Brad Smith, Microsoft vice chair and president, said. “While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”
The FTC’s complaint is available here.
The complaint's primary thrust has to do with Microsoft removing one of the few “independent companies capable of developing standout video games [for high-performance video game consoles]” and the impact such a deal would have on Sony PlayStation.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Foxconn Invests Another $500M in India, iPhone Production in India, Twitter Looking To Offset App Store Revenue Share (Daily Update)
We begin with Neil’s thoughts on Foxconn announcing another $500 million investment in India to diversify its supply chain. The discussion then turns to iPhone sales and production in India and rumors of Apple looking to greatly expand production in the country. The update concludes with an examination of Twitter relaunching Twitter Blue with different pricing to reflect App Store revenue share percentages.
Hello everyone. Happy Monday.
With two weeks left of 2022 for many of us, we are continuing to run forward.
A quick reminder – Above Avalon Gifts are available. There are various gift options to choose from, starting at $90. Group discounts are also available. If you know someone who would enjoy Above Avalon, gifting a membership makes for a unique gift this holiday season. All of the gift options are available here. Thank you to those who purchased a gift last week.
Let’s jump into today’s update.
Foxconn Invests Another $500M in India
In an article published on December 9th, here’s South China Morning Post:
“Foxconn Technology Group, Apple’s biggest contractor, has invested US$500 million in its Indian subsidiary, as the Taiwanese manufacturing giant moves ahead to diversify its supply chain after China’s stringent pandemic controls disrupted production at its top iPhone plant in the central city of Zhengzhou.
The cash injection into Foxconn Hon Hai Technology India Mega Development Private Limited, made through Foxconn’s Singapore unit Foxconn Singapore Pte Ltd, involved the purchase of over 4 billion shares, according to a filing on Thursday to the Taiwan Stock Exchange…
Foxconn signed a US$300 million agreement with a Vietnamese developer in August to expand a new local plant, and plans to quadruple the workforce at its iPhone-making Indian plant over two years, according to reports by Reuters earlier this year…
Despite Foxconn’s move to diversify its manufacturing footprint, chairman Liu Young-way said in last month’s earnings call that the company planned to spend the largest portion of its increased capital spending next year in mainland China.”
Given the long list of issues at Foxconn’s Zhengzhou facilities, this article is getting a larger-than-usual reaction. Some are looking at the timing of Foxconn’s $500M Indian investment as the company sending a clear signal to Chinese officials.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
More on Project Titan, Transportation Problems, Apple Announces New Data Protections (Daily Update)
Hello everyone. There a few follow-ups related to Project Titan that are worth discussing in today's update. We will then turn to Apple’s user data protection announcements.
More on Project Titan
Apple does not have something equivalent to a “future bets” team or division tasked with coming up with futuristic technologies that may or may not be commercially viable. Instead, R&D dollars are funneled to teams and technology with a defined purpose. This is part of Apple’s collaborative culture consisting of small teams comprised of people from various disciplines and backgrounds who are given the autonomy to think differently.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple’s Electric Car Plans, Apple Car Design Questions, Apple’s Largest Risk (Daily Update)
We begin today’s update with Neil’s thoughts on the Bloomberg article about Project Titan. The discussion then turns to an in-depth examination of Apple Car from a design perspective. We conclude with a look at what Neil positions as Apple’s largest risk.
Hello everyone. Happy Wednesday. We have a lot to discuss so let’s jump right in.
Apple’s Electric Car Plans
Over at Bloomberg, here’s Mark Gurman:
“Apple Inc. has scaled back ambitious self-driving plans for its future electric vehicle and postponed the car’s target launch date by about a year to 2026, according to people with knowledge of the matter.
The car project, dubbed Titan inside the company, has been in limbo for the past several months as Apple executives grappled with the reality that its vision for a fully autonomous vehicle — without a steering wheel or pedals — isn’t feasible with current technology.
In a significant shift for the project, the company is now planning a less-ambitious design that will include a steering wheel and pedals and only support full autonomous capabilities on highways, said the people, who asked not to be identified because the information is private.”
Gurman’s article came across as something of a catch basin for everything we already know about Titan. Most of the details we have discussed in the past either in these updates or over at AboveAvalon.com. For example:
Apple VP of technology Kevin Lynch’s involvement (more detail here).
Apple’s vehicle proving grounds in Arizona (more detail here).
Former BMW executive and Canoo co-founder Ulrich Kranz’s involvement and Apple’s interest in the company’s unique approach to automobiles (more detail here).
Apple’s land purchases around San Jose International airport strongly pointing to being car related (more detail here). It's not clear if Apple still plans on putting affordable housing on some of the land, as Apple said it would back in 2019.
Canadian involvement regarding QNX (more detail here).
Lidar/radar usage, along with cameras.
Apple's R&D explosion over the years (more detail here).
Bloomberg once again tried to position its report as AAPL stock moving news, which is unfortunate.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Apple News+ Circulation Data, Goertek Runs Into AirPods Pro Trouble, The Case for Foxconn (Daily Update)
We begin today’s update with new data/estimates regarding circulation data for magazines that are part of Apple News+. The discussion then turns to Apple’s contract manufacturers. There was one follow-up from yesterday’s update worth pursuing regarding Foxconn. We look at Goertek running into trouble assembling AirPods Pro and how the news points to a broader truth found in doing business with Foxconn.
