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Apple Roundup: China, iPhone Rumor, WWDC, Acquisitions
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June ended on a positive note for the market with the President relenting on the issue of Huawei and going back to the negotiating table with China. This is good for many technology companies including Apple (AAPL - Free Report) , which has from the beginning said that no good would come from the trade war.
CEO Tim Cook, along with other technology leaders have been meeting with the President and his advisory committee where they have promised to train an increasing number of Americans so the skill shortage wont force them to recruit from other places.
At the same time, Apple is considering moving part of its manufacturing out of China and preparing for antitrust lawsuits at home. Regulatory matters aside, June is always special because Apple hosts its developers’ conference this month, which along with some acquisition news, rounds out the top stories.
Apple Moving Production Out of China
According to a Nikkei Asian Review report, Apple has asked its Chinese suppliers Foxconn, Pegatron, Wistron, MacBook maker Quanta Computer, iPad maker Compal Electronics and AirPods makers Inventec Corp, Luxshare-ICT and Goertek to consider moving 15-30% of production out of China. The goal is to geographically diversify the supplier base so as not to be overly dependent on any particular country/government.
Apple apparently specified that Mexico, India, Vietnam, Indonesia and Malaysia were preferred locations with India and Vietnam being favorites for smartphones.
Meanwhile, Young Liu-Way, one of Foxconn's incoming directors, has said that around 25% of its production capacity is already located outside China and that there would be no difficulty responding to the demands of the U.S. market.
CEO Tim Cook maintains that while people think that the iPhone is made in China, it’s actually only assembled there and that the iPhone is actually built all over the world. “And so a tariff on the iPhone would hurt all of those countries, but the one that would be hurt the most is this one,” he said of the U.S.
He has also said that he doesn’t expect China to impose retaliatory tariffs that could hurt Apple: "Well, currently, the Chinese have not targeted Apple at all. And I don't anticipate that happening, to be honest," according to CBS News.
Morgan Stanley analysts estimate that the impact of Apple’s China exposure is 29% of earnings as any loss of revenue is partially offset by reduction in operating cost.
Developers Sue Apple
After the Supreme Court okayed lawsuits against Apple regarding its dominance of the iOS app marketplace, some developers have sued the company for forcing them to sell via the app store.
Developers of basketball-workout and baby-naming apps were among entities complaining that Apple’s policy of requiring sales only through the app store forced them to raise the prices of their apps. Apple’s 30% commission for maintaining a relatively secure marketplace where they had to compete with 2 million other developers for visibility, is excessive according to them, and prevented them from making a profit.
Apple has denied that it’s a monopoly because they can still make Android apps, but of course this is not the issue. It has also said that it charged a commission of only 1% of Spotify (SPOT - Free Report) users, so the company shouldn’t complain (Spotify is the one that first took the matter to European regulators). The monopolistic practices of technology companies have come under fire of late, so Apple’s arguments may not stand up in court. It’s dominance of the iOS marketplace may be short-lived. Then again, it may succeed in keeping the matter in court indefinitely.
Developers’ Update
The highlights of this year’s WWDC included a brand-new iPad OS and updates for watchOS, tvOS, iOS 13 and macOS. Here are some of the highlights-
The iPadOS interface is now a hybrid between macOS and iOS with enhanced Apple Pen support, upgraded Split View and Slide Over, a more powerful Files App, as well as a customizable home screen.
The iOS 13 preview showed a new Dark Mode for iOS, more comprehensive editing tools, a revamped Maps app with much greater accuracy despite being far more detailed (to launch later this year) and a more natural sounding Siri. There will also be a new encryption framework called CryptoKit that developers can use to “perform cryptographic operations securely and efficiently” in iOS applications. The promise is that the new OS will launch apps up to 2X as fast, with 30% improvement in Face ID unlocking speeds, a 50% drop in app download sizes and a 60% drop in app update sizes.
