It’s An Apple Kinda Week
Peter is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Apple Worldwide Developer’s Conference is this week and the rumors are flying hot and heavy about what new stuff will be introduced in the land of dream-based marketing. As opposed to adding to the rumor mongering it seems more interesting to highlight what this will mean to a number of Apple’s (NASDAQ: AAPL) suppliers, both current and future. The new version iOS is on the table, as banners have been spotted. Bloomberg reported that Baidu (NASDAQ: BIDU) will be a built-in search option for China iPhones and iPads which is a big win for them and signals a move towards getting the iPhone onto China Mobile.
A6 Supply Chain Leverage
The biggest worry for those in the Apple supply chain is Samsung. They who have built themselves a brilliant business on the strength of their partnership with Apple has also run into the inevitable patent-lawsuit iceberg, which now threatens the U.S. launch of the Galaxy S3 smartphone. Apple must feel confident that they can source enough of the 28nm A6 chips from other chip fabricators than Samsung to file this suit right now.
Rumors abound about the capabilities of the A6 and whether it will incorporate an LTE modem is the biggest issue, not the number of cores. Apple’s focus is on the whole experience with their devices not satisfying the numbers geeks who troll the tech blogs. Qualcomm’s (NASDAQ: QCOM) current business with Apple constitutes just less than 6% of their revenue, less than half of that which comes from Samsung and HTC.
If the A6, which is likely to be in the next iteration of the iPad, has an integrated LTE chip of Apple’s design look out for both Samsung and Qualcomm to file patent-infringement suits against Apple. If they license the technology then whoever wins the license is in very good shape, most likely Qualcomm. Do not discount Nokia’s (NYSE: NOK) angle in this market as they hold more than half of the patents issued surrounding LTE security. With Apple’s ridiculous profit margin per item, these licenses wouldn’t affect the bottom line much if at all.
Effects of WWDC
The announcement of adding Apple’s own mapping software to their iGadgets will be a big blow to rival Google (NASDAQ: GOOG) as the license agreement with Apple brings in nearly 40% of their mobile revenue every year. This is a $1.6 billion dollar hit to Google’s top and bottom line, or about 2% of total revenue.
The new line of MacBooks and MacBook Airs has been unveiled. A touchscreen MacBook Air is not in the cards, does that give the upcoming Windows 8/RT tablets and hybrids an opening to meaningfully grab market share? Intel’s new IvyBridge processors are the big upgrade as nothing shipping currently from any of the ARM manufacturers or AMD was capable of truly competing with an Intel plus discrete graphics combination, especially at Apple’s level of margin. The big reveal was that Nvidia is the GPU provider in the new MacBook, ending Apple’s relationship with AMD. AMD will have to console themselves with their design wins with the Wii-U and the recently leaked specs on the new Playstation 4.
The rumors of some form of Apple TV turned out to be just that, rumors. FOXCONN, however, has been rumored (via Digitimes) to be taking orders for some form of Apple television set. Even an iOS variant developer’s kit for AppleTV was not announced. Microsoft is already moving in that direction as well with their SmartGlass app and Xbox 360; announcing their system for integrating the living room with the rest of the house. Apple not announcing this puts Microsoft ahead in that part of the market right now. Apple will likely play catch up quickly announcing something massive that leap-frogs Microsoft within the next 9 months and use their huge supply chain advantage to full court press Windows 8’s first mover advantage.
Remember, Microsoft already has 65 million people who own an Xbox 360. Apple has the phones and the tablets and Microsoft has the consoles, the motion control and the PCs. Both have cloud services. Win 8 phones and tablets are incoming by the time Apple brings hardware to market. While Microsoft may have the advantage in the short term, where Apple goes the market will listen. With their dominance in the mobile device market Apple will have zero problem bringing the hardware vendors into their fold; making it easier for them to integrate iOS support into their control software, i.e. remote controls. Apple’s brand dominance in this space will have developers falling over themselves to be a part of these changes.
With Computex and E3 just past, the WWDC this week and Microsoft’s unveiling of Windows 8 and Windows Phone 8 on June 20th, we’ll have a much clearer picture of where the tech world will be going in the next 12 months.
PeterPham8 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.