On February 2nd, Apple's (AAPL. NASDAQ) first head display product, Vision Pro, was officially released.
"Just as Mac takes us into the era of personal computing, iPhone takes us into the era of mobile computing, and Apple Vision Pro takes us into the era of spatial computing." Apple CEO Tim Cook emphasized its position in Apple's development history when introducing Vision Pro.
According to data from third-party consulting firm TrendForce, Vision Pro is an important layout for Apple to expand the market size of virtual headsets, and can also enter the VR/AR market through this product, becoming a pioneer in technological innovation. If the first purchase is enthusiastic, it is estimated that the shipment volume of Vision Pro will reach 500000 to 600000 units in 2024.
The entire industry is waiting for the landing of Apple Vision Pro, paying attention to whether it can usher in the era of "spatial computing".
This is also the expectation of Steve Jobs, the soul figure of Apple. In the biography of Steve Jobs, it is mentioned that "my passion lies in building a company that can be passed down, where the people are motivated to create great products. Everything else comes in second place. Of course, making money is great because that's how you can create great products. But the motivation comes from products, not profits."
However, since Cook took over as CEO of Apple, this once stunning technology company has gradually lost its product driven genes and been replaced by money first. When Cook first took over, Apple's market value was less than $400 billion. In 2018, Apple became the first technology company with a market value exceeding trillions of dollars, and today, Apple's market value has approached the $3 trillion mark.
Behind its high market value, Apple is plagued by hidden worries: products are stuck in innovation bottlenecks, high debt to asset ratios, and frequent antitrust investigations... Now, can the highly anticipated Vision Pro become a star product like iMac, iPhone, and iPad?
Can Apple, which has gone through 48 years of development and ups and downs in the business world, overcome its midlife crisis through this?
Cook's lack of innovation
"The former leader was amazing, how should the successor take over? Looking at the world, Cook has the most say in this issue," a netizen wrote in a book review of "Tim Cook's Biography" on Douban.
Li Kaifu, who once worked at Apple, said that without Steve Jobs, there would be no Apple II in 1977, Macintosh in 1984, iMac in 1998, iPod in 2001, iPhone in 2007, and iPad in 2010.
These famous products were thanks to Steve Jobs' wild imagination and creativity. The existence of Steve Jobs has given unprecedented importance to the position of product manager. The successors include Zhang Xiaolong, who developed WeChat and is also regarded as a first-class product manager.
It is difficult to find a second tech genius like Steve Jobs who has made disruptive changes in multiple industries including music, animation, and computers, while also capturing the general public with personal charm and aesthetic concepts.
However, God envied the talents. In 2011, when Jobs was 56 years old, he died of respiratory arrest caused by pancreatic cancer. Cook, who was good at supply chain management, took over the management baton from Jobs.
In the past 13 years, the hardware products covered by the Apple ecosystem have been constantly updated, with Apple Watch, AirPods, AirTag, and other star products becoming popular. "But the stunning feeling of being one era ahead of its competitors has disappeared, and the highly anticipated Apple Car has also bounced off several times," an industry observer familiar with Apple told Time Weekly reporters.
Industry insiders believe that Apple has lost its product driven genes, and every generation of iPhone is taking a small step towards compromise with reality. When models such as iPhone 4S, iPhone 5, and iPhone 6 were launched, Apple fans gathered in offline stores to queue up and make purchases. Nowadays, this grand occasion no longer exists.
On the other hand, the lackluster product innovation was due to Apple's rapid performance during Cook's tenure. In the 2011 fiscal year, Apple's revenue was $108.249 billion. In the 2023 fiscal year, 12 years later, Apple's revenue had reached $383.285 billion, of which the iPhone alone had a revenue of $200.583 billion.
However, it is worth noting that as a technology giant with a total market value hovering around $3 trillion, Apple's debt to equity ratio is also deviating from the general public's perception. As of the end of December 2023, Apple's debt to equity ratio reached 79.04%, a historically high level.
Meanwhile, according to research data from BusinessFinancing. co.uk, Apple's debt may have reached a staggering $109.28 billion, second only to Amazon, making it the second most indebted technology company in the world.
IPhone is difficult to support on its own
Solving the current dilemma is urgent for Apple.
Data shows that in the fiscal year 2023, Apple achieved a revenue of $383.285 billion, a year-on-year decrease of 2.8%; The net profit attributable to ordinary shareholders was $96.995 billion, a year-on-year decrease of 2.81%.
However, Apple's latest Q1 2024 financial report (i.e. Q4 2023) shows a revenue of $119.575 billion, a year-on-year increase of 2%; Net profit was 33.916 billion US dollars, a year-on-year increase of 13%.
In terms of business, the "flagship product" and iPhone, which accounts for half of the revenue, had sales of $69.7 billion in the fiscal quarter, a year-on-year increase of about 6%, higher than the expected $68.6 billion.
This is the first full fiscal quarter since the large-scale launch of the iPhone 15 series in September last year. The revenue of the iPhone product line has increased significantly year-on-year, but the revenue of other hardware product lines has not increased significantly year-on-year, with some showing a significant decline.
Cook announced in his financial report that the number of active iPhone devices worldwide has exceeded 2.2 billion. Some analysts predict that iPhone sales may not be able to maintain this momentum in 2024. For example, Guo Minggui, an analyst at Tianfeng International Securities, pointed out in his latest supply chain survey that Apple has lowered the number of upstream key semiconductor components, and the estimated shipment of iPhones in 2024 is as low as 200 million units, a 15% year-on-year decline. He also stated that Apple may be the brand with the largest decline among major global mobile phone brands in 2024.