The completely voice-controlled macOS Catalina launches this fall with improved iPad compatibility to Mac owners using models from mid-2012 or later. It allows iPads to be used as second displays. It replaces iTunes with standalone versions of the Apple Music, Apple Podcasts and Apple TV apps. It comes with Project Catalyst that helps iPad developers easily convert their apps into Mac apps.
The watchOS will launch this fall, bringing healthcare enhancements for women and the hearing impaired. The update is available for Apple Watch Series 1 devices or later paired with iPhone 6S or later and running iOS 13 or later. It’s coming with the watchOS version of the App Store, complete with calculator, audiobook and voice-recording apps.
The new tvOS, to launch in the fall of 2019, will have a new Apple TV home screen and multi-user support for personalized experience to each user. It will also come with Xbox One and PlayStation 4 game controller support.
With a focus on privacy and security, Apple’s new "Human Interface Guidelines" requires developers to place a “Sign in with Apple” option above the “Sign in with Google” or “Sign in with Facebook” buttons they provide in their apps (when they provide these options).
These buttons come in handy for users who don’t want to bother with remembering separate sign-in credentials for each app. But users don’t always realize that linking all their activities to their Google or Facebook accounts enables these companies to use their data for profiling, ad targeting and developing artificial intelligence.
Apple proposes a more private sign-in option that won’t allow this to happen. Since users generally pick the default or the option placed right at the top, that’s where Apple wants its button to be.
The guidelines aren’t strictly mandatory but developers widely believe that compliance helps them get approved.
iPhone 11 Rumors
Veteran Apple analyst Ming Chi Kuo has forwarded the information that Apple is gearing up to launch 5.4-inch and 6.7-inch flagship iPhones in 2020. The lower-cost version will also have a big screen size of 6.1-inches and an OLED display. The modem in all phones will come from Qualcomm but only the 5.4-inch and 6.7-inch versions will have 5G with the 6.1-inch version only offering LTE. Its own 5G modem will first be introduced in its flagship devices in 2022 or 2023.
Apple Interested in Intel’s Modem Business
According to sources at The Information, Apple is looking to buy Intel’s modem business, which is basically the wireless arm of the German technology firm Infineon that Intel (INTC - Free Report) purchased in 2011 for $1.4 billion. This is the same unit that supplied baseband chips to Apple between 2007 and 2010, before it became part of Intel.
Intel has said publicly that after Apple patched up with Qualcomm (QCOM - Free Report) and entered into a multi-year licensing deal with the chipmaker, the modem business wasn’t something the company could profitably pursue any more. So it has been looking for buyers.
The reason Apple is interested in Intel’s unit is because of its ultimate goal of developing the 5G modem internally. As far as the Qualcomm truce is concerned, Apple was forced to eat humble pie after declaring that Qualcomm’s licensing fees were extortionist and taking the chipmaker to court. Apple has the strategy of making as much of its devices in-house as possible and has been building a semiconductor team for some time. The current deal is likely designed to buy it time until the technology is ready internally.
In February, Apple hired away Umashankar Thyagrajan from Intel, who is thought to have played a key role in the development of its XMM 8160 5G modem (that was being developed for Intel, but wasn’t delivered on time).
Bought Drive.ai
Some people were concerned that Apple was shuttering its self-driving operations, or at least trimming it when it announced a headcount reduction of 200 in January. Apple put those fears to rest in June with the confirmation that it was buying struggling self-driving shuttle service Drive.ai. The company operates in Texas.
This is a standard aqui-hire, with not much more to add. The company trimmed its own workforce by 90 before Apple acquired it. Apple being the giant that it is, doesn’t need to report what it paid for the company, but Drive.ai reportedly raised $77 million.
Unlike Alphabet’s (GOOGL - Free Report) Waymo, Apple hasn’t reported any major automotive partnerships and its own self driving technology doesn’t receive the same amount of press, but comments by Tim Cook on various occasions indicate that it remains very much in the running. Talking about where it’s going in the future is just something Apple has never done that well.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Apple Roundup: China, iPhone Rumor, WWDC, Acquisitions
June ended on a positive note for the market with the President relenting on the issue of Huawei and going back to the negotiating table with China. This is good for many technology companies including Apple (AAPL - Free Report) , which has from the beginning said that no good would come from the trade war.
