Apple: Why is it getting bigger and bigger?

　　On the one hand, Apple makes large-scale acquisitions for technology, and on the other hand, it cuts expenses and controls costs through continuous patent wars. Over the years, this model has allowed Apple to continue to lead the global technology fashion and earn a lot of profits. Let's follow the mobile phone portable editor to learn about the relevant content.

　　Three years ago, a senior executive of Broadcom in Asia told a reporter from China Business News, "If I were to compare the business models of Apple and Samsung, I would prefer Apple because its model is simple and efficient. Unlike Samsung, which has a huge industrial chain, it has a higher profit margin than Samsung."

　　However, three years later, Apple's business model is facing challenges from the "other side of the coin". Faced with the changing market demands brought about by big data, cloud computing, and artificial intelligence (AI) in the mobile Internet era, Apple is stepping up its acquisition pace, from augmented reality to motion capture, from high-precision GPS technology to cutting-edge camera technology, from facial expression recognition, voiceprint recognition to software and hardware security to server integration technology, and driverless technology, etc. In order to better carry these high-tech hardware and software, Apple has even stepped into the initiative of the chain for Qualcomm, INTEL, TSMC, and AMD. Currently, Apple supports Foxconn's bid for Toshiba's chip business, which has attracted global attention.

　　"From PC to mobile Internet and then to the AI ​​(digital and cloud computing) era, if Apple wants to continue its existing business model, it must continue to expand forward. This is a layout for the future. However, with the continuous development of technological segmentation and verticalization, Apple is acquiring more and more companies. As a result, Apple is running further and further on a closed road, and the battle line is getting longer and longer." Li Beiheng from a high-tech company in the United States told reporters.

　　As the industrial chain gets longer and longer, the "Big Apple" is also getting bigger and bigger. Can the Big Apple continue its simple and efficient management model? Can it always occupy the highest point of technology consumption in the face of complex technologies? Especially in the face of competition from latecomers, can Apple still transform its technological advantages into market advantages?

　　supply chain

　　Seize the initiative in supply chain

　　For Apple, this is a future-oriented industrial chain layout, in which technology is the top priority. For mobile phones, the core of technology lies in chips.

　　In June 2017, Reuters reported that Apple was participating in Foxconn's acquisition of Toshiba's chip division. Terry Gou, the actual controller of Foxconn, also confirmed that "Apple's participation in the acquisition has been approved by Apple CEO Tim Cook and Apple's board of directors."

　　Prior to this, there was news that Apple held at least 20% of the shares in the joint acquisition of Toshiba Semiconductor with Foxconn. Almost all the industry leaders participated in the bidding. In addition to Apple, Amazon, Dell, Google, Microsoft, Cisco and other giants behind Foxconn, Broadcom, Hynix (backed by Bain Capital), Western Digital (etc.) were also on the bidder list. The bid amount was as high as 27 billion US dollars. It is worth noting that this is almost the first time in Apple's history that it has participated in the bidding of supply chain companies in such a high-profile manner? Why are Toshiba chips so popular?

　　Li Beiheng told reporters, "This is because Flash is out of stock. The global shortage has led to price increases. In the Flash field, Toshiba ranks second and Samsung ranks first. For Apple, Samsung is both a partner and a competitor. In the context of global shortages, if Apple wants to be free from Samsung's control, it must find ways to expand its supply. In this regard, investing in supply chain companies is the best choice."

　　Judging from the trend of technological development, global technology giants are currently betting on the chip industry related to neural network computing. In the first half of 2017 alone, there were as many as 20 mergers and acquisitions, with a total value of more than US$20 billion. Among them, the most eye-catching one is undoubtedly Intel's (33.74, 0.20, 0.60%) acquisition of Mobileye, which amounted to US$15.3 billion.

　　Therefore, Apple must invest in Zhida to maintain production capacity and grab the market where Android is in short supply. "This is a good opportunity to win by doing well and not making mistakes," said Li Beiheng.

　　However, this also forces Apple to face an increasingly long battle line.

　　In fact, in the first half of this year, Apple's replacement of the graphics chip supply chain also attracted global attention. This is also a major decision for Apple in its future strategy. If participating in Dongzhi does not bring too much trouble to Apple and consume too much energy, then the self-development of alternative suppliers will inevitably bring Apple into a new "competitive field."

　　Just in April this year, the shares of two semiconductor chip suppliers plummeted due to the news that Apple was developing its own chips, which aroused people's attention to Apple's ambitions.

　　First, there was news that Apple was preparing to develop its own display chips, which caused the stock price of Imagination, a British semiconductor company and supplier of graphics chips (GPU), to suffer a heavy blow, with its stock price plummeting by 70%. Then, there was news that Apple was developing its own power management chips, causing the stock price of Dialog, a well-known German semiconductor company, to plummet by one-third.

　　There are signs that Apple is investing more in developing semiconductors on its own, thereby abandoning external suppliers. On the one hand, self-development can reduce the payment of patent fees and reduce costs, and on the other hand, Apple can better control and manage its products.

