Apple is "worried about internal and external troubles", and Cook China asks for help
作者 | Yinting Hou
Edit | weber
"I am very happy to be back in China again and we will continue to invest in the Chinese market. At the end of last week, Apple CEO Tim Cook (Tim Cook) appeared at the 2024 annual meeting of the China Development Forum, telling the media that the Apple Vision Pro headset will be launched in the Chinese market within the year, and Apple is continuing to increase investment in research and development in China.
During his five-day trip to China, Cook expounded confidence while looking for allies. On March 25, according to the "Science and Technology Innovation Board Daily" of the Interface and Finance Associated Press, Baidu will provide AI functions for Apple's iPhone 16, Mac system and iOS 18 released this year.
On March 26, Silicon Valley technology media The Information quoted sources as saying that Apple has reached a cooperation agreement with Tencent, which will provide Vision Pro with a number of its popular apps.
At the same time, Apple's own backyard "caught fire". On March 21, the day after Cook's visit to China, the U.S. government sued Apple for illegally monopolizing the smartphone market in a lawsuit that threatens to upend the tech giant's business model and the way consumers around the world use iPhones.
From the "AI war" in Silicon Valley to the "heavy punch" of the US Department of Justice, Apple faces multiple challenges in 2024. On January 12, Microsoft's stock price rose 1%, reaching a market value of $2.88 trillion, once again surpassing Apple and returning to the world's first place. This means that at the turn of the times, AI has officially become the new technological productivity.
In the early morning of March 27, Apple announced that it will hold the "WWDC 2024" Worldwide Developers Conference from June 10 to June 14, Pacific Time in the United States, and this year's theme will be AI.
Since the beginning of the year, Apple's market value has fallen by more than 11%, and the pressure on Cook is mounting. In order to accelerate his entry into the AI track, Cook asked for help from many sources, and this trip to China was no exception.
On March 20, Cook arrived in Shanghai and walked along the Bund with Chinese actor Zheng Kai. On the same day, Cook also met with Apple's Chinese suppliers, including Wang Chuanfu, chairman of BYD, Zhou Qunfei, chairman of Lens Technology, and Chen Xiaoshuo, general manager of EPI Precision.
The next day, Asia's largest Apple retail store, Apple Shanghai Jing'an store, opened, and Cook pushed the door on the spot to attract the first batch of "fruit fans" into the store. It is reported that Apple's Shanghai Jing'an store is the highest standard Apple flagship store in China, with a total investment of more than 83.4 million yuan, second only to the global Apple flagship store on New York's Fifth Avenue.
Source: Weibo @TimCook
On Xiaohongshu, a popular social media platform in China, netizens also enthusiastically discussed Cook's visit. But behind the euphoria is the fact that iPhone sales are declining in China, and Cook needs to regain the love of this market.
In the first six weeks of 2024, iPhone sales in China fell 24% year-on-year, ranking fourth among Chinese smartphone suppliers, and its market share fell to 15.7% from 19% in 2023, according to research firm Counterpoint. Greater China is Apple's third largest market. Apple's financial report shows that in the fourth quarter of 2023, Apple's net sales will be $119.575 billion, of which about 17% will come from the Greater China market, but this figure has fallen by 13% year-on-year.
"For us, there is no more important supply chain in the world than China. Cook told the media that all of Apple's products will be carbon neutral by 2030, which will require China's help, and Apple is investing heavily in generative AI.
Cook spoke about AI for the first time in China, saying that AI is already being used in various aspects of Apple products, such as the Apple Watch's fall detection and the iPhone's predictive text input, all of which are powered by AI. However, compared to the technological revolution started by Google, Meta and OpenAI, Apple's current progress does not seem worth mentioning.
In order to boost product sales in the Chinese market, and to fast-forward a little on the generative AI track, Cook sought to cooperate with Chinese Internet companies.
On March 25, the Wall Street Journal reported that "Apple has held preliminary talks with Baidu about the use of Baidu's generative AI technology in Apple devices in the Chinese market, the latest example of the iPhone maker's commitment to expanding AI capabilities." ”
Previously, Apple's rival Samsung had partnered with Baidu. In January, Baidu Intelligent Cloud announced a partnership with Samsung, and the AI of the Samsung Galaxy S24 series integrates the capabilities of Baidu's Wenxin large model.
The boots have not yet landed, and Xiaguang Society learned that the cooperation between Baidu and Apple, led by Baidu Intelligent Cloud, is still in the exploration stage, and the two sides have not yet responded to this.
According to the above-mentioned "Science and Technology Innovation Board Daily" report, Apple has negotiated with Alibaba and another domestic large-scale model company, and finally decided that Baidu will provide this service, and Apple is expected to adopt the API interface for billing.
In addition, during his trip to China, Cook also actively promoted the cooperation and implementation of Vision Pro in China.
