If Apple were truly serious about building self-driving cars, they would buy one of the big 3 US auto manufacturers. It could buy all 3 with cash and still have one of the largest hoards of cash ever accumulated.
Over the decades I've noticed how businesses need to recognize and focus on their core competencies - if they don't, they die. Everything must feed that core, and undue distractions are lethal. Occasionally there's a need to pivot, which is deliberately stepping from one competency to another, but that is rare and difficult. Apple's core is to build small computers; everything else they do (music, video, cloud services, Siri, AI, AR, operating systems, etc) are all built to draw customers deeper into the ecosystem for the sole purpose of buying more small computers. Electric self-driving cars, while very nifty, are decidedly not small computers (at best being a tiny part of a large product demanding other competencies); to compete in that market requires scale which Apple could certainly buy but would fiercely compete for the attention vs small computers.
I definitely wouldn't call AWS, Echo from Amazon occasional. I think companies come in all shapes and sizes - some focus 90% on their core, some try to spend more time and diverge out to other business segments. Its upto Apple to figure out what to do and what would make it successful.
AWS is an offshoot of building the massive system needed to process the "we sell absolutely everything" goal. Methinks they just got so good at it, cloud services just kinda took on a life of its own and grew from there - but still feeds the retailing monster.
Echo is a consequence of exploring digital appliances as marketing tools. If you're going to build a device which can voice-interface someone ordering 6 bottles of Tide with extreme ease, doesn't take much more to turn it into a nice music speaker and tell you weather & sports & jokes on request. Echo, Fire, etc are just extensions to feeding the retailing monster.
Do notice how Amazon's innovative foray into cell phones crashed & burned hard - despite being lauded as rather a well-built device. That shows how straying too far doesn't work, and that "far" isn't very.
I worked at Amazon for a while and the point to note is that the Fire phone, despite being a public failure, led to a lot of things at Amazon. For ex:
1. The computer vision and machine learning stuff behind the 8 cameras on the Fire phone has been repacked and reused at multiple places. There's also a object recognition service in AWS if I remember correctly.
2. The FireOS, which powered the Fire phone, is being used on all Kindles except the older e-ink Kindles.
While the hardware division was indeed shut down, Amazon did manage to salvage as much as they can.
The cloud service didn't take a life on its own - in the very early days there was just EC2 and S3, nothing else. It took a lot of focused investment, commitment and trust from the management to give the AWS experiment more time so that it could succeed and eventually it did.
Fire phone was one of Amazon's many experiments. It failed sure, but hey you miss 100% of the changes you don't take.
In what way is the billions of dollars Amazon is spending on original content "just an extention to feeding the retailing monster"?
It's easy to point to one failed product as proof that "straying too far doesn't work", if you can do the mental gymnastics required to classify all their successful products as somehow more connected to their original goal.
IMO you do have a good point: Nothing about Prime seems to play particularly to Amazon's strengths, other than the wide reach of their sales channels (but if that's an argument, you could as well have Walmart doing the same). This is especially visible when you compare their software to Netflix. Still light years ahead of Apple though.
I think it's more that most don't see Amazon's actual core competence. Amazon is a logistics business, both information and physical. They do logistics for themselves for various front-ends (amazon.com, echo, video, kindle, etc.) but you can view all of those as accessories to their AWS, warehousing, and shipping business which they provide both for their own front ends and for sale to anyone.
If you define "core competence" sufficiently vaguely then sure, everything can be related to that core competence.
"a logistics business, both information and physical"? Really? Calling their massive retail business, original content, and physical devices an "accessory" to their warehousing is an extremely myopic view of Amazon.
Remember that much of what is sold on Amazon.com is not actually sold by Amazon. Amazon provides warehousing and fulfillment and an online storefront for third party sellers as well as for itself. The tools that it uses to run that online storefront in the form of AWS are used by many non-Amazon websites as well. The Kindle ecosystem helps Amazon sell retail books but also provides a self-publishing platform. It's not unreasonable to say that logistics, warehousing and web services are the real business, and that Amazon's retail business is one of many customers.
Nothing, business. It's a conglomerate. A business that's function is running businesses. A Yamaha piano has nothing at all to do with a Yamaha motorcycle exactly opposite to how all of Amazon's services are related and intertwined.
You are chooosing to ignore the many diversified companies and conglomerates that have done very well, some for more than a human lifetime.
Besides, Apple doing the iPod and iPhone is a counter example to your argument, unless you stretch the definition of the core business of a Y2K computer company to be music players and phones.
No, Apple's strength is refining, polishing, blending, and packaging existing electronic and software technologies.
Cars are more about mechanical engineering than electronics or software. Learning automotive design from scratch when you have no experience and barely any trained staff is not a trivial task.
