The iPhone 5G - The Ripple or the Wave?
The iPhone 12 will be the most significant update to the most profitable product in the history of the world since the iPhone 6 and 6+ launched in 2014. The biggest reason why is that the iPhone 12 will be Apple’s first foray into 5G. 5G is considered a ‘paradigm shift’ because it enables a whole host of technology applications that simply could not work over 4G LTE. Mobile broadband scales exponentially. 4G LTE max download speed is around 300 MB/sec. Consider this – 5G can max out at 7GB/sec – you can (theoretically) download a full-length 4K feature film in 1 sec or less.
The technology for autonomous cars to be fully ‘unleashed’ has been there for a couple years now, but the realization of that dream has been hampered by mobile infrastructure. Autonomous cars will rely on a much faster network infrastructure (which 5G theoretically provides) to enhance safety and overall reliability through non-latent communication. Oh and btw, you know how cable companies make all their money off internet service and very little off actual cable television now? 5G is the link that will allow wireless internet (through mobile carriers) to become the standard connectivity on smartphones, tablets, laptops and soon enough…home networks. 5G will allow you to obtain speeds that cable wi-fi could never dream of. Additionally, all laptops in the near-future will have always-on connectivity with built-in 5G modems…no more of this tethering or hotspot b.s. Apple is already working on a 5G MacBook powered by Apple silicon.
iPhone 12:
4 Models to launch:
Display: All models will have OLED displays sourced from either Samsung Display or LG Display and calibrated in-house with PPI ranges from 458 to 475 – can’t actually tell the difference at that high of resolution.
Pro Models will likely feature 120hz ProMotion displays which automatically adjusts the refresh rate based on the app being used to conserve power and battery.
Chassis Design: Will revert back to the iPhone 4’s “sandwich-like” chassis (aluminum squared-off edges) as seen on latest iPad Pro models – Aluminum chassis with glass front and rear panels.
Not all 5G is created equal: There are currently 2 versions of 5G networks in the world – mmWave and sub-6GHz (In some ways, it’s comparable to the two standards for 4G LTE that exist now - GSM and CDMA). mmWave is faster, but more limited in range (requires more base stations), while sub-6GHz is slower but has wider range. mmWave is said to be better in urban city environments, while sub-6GHz is said to be better in rural and suburban areas.
Qualcomm: Qualcomm is working on its latest X60 Snapdragon modem which will support both mmWave and the sub-GHz standards, but insiders have said that the development is behind schedule and that the X60 won’t be ready to ship until calendar 2021.
Apple Employees not impressed with 5G: Apple has had employees testing prototypes with 5G connectivity and the results have been mixed mainly due to the lack of network infrastructure that has fallen completely behind schedule because of COVID and the fact that half of the US is on fire right now. The power of 5G can only be realized with adequate infrastructure (i.e., enough base stations) and it’s just not there yet. NYC is said to have decent 5G coverage, but that was before the liberals decided that we don’t have laws in the US, so who knows if they’ve torched the 5G based stations on their way to “peacefully protest”.
AirPods: Apple is going to continue to double-down on its market share strategy and is looking to continue to bleed-out the competition through pricing and not new products. So I would look for continued price reductions as opposed to new releases. A second generation of the AirPods Pro (known as the AirPods Pro 2) will likely ship in 2H 2021 with some health functionality built in.
AirPods Studio: Apple is working on a high-end wireless over-ear active noise cancelling headset that could launch in the next couple months. The headset is said to be full of sensors that will detect orientation (i.e., they will be agnostic to L or R) The AirPods Studio will likely be the product that finally puts Bose out of its misery. MSRP is said to be $349.
The Epic Games (Fortnite) Saga
Epic Games (publisher of Fortnite) has unleashed an all-out war on Apple and Google citing anti-trust violations on both the App Store and Google Play. The issue is this – when you put an app on the App Store and want to offer in-app purchases, Apple requires that those purchases go through the App Store. Apple takes a 30% cut on all of those purchases. What Epic tried to do was route people outside of the App Store to make those purchases and in doing so, not provide Apple its 30% commission. This maneuver was in direct violation of the T&C’s for Apple Developer accounts and therefore Apple removed Fortnite from the App Store.
The question remains – is this an isolated case, or is this the first wave of a much larger storm to threaten Apple’s control of the App Store. Apple has once again retained Gibson Dunn who helped them successfully reach a global settlement with Samsung on matters of IP theft. However, Epic has retained Cravath Swaine and their lead counsel happens to be the former director of the FTC.
Google faces a showdown with the DOJ
Both Apple and Google face antitrust issues on these App Store issues and likely will face some consequence or change of T&Cs as a result. However, the DOJ is about to file a massive antitrust lawsuit against Google that threatens its entire business. Google processes 90% of all online searches in the U.S., and its adtech business represents nearly all of its revenue – for all of the “smart” people they’ve hired, they have never successfully diversified the revenue.
Other Tech Predictions:
Intel Demise: Intel is facing a world of hurt – the saying “a rising tide lifts all boats” does not apply as Intel is anchored by this notion that mobile doesn’t matter.
ARM Holdings (a subsidiary of Softbank) will harvest this year: will see a dramatic increase in revenue as it holds the license to the software architecture that all mobile and PC devices are migrating to.
Nike goes tech: Nike will continue its migration and focus to technology-driven products (Tim Cook is on Nike’s board for a reason), and will seek to reclaim profits with greater control over its distribution strategy – they are quietly eliminating distributors (Zappos will no longer be carrying Nike products). Nike will also likely make a large acquisition as it continues to diversify its reach – Lululemon is targeted for its affluent, fashion-forward and loyal customer base. Under Armour will bleed out as New Balance solidifies itself as #3.
Amazon PrimeWear: Amazon will make a bold play in apparel – all the pieces are starting to show up and there is no doubt that Bezos has been laying the foundation for Amazon to really become the here-all-end-all for retail.
Apple to go private? There is certainly a lot of evidence out there that Apple would like to take itself private. The super aggressive share buybacks have more to them than just ‘neutralizing’ RSUs – it won’t happen in 2021, but I am convinced Apple is tired of all the reporting and disclosures it has to make as a publicly-traded company. I think Warren Buffett and Berkshire, as the single largest shareholder of Apple, is guiding Cook down a certain path. With interest rates where they are, look for Apple to further accelerate its debt issuances to do nothing more than….buy itself. Cook will be succeeded by Apple’s COO, Jeff Williams, in less than 5 years, however that could be accelerated quickly. Look for Cook’s name to be thrown around for a cabinet position should the Dems reclaim the White House.
Tech Companies to Create Universities: The most valuable commodity in Silicon Valley is talent. Look for Google, Facebook and others to create their own universities where they provide kids a free education. What’s the catch? It will be like the military. They will give you an education (where the curriculum is designed to strictly benefit their companies), and in return, they will get x years of service from their ‘alumni’ with a decent compensation package. The best way to attract talent is to create it and groom it yourself….and then create a contract that enables you to retain it. And the best part about it for these tech companies….your education curriculum is designed so it has significantly little value to other companies so you will likely stay long after any contract says you have to – it’s brilliant and shrewd.
Tesla is looking more like Netflix, and less like RIM (Blackberry) and I don’t see that changing materially in 2021.
Top trade: Take a very close look at AMD – always the forgotten one, but never the irrelevant one. Like Nvidia, AMD holds a lot of cards in graphics computing that is immensely valuable to a wide range of strategic buyers.