The Information reported that people familiar with the decision, who have first-hand information about the decision, said that Tencent has agreed to provide Apple's Vision Pro with a number of "most important apps".
Tencent is China's largest gaming, social media and streaming company, and Tencent Video and Honor of Kings are key Tencent products, which may be launched in Vision Pro.
In fact, Cook also met warmly with game maker Papergames last week. It is reported that at the beginning of February, the Vision Pro version of the papergames product "Love and Deep Space" was officially established.
Source: Weibo @TimCook
Since its launch, Vision Pro has collaborated on a number of Chinese games, such as "My Tom Cat+" and "My Angela 2+" under Talking Tom, a Chinese listed game company. Also at the beginning of February, miHoYo officially announced that "Honkai: Star Dome Railway" will be available on Vision Pro.
It is worth mentioning that in mid-March, Apple also announced that it would upgrade the capacity of its Shanghai research center and open a new lab in Shenzhen to conduct research and testing work for the iPhone, iPad and Vision Pro product lines, while deepening cooperation with Chinese suppliers.
Apple said it had invested more than 1 billion yuan in various applied research labs in China before the projects. Isabel Ge Mahe, Apple's vice president and managing director of Greater China, said, "We are proud to be deeply involved in China and expand our world-class facilities here. ”
Since OpenAI launched ChatGPT in December 2022, the "AI race" in Silicon Valley has become increasingly fierce, and the positions of major tech giants are changing rapidly.
Earlier this month, Ming-Chi Kuo, an international analyst at Tianfeng Securities, posted on X (formerly Twitter) that "if Apple fails to launch generative AI services that are better than market expectations this year, NVIDIA will most likely surpass Apple in terms of market capitalization." ”
Source: X @mingchikuo
As of the close of the U.S. stock market on March 26, Nvidia's market capitalization was $2.38 trillion, while Apple's market capitalization was $2.64 trillion, a gap of less than $300 billion.
As soon as the news of the U.S. Department of Justice's antitrust lawsuit against Apple came out, at the close of trading on March 21, Apple's stock price fell by more than 4%, the largest one-day decline since August 4, 2023, and its market value evaporated by more than $100 billion in one day.
Looking back less than a year ago, on June 30, 2023, Apple's market capitalization exceeded $3 trillion for the first time, becoming the first company in the United States to exceed $3 trillion in market capitalization.
With the advent of the AI era, Apple continues to "fall behind", and Wall Street investors are becoming more and more skeptical. Today, Apple's market capitalization has retreated sharply, with its stock price falling from a peak of $199.62 per share to around $170 per share.
The rest of the big companies in Silicon Valley have taken off against the trend with AI, telling beautiful stories in the capital market, and their stock prices have risen frequently.
ChatGPT, an epoch-making innovative product, has brought the former giant Microsoft back to its glory and become the king of global market capitalization. Last year, Microsoft's stock price soared every time it released AI-related product news. In 2023, the company's stock price has risen by nearly 60%.
Microsoft is OpenAI's largest shareholder. Back in 2019, Microsoft invested $1 billion in it, which didn't receive much attention at the time, and by 2023, Microsoft has invested a total of $13 billion in it.
According to a report by the Financial Times in early February, OpenAI's annual run rate (a measure of one-month revenue multiplied by 12) reached the $2 billion revenue mark in December 2023.
In addition to Microsoft, Meta and Google are also rapidly seizing the dividends of the AI era.
In July 2023, Meta launched LLama 2, an open-source model equivalent to GPT-3.5, and received more than 150,000 download requests within a week of its release. In January, Meta CEO Mark Zuckerberg announced on Instagram that Meta AI had begun training Llama 3. According to the latest disclosure from The Information, Meta plans to officially release Llama 3 in July this year.
In February, Meta produced the "strongest financial report in history", with revenue of $40.11 billion in the fourth quarter of 2023, a year-on-year increase of 25%, higher than analysts' expectations. Market sentiment was high, and Meta's stock price soared more than 15% after hours, and its market value soared by more than $140 billion. Within a year, Meta quickly entered the trillion-dollar club, and as of the close of the U.S. stock market on March 26, its stock price had reached $495.9 per share, with a market capitalization of $1.26 trillion.
Google's "hurricane" in AI is also obvious to all. Just two weeks after the launch of ChatGPT, Bard was urgently launched, but there was a mistake in its debut. In December 2023, Google released the AI killer Gemini. Judging from the test results released by Google, Gemini's performance crushed GPT-4 in the fields of text, conventional reasoning, mathematics, and code. Just in February, Google announced the launch of Gemma, the world's most powerful and lightweight open-source model series, making it the world's most powerful open-source model.
In 2023, Google's stock price has also risen by more than 50%, significantly outperforming the Nasdaq Composite Index and slightly behind Microsoft.