Worse, a Level 5 autonomous car is not an existing consumer technology. At this point there's nothing to refine, and barely anything that could be bought in to start the refinement process.
Apple might as well go into house building, farming, or food products.
Not well known in the west, but Mitsubishi has been and is active in an insane number of business sectors:
Shipping, motor vehicles, home electronics, bank and finance (UFJ holdings), nuclear power, cameras and optics (Nikon), industrial chemistry, beer brewing (Kirin) and real estate.
Google was a search engine that made money via ads then pivoted into an ad platform that also has a search engine. Android and Chrome are about ensuring they have a seat at the table and don't get pushed out by Apple or Microsoft. The first thing of significance they've done that doesn't fit this is their cloud platform.
Their cloud platform is the same thing: trying to not get pushed out by Amazon and Microsoft.
Google Cloud is about ensuring that those two have competition and can't somehow pull an EEE. Extreme scenario: vast majority of world's online businesses are hosted on AWS and Amazon for whatever reason creates their own AWS ad service and forbids or undercuts Google AdWords for everything hosted on AWS.
Imo modern cars are basically small computers and everything else(seats,doors,wheels)is peripheral. I mean it is 2017 after all, don't you think it's about time we accept that cars are computers? Sure, we used to need humans to "complete" the computer part, seeing as we didn't have motherboards at first. But now computer is the core part of car and even humans aren't necessary. Why even bring your cell phone when your car is a cell phone? It's possible Apple needs the car to compete in a post cell phone world.
They have to focus on their competencies but they also have to completely reinvent themselves every decade or so or they will die. Once the iPhone is gone, Apple will be gone.
When companies focus on just one thing in a vertical, they're incredibly vulnerable. Samsung does lots of things fairly well, with some hiccups, well beyond just personal electronics and home appliances. It's diversification.
EDIT: Samsung does all sorts of things including ship-building, life insurance, construction and advertising.
For example, Apple MacBook Pros have become uncool, expensive, unrepairable and impractical... a giant FU to customers. That business is tettering on failure because they've been hypnotized on elixir of utopian, aspirational design rather than technical, environmental and practical usability. iPhone is the lion's share of
Apple's business, and they're losing ground to Android. That's a problem and most other products have plateaued and aren't anywhere near as dominant-capable or category-defining as the smartphone. That means Apple is a basically a banana republic (pun intended) unless they create or retake a category with a non-incrementalist product.
Disclaimer: I own an A1278 13" from 2013 but refuse to buy a $3000 soldered on RAM and SSD laptop that can't be transfered without proprietary service tools and whose glued-on batteries are a PITA to change. Also the low-travel, flush keyboards are terrible. Looking at Lenovo and System76 machines instead.
Numbers today are all well and good, but goodwill and rate-of-change indicate future trends. People will tire of $3000 laptops with nonfunctional WiFi and Apple Authorized Service Centers voiding their AppleCare warranties.
I mostly agree with this post but the more I type on my new MBP keyboard the more I love it. Was skeptical at first, made a lot of noise, felt weird, but this flipped pretty fast to big appreciation.
There's less affordances for touch-typing based on the shape of keys like Lenovo or older keyboards for boundaries of keys... it just makes typing harder unnecessarily to shave a few millimeters.
Manufacturing scale is not something they need until after they have the self driving tech (and also, I'd just partner with a Japanese or German automaker tbh. Toyota under the current CEO has made moves that hint that it would be open to a joint venture).
The main differentiator of current big auto is the engine and drivetrain engineering, which you can circumvent when going electric.
It's unclear what you're buying with a big 3 company that actually helps with the self driving part of the problem, which is currently a much larger problem than manufacturing scale and quality assurance.
> - a workforce with sunk costs in last generation skills
Often a unionized workforce. You didn't want to use more robots on your assembly lines like Elon Musk, did you? Because these guys are still going to be employed. Period.
I don't think these points are of any relevance. Once you have stage IV autonomy, you can partner with any car manufacturer you want, you have all the leverage.
However, knowledge in cars definitely helps building the technology, since there are so many little variables that you otherwise would oversee.
You can try to partner. However all major auto manufactures are looking at self driving cars. Some are doing it in house, some are having and existing trusted partner do it. That minor auto manufactures have partnerships with someone major and have reasonable confidence that their major partner will provide the technology.
Apple and Silicone valley in general is not a trusted partner, in fact they are the opposite: untrusted. Car manufactures have lost millions of dollars on safety lawsuits. The cowboy coding culture silicon valley has a reputation (not always deserved) for doesn't work, they need controlled processes where they can show the courts they made effort to check everything, starting with the design phase.