This means that the imagination space of hardware is gradually narrowing.
In recent generations, new iPhone products have been frequently ridiculed by netizens as "toothpaste squeezing innovation" and "old is new". For this reason, Apple began to boost sales through price reductions, promotions, and other means.
As the Chinese New Year approaches, there is a rare price reduction on Apple's official website: discounts and promotions for all products including iPad, iPhone, Mac, and AppleWatch. Consumers can purchase designated products through eligible payment methods, with a maximum price reduction of 800 yuan. The new iPhone 15 series is also included in the promotion range.
What does middle-aged Apple need to rely on to support high valuations and long-term development?
From the existing business perspective, the service business is seen by Apple as the next growth point. Apple's service business includes App Store, audio and video streaming Apple Music and Apple TV+, iCloud storage, AppleCare warranty, advertising revenue from Google search engine license agreements, payment fees for Apple Pay and other products, etc.
Apple's recent performance report shows that in the first quarter of the 2024 fiscal year, the services business achieved a revenue of $23.12 billion, accounting for nearly 25% of the total revenue, and is the second largest business after the iPhone.
However, Apple's hard-earned service business is also facing challenges. The "Apple tax" is an important component of Apple's service business, but it has always been criticized, and technology celebrities such as Zuckerberg and Musk have publicly complained.
Nowadays, antitrust regulations in the European Union, the United States, and Japan are prying open Apple's third-party app sideloading and third-party payments, directly threatening the "Apple tax".
Recently, Apple announced on its official website that significant updates to the iOS system, Safari browser, and App Store will be implemented in the EU region to comply with the European Union's Digital Markets Act (DMA). Apple has made a historic concession: iOS apps in the EU region will reduce the royalty rate (Apple tax) for developers, from the original 30% to 17%, or from the discounted 15% to 10%, almost halving.
Starting from the "head" and moving towards the unknown
For Apple, finding the "next generation iPhone" outside of the iPhone has become a top priority for the continuation of Apple's business empire.
Nowadays, the Apple Vision Pro headset is considered the most likely flagship product to take over the iPhone, and has recently received increasing exposure.
It is reported that Vision Pro is equipped with M2+R1 dual chips and uses the VisionOS operating system. Its main feature is the integration of AR (augmented reality) and VR (virtual reality) technologies, allowing wearers to stay in touch with the real world while experiencing the virtual world. On the application level, in addition to common games and movies, Vision Pro has also expanded into office and leisure scenarios.
Guo Minggui stated in a report that based on the pre order stocking level and shipping time, it is estimated that Apple will sell 160000-180000 Vision Pro units in the first weekend after opening the Vision Pro pre order. Consistent with previous predictions, the opening of Vision Pro pre orders means that all models are sold out, and the shipping time for each model is generally extended to 5-7 weeks within a few hours after the opening of pre orders.
Guo Minggui also pointed out that within 48 hours after the opening of bookings, those extended delivery times have not changed, which has raised a major concern that demand may quickly weaken after core fans and heavy users place orders.
Meanwhile, according to Wall Street analysts, the expensive Vision Pro will not immediately bring significant revenue growth to Apple. They are monitoring people's initial reactions to Apple's new product categories to demonstrate their future potential. They expect that at present, Vision Pro is still a relatively niche product.
But in the latest earnings conference call, Cook responded to analysts' questions about the price of the Vision Pro, stating that the reason why this headset is priced higher is because it covers 5000 patented technologies.
This also brings huge business opportunities to the supply chain. According to Wellsenn XR data, a total of 7 mainland Chinese companies have been included in the Vision Pro supply chain list. Among them, the whole machine assembly is outsourced by Lixun Precision, the body frame and outer shell are provided by Changying Precision and Lingyi Technology, the power system will come from Desai Battery, and the speaker module will come from Goethe Corporation. Roughly estimated, the above hardware accounts for about 16% of the overall cost of Vision Pro.
Huatai Securities wrote a research report proposing that assuming the shipment volume of Vision Pro's first generation products corresponds to the scale of 500000 to 1 million units, the optimistic calculation shows that the first generation products will drive the supply chain by about 3 billion US dollars per year, accounting for 5% of Apple's 60 billion US dollars. Therefore, the overall performance of the first generation products on the supply chain company is limited.
In addition, taking the development history of the smartphone industry as a reference, in addition to product hardware, excellent content is also an important factor driving the rapid development of the industry. If developers can develop early "Temple Escape" of iPhone, "Animal Forest" of Switch, or national level applications on mobile phones such as WeChat and Tiktok on Vision Pro, it is possible to drive the rapid rise of terminal sales.
In the eyes of industry observers, it is difficult for Vision Pro to be considered mature at this stage, but as the first new product since the launch of smartwatches in 2015, Vision Pro may improve market confidence in Apple and establish the company's position as an AR/VR technology innovator, which is beneficial for driving stock prices.
As for whether the head display device Vision Pro can become Apple's new ace in the next 10 years, it still needs time to be verified. Before the release of Vision Pro, Nick Bilton, a special correspondent for Vanity Fair, interviewed Cook, who frankly stated that it is difficult to accurately predict the future, even if this product is created by Apple.
Cook said, "What we do is get very excited about something, and then we start researching to see where it will take us." In his view, "Sometimes these points are interconnected. They will take you to an unexpected place.".