CEO Tim Cook, along with other technology leaders have been meeting with the President and his advisory committee where they have promised to train an increasing number of Americans so the skill shortage wont force them to recruit from other places.
At the same time, Apple is considering moving part of its manufacturing out of China and preparing for antitrust lawsuits at home. Regulatory matters aside, June is always special because Apple hosts its developers’ conference this month, which along with some acquisition news, rounds out the top stories.
Apple Moving Production Out of China
According to a Nikkei Asian Review report, Apple has asked its Chinese suppliers Foxconn, Pegatron, Wistron, MacBook maker Quanta Computer, iPad maker Compal Electronics and AirPods makers Inventec Corp, Luxshare-ICT and Goertek to consider moving 15-30% of production out of China. The goal is to geographically diversify the supplier base so as not to be overly dependent on any particular country/government.
Apple apparently specified that Mexico, India, Vietnam, Indonesia and Malaysia were preferred locations with India and Vietnam being favorites for smartphones.
Meanwhile, Young Liu-Way, one of Foxconn's incoming directors, has said that around 25% of its production capacity is already located outside China and that there would be no difficulty responding to the demands of the U.S. market.
CEO Tim Cook maintains that while people think that the iPhone is made in China, it’s actually only assembled there and that the iPhone is actually built all over the world. “And so a tariff on the iPhone would hurt all of those countries, but the one that would be hurt the most is this one,” he said of the U.S.
He has also said that he doesn’t expect China to impose retaliatory tariffs that could hurt Apple: "Well, currently, the Chinese have not targeted Apple at all. And I don't anticipate that happening, to be honest," according to CBS News.
Morgan Stanley analysts estimate that the impact of Apple’s China exposure is 29% of earnings as any loss of revenue is partially offset by reduction in operating cost.
Developers Sue Apple
After the Supreme Court okayed lawsuits against Apple regarding its dominance of the iOS app marketplace, some developers have sued the company for forcing them to sell via the app store.
Developers of basketball-workout and baby-naming apps were among entities complaining that Apple’s policy of requiring sales only through the app store forced them to raise the prices of their apps. Apple’s 30% commission for maintaining a relatively secure marketplace where they had to compete with 2 million other developers for visibility, is excessive according to them, and prevented them from making a profit.
Apple has denied that it’s a monopoly because they can still make Android apps, but of course this is not the issue. It has also said that it charged a commission of only 1% of Spotify (SPOT - Free Report) users, so the company shouldn’t complain (Spotify is the one that first took the matter to European regulators). The monopolistic practices of technology companies have come under fire of late, so Apple’s arguments may not stand up in court. It’s dominance of the iOS marketplace may be short-lived. Then again, it may succeed in keeping the matter in court indefinitely.
Developers’ Update
The highlights of this year’s WWDC included a brand-new iPad OS and updates for watchOS, tvOS, iOS 13 and macOS. Here are some of the highlights-
The iPadOS interface is now a hybrid between macOS and iOS with enhanced Apple Pen support, upgraded Split View and Slide Over, a more powerful Files App, as well as a customizable home screen.
The iOS 13 preview showed a new Dark Mode for iOS, more comprehensive editing tools, a revamped Maps app with much greater accuracy despite being far more detailed (to launch later this year) and a more natural sounding Siri. There will also be a new encryption framework called CryptoKit that developers can use to “perform cryptographic operations securely and efficiently” in iOS applications. The promise is that the new OS will launch apps up to 2X as fast, with 30% improvement in Face ID unlocking speeds, a 50% drop in app download sizes and a 60% drop in app update sizes.