Car makers expect that they will be sued over a 10 year old car with some parts failing. They need to show the court they did everything possible to anticipate that exact failure case and either ensure it couldn't happen, or if it they handle it. When someone is dead, "we didn't think about that case" doesn't cut it.
In short, I don't think Apple or google will get anywhere in self driving cars. They have early demonstrations, but that doesn't mean anything long term. It doesn't even prove they have an early lead (though I suspect they do) since car companies might or might not say anything about where they are. In fact in this case I expect them to be very careful not to say anything: if they say to much a lawyer might argue the car should have been self driving and thus the car manufacture is fault for an accident. As such they need to set expectations that self driving cars are a future thing that isn't ready yet.
Why would a high margin, high ROE, low capital requirements business like Apple invest in a low margin, poor ROE, high capital requirements business like a car maker?
Besides being a poor investment that would lock up lots of their capital, it would also create a ton of management distractions.
If they are serious about building self-driving cars, they are probably making a huge mistake. Cars have been a poor business model for quite a long time. Licensing automonomous tech seems like a far better business model.
Electric will drive down the per-mile cost of the vehicles, and autonomous will drive up the per-hour use of the vehicles, which will lead to a larger potential margin.
You can sell a car for a lot more if it's being rented out for 12 driving hours per day. Especially so if it's a high end experience. People have a hard time shelling out $60,000 for a car when they could get something pretty adequate for $30,000, but when the choice is a $2 cab ride or a $4 luxury cab ride, a lot more people will pay the margin.
It won't work that way though. Cities have this thing called "rush hour" for a reason: a some specific times of the day far more people need to get around than others.
Worse, the people who use their car in the middle of the day are the least likely to use shared cars. They are the most likely to need a change of clothing, a stroller in their car just in case. They are also the most likely to run back and for from their car for each purchase at the mall.
What that leaves is people going to/from work, and their lunch breaks. At this point you may as well own your own car self driving car: at worst it is not much more expensive (shared might be 10% cheaper), and you get to leave your golf clubs in the car while at work. At best you can ignore a few tears and keep the car for longer making owning your own car cheaper than a shared car which needs to maintain appearance and cleanliness standards.
Shared cars work well for those people who rarely use a car. However those are the people who already are renting cars, using taxis and the like for the few times they need a car.
My understanding is that it's one of the few markets left that can move the needle. The biggest markets are health care, finance, petroleum, consumer electronics, and automotive.
PCs and phones are low-margin capital intensive businesses. Apple seems pretty good at commanding high margins in such industries.
As for why Apple doesn't license their tech, well, that's not how Apple operates, because then they lose control over the experience. ROKR and the like.
Apple has an easy way to move the needle, return it's profits to shareholders as dividends. They can produce better returns that way then dumping it into lesser businesses.
Apple has made great margins in PCs and Phones because it refused to use commodity operating systems. It's not clear that there is any similar advantage in cars. Everyone will be making autonomous cars, the markets will be highly competitive and they'll still require massive capital investments to make. It's unlikely customers will pay up much for a slightly better autonomous system.
If Apple wanted to go into cars, they should buy Porshe or Ferrari. They actually have brands that make their products difficult or impossible to copy well. Porsche in particular sells cares that are super highly engineered in every area, Apple can't create a Porsche like car business by selling an autonomous car by doing autonomous great, but ride, handling, acceleration, etc just acceptably
Everybody and their dog is trying to develop autonomous tech and license it. Autonomous capabilities used to be regarded as the secret sauce, and if you had it, the future of mobility was yours. This is not true. The ability to mass produce a vehicle is the secret sauce. It's the part that's hard to do.
But as far as low margins in the car industry goes, that point is irrelevant. Robotaxis are a different ballgame.
> Autonomous capabilities used to be regarded as the secret sauce, and if you had it, the future of mobility was yours. This is not true.
I think you're right that when we get self-driving cars it won't be due to a single secret, but rather hundreds of years of engineering time dedicated to getting all the kinks out.
But this is still a super complicated engineering problem, and not all people/orgs will be up to the task, and will not execute on the same timescales.
I think the way this plays out will be determined by how much of a lead the first movers (probably WayMo) will have, and whether companies will cut corners to get something "good enough" out the door, and how the public will react to that.
E.g. I think it's a very different world for automakers if WayMo turns out to have a 5 year lead on them, vs a 1 year lead on them. Cruise certainly looks like they are giving them a good run for their money.
It wasn't true about mobile phones, a business which had what looked like insurmountably dominant incumbents when Apple entered the business. Instead, Apple changed the business out from under the incumbents. Autonomous vehicles will similarly change the vehicle and transportation industry. That's an inflection point where incumbency matters less.
Apple will not buy any US company using it's cash hoard because of tax implications. They can of course raise debt, similar to what Amazon is doing with Whole foods.
