Author/ Author of "Finance and Economics" Weekly Wu Di Kang Jialin
Editor/ You Yong
Does the apple have moisture?
On the first trading day of 2022, Apple received a big gift from the stock market.
In the early morning of January 4, Apple's stock price rose as high as 3% intraday to $182.88 per share, and its total market value once exceeded $3 trillion, becoming the world's first company to step into the $3 trillion club. After that, the stock price fell slightly, and the closing market value was fixed at $2.99 trillion.
What is the concept of $3 trillion? We can compare the leaders of Hong Kong stocks and A shares. Hong Kong leading Tencent closed with a market capitalization of HK$4.3 trillion (US$0.55 trillion) on the 4th, while A-share leader Moutai closed with a market value of 2.58 trillion yuan (US$0.4 trillion) on the same day. Apple's $3 trillion is equivalent to 5.4 Tencents, which is about equal to 7.5 Moutai. If according to the volume of the world economy, Apple's $3 trillion market value can also rank 5th, surpassing the United Kingdom, second only to the United States, China, Japan and Germany.
In 1982, Apple went public in the United States with a market capitalization of only $1.8 billion. In August 2018, Apple broke through $1 trillion for the first time, becoming the first company in the world to break through the trillion-dollar mark. Apple achieved this result, and it took 36 years in the middle. But it took Apple only 2 years to go from $1 trillion to $2 trillion, and it took just over a year to go from $2 trillion to $3 trillion.
A cruel fact is that when Apple rose to $1 trillion, it was only equivalent to 2.5 Tencents, but now when it rises to $3 trillion, it is already equivalent to 5.4 Tencents, and the market value gap is obviously widening.
Why can Apple be so fierce? In particular, many consumers obviously feel that Apple's product strength and brand power are declining, why can the company's stock ride the dust and hit a record high?
An investment banker analyzed the weekly magazine "Finance and Economics" that technology research and development and product innovation require cyclical and continuous investment, and it is impossible to innovate in three days and make a breakthrough in five days as some companies advertise. "It is Apple's tradition of not launching any products to the market that it is not satisfied with, but it has stimulated the expectations of the outside world for Apple's future pixel universe, VR/AR devices, and smart cars."
Apple is a product company that adheres to a strict confidentiality system, and apple rarely does too much advance publicity and momentum for products with future ideas. In the market cognition, in the exploration of many forward-looking product technologies, Apple often lags behind the release of peers, but the product will always be post-attacked.
Careful Apple users have found that in the just-released Apple's new film "Swan Song (Swan Elegy)", it is particularly presented about Apple's concept of AR/VR and smart cars, and autonomous driving. "Basically, it inherits the Apple concept map that was previously rumored in the market." Some Apple users gave feedback to the "Finance World" weekly, "This has stimulated the market imagination and expectations." ”
Screenshot of a driverless car/movie presented by Apple in "Swan Elegy"
Zhang Aoping, an economist and president of the Incremental Research Institute, told his understanding of why the capital market has high expectations for Apple from the macro and micro dimensions.
In fact, based on the Fed's loose monetary policy, the release of liquidity has put stocks in the entire US stock technology industry in a general state of growth. Not only Apple, but also Google, Microsoft, Amazon and other stock prices have generally hit new highs. Taking Google as an example, Google's parent company Alphabet has risen by about 70% since 2021, and its performance has also reached the best year since 2009.
"We say that this kind of loose monetary policy in the United States, especially since the epidemic crisis, can basically define it as bottomless easing." Zhang Aoping explained to the "Finance and Economics World" weekly, "To put it bluntly, there is no theory to follow, and you can print as much money as you want. After the epidemic, a large number of developed economies have entered the development mode of debt-based economies. ”
But the bottomless loose funds must have a flow. In his view, the final flow is nothing more than two reservoirs: real estate and the stock market. "With the flood of liquidity in the United States, in fact, a large amount of money has flowed to the capital market, which has also boosted the bull market in the United States capital market." Zhang Aoping said.
This is the macro level of support for the US capital market, especially the head of the technology industry stocks.
At the micro level, the impact of the epidemic on consumption, especially high-tech products, is limited. Although the epidemic has affected the supply chain and triggered a shortage of supply, work and life during the epidemic have stimulated people's consumer demand for smartphones, computers, tablets and other products.
Therefore, although the iPhone 13 series brought a sense of innovation and surprise, Apple was still driven by the release of the iPhone 13 series and won the mobile phone sales championship in the Chinese market for two consecutive months. According to market research firms, Apple's share of the market in October 2021 to win the first sales volume in China's smartphone market, which is the first time since December 2015 that it has returned to the first place in China. In November 2021, Apple ranked first in the Chinese market, with a share of 23.6%. Since Huawei was affected by restrictions, the throne of the first place in the domestic market has changed hands several times, but Apple's continuous summit reflects its still strong brand influence. In the high-end market where Huawei left blank, Apple has become the biggest beneficiary.
