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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Apple, famously, does not rush into new markets. It holds back, often ceding first-mover advantage to rivals, until it believes it has a sure-fire hit on its hands.
Even by the high standards of the perfectionists from Cupertino, though, nearly a decade is a long time to wait for a groundbreaking new gadget. That’s how long it has been working on its two most hotly anticipated new products: a car and a “mixed-reality” headset, which combines elements of virtual and augmented reality. Each of these products has reached something of a crossroads, presenting a test for the company’s vaunted launch discipline.
Apple’s last big gadget launch was nine years ago, with the Watch. In the equivalent space of time, Steve Jobs landed the iPod, iPhone and iPad on the world, a series of industry-shaking firsts that may never be matched. His successor Tim Cook has always faced questions about his own ability to find Apple’s “next big thing” — though his successful stewardship of the iPhone and expansion into the profitable services business has lifted the company’s stock price 15-fold since Jobs’s death in 2011.
Cook could hardly be accused of sitting on his hands. On his watch, Apple’s research and development intensity has mounted steadily. Spending on R&D reached nearly 8 per cent of revenue last year, up from just over 2 per cent a decade ago.
This reflects an escalation of spending on existing mobile platforms as Apple has taken on development of most of the core technology in its products, from chips to advanced software. Bringing generative AI to its devices is the latest front — though as usual, Apple is staying quiet about how it plans to use the technology. But if the smartphone accounts for much of the escalation in R&D, running long-term projects for major new computing platforms such as mixed reality headsets and cars does not come cheap.
The much-delayed Apple car has been the most intriguing of these, and Bloomberg reported this week that its potential launch had been pushed back again, to 2028. It has never been easy to see how Apple could achieve a clear advantage in such a slow-moving and capital-intensive market. In recent months, as driverless car companies across the board have experienced delays and setbacks, the prospect of an outsider being able to ride the wave of a disruptive new technology has looked even more remote.
The car industry also presents a challenge to Apple’s hugely profitable business model. The industry-leading gross profit margin on Tesla’s automotive operations briefly topped 30 per cent in 2021. Since then, though, higher interest rates and rising competition have driven Tesla’s margin below 18 per cent. Compare that with Apple on a gross margin in a far less cyclically sensitive industry that reached nearly 45 per cent last year.
Meanwhile, Apple’s first mixed-reality headset, the Vision Pro, will finally hit the market next week. It arrives to unusually low sales expectations for a landmark product from a company with a reputation for defining important new consumer tech markets. That reflects supply constraints in the short term, though a $3,499 price tag has also made it prohibitively expensive for most.
The user experience was greatly praised last year after very limited and highly controlled “hands-on” tests, but the technology still has a way to go. The headset will have an external battery pack and early reports from reviewers suggest it is heavy to wear.
Nor is it clear what buyers would use it for. Apple has stressed the Vision Pro’s potential as a work tool — though it has also pitched it as an entertainment device and a way to take and view 3D videos. The decision by some of key entertainment companies, including Netflix and Spotify, not to release apps for the new device at launch could also limit the appeal.
That is why it is still tempting to see the launch of the Vision Pro as too early. Yet it is never easy to see how general-purpose computing platforms will catch on, or what gaps they will fill in users’ lives. When he first showed off the iPhone, Jobs pitched it as the perfect device for three things: making phone calls, browsing the web and listening to music: an App Store did not figure in the equation.
For better or worse, the Vision Pro’s time has come. But it looks like being a very slow burn, and it is far too early to tell whether it will end up being a major new computing platform or a niche for Apple superfans.
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