The completely voice-controlled macOS Catalina launches this fall with improved iPad compatibility to Mac owners using models from mid-2012 or later. It allows iPads to be used as second displays. It replaces iTunes with standalone versions of the Apple Music, Apple Podcasts and Apple TV apps. It comes with Project Catalyst that helps iPad developers easily convert their apps into Mac apps.
The watchOS will launch this fall, bringing healthcare enhancements for women and the hearing impaired. The update is available for Apple Watch Series 1 devices or later paired with iPhone 6S or later and running iOS 13 or later. It’s coming with the watchOS version of the App Store, complete with calculator, audiobook and voice-recording apps.
The new tvOS, to launch in the fall of 2019, will have a new Apple TV home screen and multi-user support for personalized experience to each user. It will also come with Xbox One and PlayStation 4 game controller support.
With a focus on privacy and security, Apple’s new "Human Interface Guidelines" requires developers to place a “Sign in with Apple” option above the “Sign in with Google” or “Sign in with Facebook” buttons they provide in their apps (when they provide these options).
These buttons come in handy for users who don’t want to bother with remembering separate sign-in credentials for each app. But users don’t always realize that linking all their activities to their Google or Facebook accounts enables these companies to use their data for profiling, ad targeting and developing artificial intelligence.
Apple proposes a more private sign-in option that won’t allow this to happen. Since users generally pick the default or the option placed right at the top, that’s where Apple wants its button to be.
The guidelines aren’t strictly mandatory but developers widely believe that compliance helps them get approved.
iPhone 11 Rumors
Veteran Apple analyst Ming Chi Kuo has forwarded the information that Apple is gearing up to launch 5.4-inch and 6.7-inch flagship iPhones in 2020. The lower-cost version will also have a big screen size of 6.1-inches and an OLED display. The modem in all phones will come from Qualcomm but only the 5.4-inch and 6.7-inch versions will have 5G with the 6.1-inch version only offering LTE. Its own 5G modem will first be introduced in its flagship devices in 2022 or 2023.
Apple Interested in Intel’s Modem Business
According to sources at The Information, Apple is looking to buy Intel’s modem business, which is basically the wireless arm of the German technology firm Infineon that Intel (INTC - Free Report) purchased in 2011 for $1.4 billion. This is the same unit that supplied baseband chips to Apple between 2007 and 2010, before it became part of Intel.
Intel has said publicly that after Apple patched up with Qualcomm (QCOM - Free Report) and entered into a multi-year licensing deal with the chipmaker, the modem business wasn’t something the company could profitably pursue any more. So it has been looking for buyers.
The reason Apple is interested in Intel’s unit is because of its ultimate goal of developing the 5G modem internally. As far as the Qualcomm truce is concerned, Apple was forced to eat humble pie after declaring that Qualcomm’s licensing fees were extortionist and taking the chipmaker to court. Apple has the strategy of making as much of its devices in-house as possible and has been building a semiconductor team for some time. The current deal is likely designed to buy it time until the technology is ready internally.
In February, Apple hired away Umashankar Thyagrajan from Intel, who is thought to have played a key role in the development of its XMM 8160 5G modem (that was being developed for Intel, but wasn’t delivered on time).
Bought Drive.ai
Some people were concerned that Apple was shuttering its self-driving operations, or at least trimming it when it announced a headcount reduction of 200 in January. Apple put those fears to rest in June with the confirmation that it was buying struggling self-driving shuttle service Drive.ai. The company operates in Texas.
This is a standard aqui-hire, with not much more to add. The company trimmed its own workforce by 90 before Apple acquired it. Apple being the giant that it is, doesn’t need to report what it paid for the company, but Drive.ai reportedly raised $77 million.
Unlike Alphabet’s (GOOGL - Free Report) Waymo, Apple hasn’t reported any major automotive partnerships and its own self driving technology doesn’t receive the same amount of press, but comments by Tim Cook on various occasions indicate that it remains very much in the running. Talking about where it’s going in the future is just something Apple has never done that well.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>