It is precisely because of Apple's voice in the high-end market that the company has obtained ultra-high profits. In the third quarter of this year, Apple's net profit margin has exceeded 30%, and an iPhone alone has taken three-quarters of the profits of the global mobile phone industry. And Xiaomi, which shouts "officially benchmarks Apple", has a net profit margin hovering in single digits all year round.
In addition, stable and abundant cash flow and huge cash reserves, as Apple's base, have also won the favor of a large number of investors. In 2021, Apple's cash flow size is about $100 billion, and it has stabilized at more than $50 billion for many years. Apple's current net cash reserves have reached $267.2 billion, which truly explains what is meant by "having surplus grain in hand and not panicking in your heart.".
Zhang Aoping's recent observation is that at present, the entire overseas capital market basically regards this kind of stock in the technology industry as a way of investing similar to gold. "For a large number of U.S. investors, psychologically, in a situation where no one knows what to buy today, Apple as a high-quality technology stock is a good defensive asset."
Therefore, Apple's market value has repeatedly reached new highs, with the quality and uniqueness of its own targets, and there is also the Fed's flood irrigation policy behind the boost.
The boring Cook, however, made Apple more and more profitable
If Apple's early legend was created by Jobs, then Apple can achieve a market value of $3 trillion, inseparable from Cook's 10 years of operation and compromise.
Succeeding from legendary figures like Jobs, Cook, with his aura and controversy, led Apple through an uneventful decade.
The harshest sound is that the outside world believes that only Jobs can represent the true soul of Apple products. The two have completely different styles, and Jobs's appeal on stage, the kind of personal charm that can firmly attract the audience's attention, control and drive the emotions of the audience, is what Cook lacks the most.
As the book "Cook Biography" wrote: At first, no one was optimistic about Cook. Although Cook has strong operational management skills, in the eyes of many people, he is a boring, boring and unimaginative person. People expect a real CEO, and Cook is positioned more like a professional manager.
Cook knew he couldn't be Jobs, and in his response he said he just wanted to be better Tim Cook. What Jobs did was to create, and Cook's mission was to keep it.
What do people say about the Jobs-era iPhone? "Epoch-making", "Disruptive Product". But keywords such as "unimaginative," "lack of innovation," and "boring" began to accompany the successor. Compared with the Jobs era, apples that lack surprises are somewhat discolored. Liu Haiping has been used for five years, and even in recent years, the high brush and fast charging that have been updated have long been the standard of domestic Android manufacturers. Squeezing toothpaste-style product innovation has also begun to become the evaluation of Apple by the outside world.
All this dilutes Apple's original brand tone. The iPhone is Apple's ace product, Jobs hopes to take the boutique route, insist on launching an iPhone a year, as long as it is good enough, there will be users to pay. One of his often hanging on his lips is "Apple is a company that stands at the crossroads of technology and humanities." The design of each product follows this vein, simple, easy to use, and breakthrough.
What Cook needs is growth, adapting to the market, eager to occupy multiple market segments, and wants Apple products to be more diversified. Starting with the iPhone 6, he experimented with the 6 and 6 Plus dual models, and later derived the SE series. Until a few years ago, iterated out three models, from the iPhone XR to the iPhone XS, XS Max, the suffixes are longer than one, and the naming rules are gradually complicated. Apple Watch and AirPods, two products that are really dominated by Cook, imply his expectations for Apple.
It turns out that relying solely on mobile phones to drive the rapid growth of companies will not last long. There is no doubt that Cook has enabled Apple to achieve advanced commercial success. As industry insiders put it: "Jobs was a genius artist, Cook was a successful businessman"
In 2015, Apple released the smart watch Apple Watch, a product that has performed well in the market for several years and has become the main sales force of new products in the autumn; in 2016, Apple released wireless headphone AirPods, which were rated by the US media as the top 10 of the top 100 innovative products in the past decade, and sales in 2019 reached nearly 60 million, accounting for 71% of the revenue of the real wireless headset market. The Android camp has followed Apple's lead, but so far in this market, Apple is still the first share.
Apple has also extended its business tentacles to self-developed chips, and its territory continues to expand. Up to now, in addition to the processor chips represented by the A series, the territory of Apple's self-developed chips has been expanded to power management chips, screen driver chips, T-series security chips, Bluetooth headset main chips, fundamental frequency chips, fingerprint recognition chips, 3D somatosensory chips, etc. In 2020, Apple built the M1 series of chips based on the ARM architecture, facing competition with the x86 architecture in the PC industry, trying to revolutionize Intel's life. Looking at the performance report of the fourth fiscal quarter of fiscal 2021, the revenue of the Mac segment has mainly come from the MacBook Air equipped with self-developed chips.
