Digital Ecosystems – Hardware season

Very little to excite consumers.

• The autumn hardware launch season kicks off today with Apple followed by Google and Meta the main theme of which is going to be how to keep consumers buying when they are worse off.
• Apple is expected to launch a new iPhone range and a watch on 7^th September with Google launching a new Pixel and accessories on October 6^th and Meta Platforms launching a new high end VR unit on October 11^th.
• The problem that all of these launches are presented with is that inflation is reducing disposable income, and in a market where almost everyone has a smartphone, these are not essential purchases.
• The majority of users change their smartphone before the one that they have stops working meaning that when disposable income declines there is a tendency for users to use their smartphones for longer before buying a new one.
• This is what is driving the current weakness in the market and the challenge for this hardware launch season will be to convince users that they need a new device.
• As Apple’s market share of the installed base grows in developed markets, this is becoming more of an issue as its reach into the mid-range has increased over the last few years.
• The market is not expecting a huge amount from this release season and the focus is likely to remain on incremental camera improvements which I do not think is going to inspire users to rethink delaying their purchases.
• The one area that Apple may surprise is in the Metaverse.
• The title of the session is “Far Out” which could be a veiled reference to the Metaverse which RFM Research has concluded is a very long-term concept.
• I don’t think that Apple will launch a device, but it may begin to discuss its aspirations in this area perhaps with some on stage developers or partners or even an upgrade to AR Kit.
• Google is showing no signs talking about what it is doing in the Metaverse and so I continue to expect it to launch a range of devices that very few people will buy.
• Meta Platforms is also showing some hesitancy with its all-in strategy for the Metaverse and so I am not expecting that its event (which will be entirely focused on the Metaverse) to have much in the way of fireworks.
• There are signs that Meta is already slowing its investments in this area as a result of both the slowdown in digital advertising and the rise of nimble and effective competition hurting its core business.
• I think that Meta will launch a new higher-end VR headset which will provide a needed upgrade but in terms of accelerating the roll-out of the Metaverse, there will be very little.
• Hence, I see nothing here that is going to drive consumers to buy more devices and so it looks like 2022 is going to be a soft year as one would expect.
• This is why I remain pretty ambivalent to the large digital ecosystems as their valuations remain quite high despite falling or even negative, revenue growth.
• Meta Platforms is coming into interesting territory, but I don’t think that the worst is yet over and so this is not one I want to buy yet.
• Alibaba is the only one that I hold but even this has been a rotten choice so far.