Apple – Ugly duckling.

Only software can make it a swan.

• The much-leaked iPhone 11 was launched to very little surprise and a form factor that only a mother could love.
• The huge square camera bump is going to divide opinion as some people will love it but personally, I think the new design destroys the beautiful aesthetics of the device and has Steve Jobs turning in his grave.
• Furthermore, I think the design is unnecessary as both Samsung and Huawei have done perfectly acceptable implementations of a triple camera set-up from a design perspective.
• Perhaps Apple thinks that because it will cost around $600 to replace the back glass, that everyone will put a case on it, thereby rendering the design less important.
• I do not see this as a good turn of events as almost everyone has found previous designs to be pleasing meaning that the total number of people who like the look of the device will be less than before.
• Hence, it may dissuade some users from making the upgrade.

iPhone 11

• Outside of this, three new iPhones have been released: the iPhone 11 (which succeeds the Xr), the iPhone 11 Pro and the iPhone 11 Pro Max.
• By far the biggest upgrade this year is the cameras which on their own are nothing special, but it is the software that brings them to life.
• Apple has added a series of touches to the software experience that blends these cameras together that puts it a step ahead of the competition.
• Smooth zooming between cameras, greatly improved night mode and advanced HDR to come in a software upgrade are what makes these devices different.
• Elsewhere they are pretty much the same as last year with no move the USB-C and only an incremental upgrade to the silicon.
• The A13 Bionic offers about 20% improvement in performance but the real upgrade is that it can do this and still provide longer battery life than its predecessors.
• Apple still leads the industry in silicon, but the improvements are becoming incremental.
• Long gone are the days when the next chip offered 2-3x the performance meaning that Qualcomm and others may soon close the gap.
• The pricing remains unchanged other than the iPhone 11 which has fallen in price to $699 meaning that these devices are still very much at the premium end of the market.

Apple Watch

• There is also a new Apple Watch (series 5) where the real upgrade is a move to a variable refresh rate OLED display which has enabled Apple to implement an always-on display.
• Why this excellent feature is not also offered on the iPhone is beyond me.
• Again, the key feature here is that the display can be always on while still offering all-day battery life.

iPad

• A new entry-level iPad also launched with a slightly larger screen that is clearly aimed at attacking the low end of the laptop market.
• In order to do this iPad OS needs mouse and full-fat Microsoft Office support both which are still lacking.
• Hence, I think there is still some distance to go before the iPad can really take a shot at this segment.

Take-Home Message

• Apple also launched a casual gaming service for $4.99 per month which offers a series of exclusive games for iPhone, iPad, Mac and TV.
• This combined with the fact that it is the software that Apple has put into its new phones that make the cameras special is a clear indicator of where the company is going.
• The hardware upgrades are becoming increasingly incremental meaning that Apple has to rely more and more on software.
• Fortunately, this is Apple’s forte (unlike Samsung or Huawei) and with Google unable or unwilling to bring its ecosystem on Android up to Apple’s level of quality, its competitive edge remains sharp.
• This event showed very clearly that it is not that Apple is doing anything special, but it is Google’s ineptitude that allows the iOS ecosystem to stay on top.
• Hence, while growth is going to be an issue, I think profitability will remain very strong making the shares very defensive.
• This is why I am happy to hold the shares but am not excited about the prospect of buying more.