Of course, one of the most direct beneficiaries of the AI boom, the global AI chip boss NVIDIA, is the star of the past year and the miracle of the capital market. On February 21, Nvidia released its earnings report, and its stock price rose 16.4% the next day to close at $785.38 per share, a new high, with a market capitalization of $1.96 trillion, an increase of $277 billion for the day, surpassing Amazon and Google, and second only to Microsoft and Apple.
There is no doubt that the AI storm is reshuffling the ranking of tech giants, and in just one year, the landscape of Silicon Valley has changed dramatically.
During Cook's trip to China, the media directly asked "what progress is being made in AI on the iPhone", and he responded positively, "Apple's generative AI will be announced later this year." ”
The outside world has paid a lot of attention to Apple's actions on the AI track.
Judging from the several AI applications announced by Apple, whether it is HUGS for building animations, MGIE for text-based editing images, Keyframer for adding action to images, and Ask, a test Q&A tool, they have failed to make much splash and are clearly lagging behind the giants.
Apple is not without effort, but in the face of the "AI race" in Silicon Valley, it was caught off guard and moved a few beats slower.
In July last year, Apple built Ajax, a large language model internally codenamed "Apple GPT", to test the functionality of Ajax. It is reported that Apple's generative AI team is pushing the project to apply the new technology to Siri in 2024. Apple invested $1 billion in this effort last year.
At the beginning of the year, Apple acquired Canadian AI startup DarwinAI. According to a report by market research firm Stocklytics, Apple has acquired a total of 32 AI companies as of 2023.
Apple has significantly increased its investment in the field of AI, focusing more energy on developing AI. The most obvious signal is that at the end of last month, Apple announced the end of the 10-year-long car-building project and transferred most of its personnel to the AI project.
At Apple's shareholder meeting on Feb. 28, Cook made it clear that he would "break new ground" in AI this year.
But there are concerns about Apple's new technology, arguing that its AI capabilities may take longer to deploy to its product line.
Before the news of Baidu's "hand-in-hand" announcement, Apple was also courting major Silicon Valley giants to help develop its AI capabilities. Recently, according to foreign media reports, Apple is negotiating a large-scale cooperation agreement with Google to integrate Google's Gemini artificial intelligence engine into the iPhone. In addition, Apple has held talks with startups, including Cohere and OpenAI.
AI has taken the tech industry by storm, and Apple is asking for help because it doesn't want to miss the next opportunity. However, there is more than one problem in front of Cook, and the challenge from the European Union and the US Department of Justice is threatening the basic disk of his iOS, which can be described as "internal and external troubles".
Just last week, the U.S. Department of Justice and 16 states filed a lawsuit against Apple in federal court in New Jersey, alleging that Apple violated Title II of the Sherman Act, the U.S. antitrust law, in an 88-page lawsuit asking a judge to order a rectification of Apple's platform competition strategy for iOS.
In the United States, U.S. Attorney General Merrick Garland said at a press conference that Apple has been able to maintain its influence not because of its strengths, but because of the company's illegal exclusivity. The tech company controls more than 65 percent of the U.S. smartphone market. ”
The U.S. government has accused Apple of obstructing competition in the market by illegal means, such as preventing other companies from using the iPhone's full capabilities. For example, Apple prevents PayPal from using the iPhone's NFC chip, iMessage from supporting Android phones, and so on.
The lawsuit is aimed at Apple's moat, which intends to change the rules of the iOS platform and break its business model of integrating software and hardware services. As the pace of sales revenue growth for hardware products such as iPhones slows, Apple relies on growth from the App Store and related services.
Martin Yang, senior analyst of emerging technologies at Oppenheimer & Co., said that the profit margin of the App Store is as high as 80%.
In addition to the U.S. government, the European Union has fined Apple $2 billion on March 4. Apple's charging commissions for in-app transactions has led users to pay more on streaming services, and the European Union has ruled that it is Apple "imposing restrictions" on competitors.
On February 2, Apple launched Cook's headset Vision Pro, which Cook described as "tomorrow's technology", did not bring the expected sales surge, but was exposed to users choosing to return it half a month later.
Another piece of bad news is that Warren Buffett, a long-term shareholder of Apple, has reduced his holdings in Apple. According to Warren Buffett's Berkshire Hathaway's Table 13F disclosure to the U.S. Securities and Exchange Commission (SEC), Berkshire reduced its holdings of about 10 million Apple shares in the fourth quarter of last year, reducing its market value by about $1.8 billion, and Berkshire Hathaway's shareholding in Apple fell to 5.9%.
13 years ago, when Siri debuted at the iPhone 5 conference, this AI voice assistant that can conduct "human-machine conversations" was the highest crystallization of artificial intelligence at that time. At that time, people were also happy to have an iPhone.
But more than a decade later, ChatGPT and Sora have started very different eras, and Siri is still standing still.
To this day, Apple remains the world's second-most valuable Silicon Valley giant. But Cook must bring a bright spot to the market in June, or investors will be voting with their feet again.