Another industry consensus is that the service business is more conducive to squeezing out more profits. Cook is also leading Apple to explore its potential in the services business segment, AppStore, Apple Arcade, Apple Music, ApplePodcasts and iCloud continue to launch in more and more countries and regions, which makes Apple's service revenue continue to set record highs. In fiscal 2020, the services segment, Apple's second largest source of revenue, had revenue of $53.8 billion and gross margin of 68.4%.
From the perspective of the company's performance, it can be said that Cook is both an excellent keeper and a qualified pioneer. But "Apple will make money, but it will no longer win people's hearts and minds" may be engraved in Cook's life label for a long time to come.
With 3 trillion Apples, how much does China contribute?
Cook is better at supply chain management than making products, and has a keen sense of business.
Jobs loved Zen Buddhism, but never set foot in China. Cook, on the other hand, attaches great importance to the Chinese market, not only frequently visiting China in the past decade, but also occasionally participating in Chinese business activities, and taking the initiative to open a Sina Weibo account.
Cook attaches great importance to the layout of the Chinese market, and the return of the Chinese market to Apple is also quite rich. Looking at the financial reports over the years, Greater China has been boosting Apple's financial report to the sun, in the third quarter of 2021, Apple's total revenue was $81.4 billion, and Greater China alone contributed $14.76 billion, accounting for 18% of total revenue.
"It was our strongest geography." On the earnings call for the third quarter of 2021, Cook was proud of greater China's performance.
Of course, Apple also relies on China's support in the supply chain.
Looking back at the supply chain management guru's resume, he studied industrial engineering related to production control during his undergraduate studies at Auburn University, and before joining Apple, he was responsible for the manufacturing and distribution of its PC division in North America and Latin America at IBM, and then Cook was responsible for material procurement and product inventory management at Compaq.
The precipitation and accumulation in this field made him well aware that "the supply chain wins the world", and soon after coming to Apple, he showed his talents in the supply chain field, such as reducing Apple's suppliers, outsourcing part of the business, and improving the efficiency of component delivery, which not only effectively shortened Apple's inventory cycle, but also reduced costs and increased profits.
After taking over as CEO, Cook was "crazy" about supply chain control. Li Tian (pseudonym), the head of a domestic antenna manufacturer who has been in contact with Apple, told Caijing Tianxia weekly that Apple has a principle in the process of managing all suppliers, and does not allow suppliers to have any black box operations, including chips, antennas, headphones and other major components, which must be fully controlled by Apple and the process is transparent.
Li Feng of Cping Capital once gave an example to AAC Technology, a company that makes acoustic components for Apple, to illustrate the details of Apple's control of the supply chain. "How does Apple control a critical supply chain? For example, AAC Has Several Production Lines Dedicated to Apple, all the control software and computers on these lines are Apple's, and the ERP system is also Apple's. The person in charge of the production line of AAC often receives an email from Apple saying that there is a problem in a certain place in a production line, and then Apple comes to open the permission and let the person in charge of the production line of AAC go to the scene to check. In addition, Apple has more than two dozen engineers stationed at the factory on a rotational basis. In simple terms, in principle, except for the equipment and workers are AAC, the rest is controlled by Apple. ”
Under this mutual influence, Apple plays a decisive role in the performance development and fate of supply chain partners, so some manufacturing companies hitch a ride, and gradually emerge in the industry, with voice, commonly known as "fruit chain". According to the list of 200 major "fruit chains" disclosed by Apple in 2020, the number of suppliers from China reached 53, accounting for more than a quarter, and the degree of connection can be seen.
But taking the "fruit chain" does not mean smooth sailing, Apple will replace a number of suppliers every year, and companies that are excluded from the list often face performance declines. Last year, camera module supplier OFILM was removed from Apple's supply chain, the stock price was frustrated, revenue plummeted, and the bonus brought by the fruit chain was a double-edged sword.
Due to the dual impact of the international situation and labor costs, prudent Cook once planned to move part of the industrial chain out of China and transfer to Southeast Asian countries such as Vietnam, India and Thailand. Reduce risk by diversifying your layout.
But the sudden outbreak of the epidemic broke his plan. In this black swan event, China's supply chain is clearly more stable and more resilient to risks. The overseas epidemic is out of control, and Apple has to strategically retreat and move the production responsibility back to China. The epidemic in India has allowed Foxconn to return to China with a large number of orders, and since mid-May 2020, Zhengzhou Foxconn has begun to recruit people, and the internal direct push bonus has risen from the original 3500 yuan to 6000 yuan; the intermediary fee of Shanghai Pegatron, Apple's second largest foundry, has also risen. At the same time, Apple's dependence on China has gone further, such as opening up the cooperation of Luxshare Precision, making it Apple's fourth oem supplier.
Apple needs the Chinese market, but also inseparable from China, stable and reliable supply chain and huge sales, has become an important cornerstone of Apple's business empire.
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.