Hello everyone. It looks like we have some Project Titan news to discuss. Given the timing, we will do that tomorrow.
In today’s update, there was one follow-up worth pursuing regarding Foxconn. We will begin though with Apple News+.
Apple News+ Circulation Data
It’s been a while since we last talked about Apple News. The service launched in September 2015 with Apple News+ launching in March 2019. Audio was introduced in mid-2020.
Back in April 2020, Apple disclosed that Apple News had 125M monthly active users. The figure likely reflected a usage boost due to the pandemic. Clicking on an Apple News story in Today View, which continues to be a value-add proposition, brings you to the Apple News app. This is likely where many of the 125M Apple News users originate. With no subsequent updates to that user figure, we can assume it hasn’t change by much. It is a very high number given that Apple News availability is still limited to a handful of countries.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Additional Details on “iPhone City” Production, The WSJ Article on Apple Moving Out of China, Apple and Concentration Risk, Above Avalon Gifts 2022 (Daily Update)
We kick off today’s update with additional details regarding how iPhone production at Foxconn’s facilities at Zhengzhou is trending. The discussion goes over further refinement in Neil’s estimates/assumptions for the shortage in iPhone sales in FY1Q23 arising from the Zhengzhou protests/riots. The update concludes with a look at the WSJ’s article about iPhone production in China. After going over why the WSJ’s headline is misleading, we discuss Apple’s product assembly strategy.
Hello everyone. Welcome to a new week.
After a record volume year for gifts in 2021, Above Avalon Gifts for the 2022 holiday season are now available. The full list of gift options are found at the end of today’s update and here.
Let’s jump into today’s update.
Additional Details on “iPhone City” Production
In an article published late Sunday, here’s Reuters:
“Apple supplier Foxconn expects its COVID-hit Zhengzhou plant in China to resume full production around late December to early January, a Foxconn source said on Monday, after worker unrest last month disrupted the world's biggest iPhone factory.
The Zhengzhou plant has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers over conditions at the factory. Production of the Apple device was disrupted ahead of Christmas and January's Lunar New Year holidays, with many workers either having to isolate to combat the spread of the virus or fleeing the plant.
Following the November unrest, that saw workers clash with security personnel, Foxconn could have seen more than 30% of the Zhengzhou site's November production affected, Reuters reported last month citing a source familiar with the matter. Foxconn hasn't disclosed details of the impact of the disruption on its production plans or finances.
‘The capacity is now being gradually resumed’ with new staff hiring under way, said the person with direct knowledge of the matter. The person declined to the named as the information was private.
‘If the recruitment goes smoothly, it could take around three to four weeks to resume full production,’ the person said, pointing to a period around late December to early January.”
Given Foxconn’s recent attempts at spinning negative news, we need to approach this latest reporting with some skepticism. Foxconn has reason to downplay the potential production impact at Zhengzhou resulting from weeks of employee unrest.
With that said, the Reuters report didn’t come across to me as overly positive. Instead, Reuters’ Foxconn source pointed to full production at Zhengzhou still being a ways off.
Last week, we assumed “Apple loses three weeks of Zhengzhou production [in November], followed by four to five weeks of reduced production.” Based on Reuters’ newest article and having more time to dive a bit more into the granular details, we can refine that assumption into:
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.
Sonos 4Q22 Earnings, Spotify Subscriber Trends (Daily Update)
We kick off today’s update by looking at the latest earnings release from Sonos. The discussion then turns to Spotify’s earnings with a focus on the company’s subscriber trends.
Hello everyone. Welcome to December. This month is going to fly by.
Two quick notes:
1) The Elon Musk saga took another twist yesterday. Tim Cook invited Musk to Apple Park. This was the first time Musk and Cook have talked with each other. According to Musk, "Tim was clear that Apple never considered [removing Twitter from the App Store]." Musk had just said the opposite - that Apple had "threatened to withhold Twitter from its App Store" without explanation – two days earlier. Musk’s initial tweet never sounded accurate to me. It’s not clear what Cook actually told Musk while walking around Apple Park yesterday. The following tweet that I wrote yesterday sums up the situation:
2) Looking back over the past two months of updates, we have gone over 10 earnings reports from various Apple competitors.
Warner Bros. Discovery (Nov 16)
Roku (Nov 10)
Peloton (11/10)
Disney (11/9)
Amazon (11/8)
Microsoft (11/8)
Meta (11/2)
Apple (10/28, 10/31, 11/1)
Alphabet (10/26)
Netflix (10/19)
Nike (10/3)
In today’s update, we will go over two earnings reports that have been on my list: Sonos and Spotify. Sonos was one of the last companies to report earnings. As for Spotify, it’s been six months since we took a closer look at the company’s subscriber trends.
Sonos 4Q22 Earnings
Sonos reported FY4Q22 earnings two weeks ago. Management had previously warned that things were going to look funky with demand slowing a bit over the summer and the company placing what ended up being poorly-timed bets on inventory.
4Q22 revenue was down 12% to $316M.
Gross margins dropped by 720 basis points (to 39.2%). Management claims the drop is temporary.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.
(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.