Apple WWDC – One missing thing

The generative AI elephant is likely to be ignored.

• All of the attention will be on Apple this week where it is almost certain to make a play for the Metaverse in the hope that in all the excitement, everyone forgets just how far behind it is when it comes to AI.
• Apple’s developer conference kicks off today and for the first time in 12 years, the company will launch a new product category rather than an iPhone accessory.
• Most likely to be included:
  • First, device embedded software: This will include iOS 17 and its derivatives such as iPadOS 17, WatchOS 10 and the new xrOS (see below).
  • I am not expecting new wow features here but more a series of incremental tweaks aimed at making the experience better and more intuitive.
  • This is classic Apple, and it is needed to keep the iOS ecosystem ahead of what is on offer on Android which is often powered by higher-specification hardware.
  • MacOS 14 as well as an M2-powered 15-inch MacBook Air are widely expected which will continue to extend Apple’s lead in the user experience as well as its ability to offer both performance and excellent battery life in a portable computer.
  • Second, The Metaverse: Apple will pitch its headset as mixed reality, but the reality will be a virtual reality device with the ability to overlay the real world on top of the virtual.
  • It will also have a screen on the front to display the user’s eyes and expressions to make interactions more natural but I think this is a weird idea that no one has ever tried and am far from convinced that users will not find it creepy.
  • Apple is also expected to launch a new iOS spinoff called xrOS which will have extensions built into it to deal with the unique use case for its device.
  • The device has been widely reported to cost $3,000 but I can’t help thinking that this may have been deliberately leaked by Apple so that when the real price comes in lower, everyone has reverse sticker shock.
  • This will be crucial as the Apple glitterati will be a vital element in helping Apple to sell this proposition which to me still looks half-baked.
  • The Metaverse is miles from any kind of technical maturity and as such it is unlikely to get any real traction for some years to come.
  • This means that no one can create a great user experience because the technology is not yet there to enable it.
  • This is similar to the situation that existed in touchscreen smartphones 20 years ago when only resistive touchscreen technology was available which offered a poor user experience.
  • When capacitive touch became available, this set the scene for touch to be the main way to interact with a small computing device.
  • I suspect there are similar issues with metaverse devices, and that Apple is launching some years before it really needs to.
  • This is why I also think that this will be a developer device in order to get developers onside and prevent Meta Platforms from locking down the entire industry with its platform.
  • In effect, it’s a placeholder.
• Most likely to be missing will be generative AI where as far as I can tell, Apple is nowhere.
• Siri remains as awful as ever and is now hopelessly outclassed by any system that is based on a large language model.
• Fortunately, everyone is likely to make their LLMs available to run on Apple devices, but this will be with the LLMs running in the cloud and doing the processing there.
• RFM Research concludes that on-device inference will offer both a much better and more private user experience as well as far better economics for the service provider (see here).
• Running LLMs with billions of parameters on battery-powered devices is very challenging and requires considerable integration of both hardware and software.
• Consequently, with no service of its own, I suspect that Apple will need to rely on supporting the LLMs of others with inference running in the cloud.
• Open source already has a 7bn LLM running on a Google Pixel and serves as an indicator of where the industry is likely to go.
• Hence, if LLM-powered services become a differentiator, Apple could find itself in similar difficulty to when Samsung pioneered large-screen smartphones and Apple was some time in reacting.
• I suspect that Apple will create plenty of buzz around its new product to distract its fans leading them to forget about the hottest new technology in digital life at the moment, but this will only last for so long.
• Hence, this is something Apple will need to address sooner rather than later, or we may start to see doubts creeping in around the long term which in turn will dent the premium multiple being afforded to the shares.
• I still can’t find any way to find the valuation attractive and remain happy to sit on the sidelines.