　　Just from 2015 to 2016, Apple's R&D expenditure increased by a quarter to $10 billion. Apple's Chief Financial Officer Maestri once revealed that the reason for the sharp increase in R&D expenses was the increase in R&D investment in semiconductors and sensors.

　　Obviously, Apple is making every effort to lay out in the core technology field of the supply chain, but it cannot be ignored that if Apple wants to develop a certain chip on its own, in addition to a large amount of R&D investment, the accumulation of professional talents is indispensable. If Apple wants to develop power management chips on its own, it must recruit at least 1,000 professional semiconductor talents, which also makes Apple's organizational structure more bloated.

　　Apple's original manufacturing model of outsourcing or OEM cooperation, which strives for "simple organization", has become even bigger due to the upward extension of the industrial chain. Is this a necessary path for Apple?

　　technology

　　Unstoppable technological competition

　　For Apple, which continues to create market miracles, each iteration of its products must face two problems: first, to keep up with the pace of technological updates, and second, to control the latest technology. Of course, the most important point is to acquire at the lowest cost. In Apple's acquisition history, it is rare to see large-scale acquisitions of billions or tens of billions of dollars. Most acquisitions are only tens of millions or hundreds of millions of dollars.

　　It is this last point that tests Apple's grasp of technology trends. Zhang Jindong, chairman of Suning Cloud Commerce, once told a reporter from China Business News, "Whoever can judge the trend of business development five or even ten years earlier will occupy a key position in the industry." In fact, for technology giants, the control of technology development trends also directly determines the competitive position of enterprises. This is the reason why technology giants such as Apple, Amazon, Microsoft, Google, and Facebook are all engaged in an unstoppable technology competition.

　　Let’s take a look at the technology areas that Apple has acquired in recent years:

　　Recently, the sleep monitoring company Beddit disclosed in its latest privacy policy that it has been acquired by Apple, and revealed that users' personal data will be collected and used in accordance with Apple's privacy policy in the future. It is clear to all that this is the expansion of Apple Watch's functions beyond fitness. Because Beddit sleep trackers can monitor users' heartbeats, breathing, snoring frequency, and bedroom quietness, generate comprehensive data and send it to mobile phones via Bluetooth, thereby further expanding the application of Apple Watch.

　　Don't underestimate Apple's technology acquisitions. In 2012, Apple acquired fingerprint sensor manufacturer AuthenTec for $356 million. Subsequently, a mature fingerprint encryption solution was unveiled on the iPhone 5s. Since then, it has driven the entire industry's progress in fingerprint recognition.

　　Similarly, 12 years ago in April 2005, Apple acquired a company called “FingerWorks” that specialized in gesture operation/gesture recognition for an unknown price. A few years later, Apple launched the first generation iPhone with multi-touch function. Now multi-touch has become a must-have feature for smart phones.

　　Today, Apple's focus areas are concentrated in facial expression recognition, motion capture and recognition, voiceprint recognition, database, map and navigation services, positioning technology, VR, AR, deep learning, software security and other fields. This means that Apple is making in-depth arrangements to enhance users' future applications.

　　以地图为例，2012 年淘汰谷歌地图开始使用自家地图，但市场口碑并不好。2015年 5 月，苹果收购了专注于高精度 GPS 技术的 Coherent Navigation，而后者公司的技术可以结合传统的地球中间轨道GPS卫星与低轨道提供语音和数据的铱星，提供更高的精密性、信号完整性和更强的抗干扰能力，其定位精度可以精确到厘米。外界推测，苹果很可能藉此来改善苹果地图的体验，但该事件也释放了一个重要的信号，那就是苹果在涉及用户应用的“技术控制”方面将不遗余力。

　　As we all know, biometric technology is becoming the core of the next generation of smart home appliances. Giants either spend a lot of money on acquisitions in this field or spend a lot of money on research and development. As early as 2013, Intel acquired Omek Omek, an Israeli gesture recognition technology developer. In 2016, eBay announced the acquisition of Corrigon, an expert in computer vision and visual search technology, to help customers find what they need from more than 1 billion products.

　　Apple has spared no effort in this field. In 2010, Apple acquired Siri and started its journey in voice recognition. In order to improve the Siri experience, Apple acquired the voice recognition company Novauris Technologies in 2013. Novauris is a voice recognition technology that can recognize entire phrases. This technology does not simply recognize single words, but attempts to use the recognition of more than 245 million phrases to assist in understanding the context.

　　Later, in 2015, Apple acquired VocalIQ, a British voice technology startup. VocalIQ focuses on natural language processing technology, which means that its products can make it easier for computers to understand human commands, which means that it can make Siri smarter. In addition to being able to recognize speech, VocalIQ's products can also help applications learn better. For example, the more you use Siri, the more training Siri gets.

　　According to expert analysis, the technology developed by VocalIQ can integrate voice processing and machine learning technology into wearable devices and home networking devices. The company also pays special attention to the development of in-vehicle applications. This acquisition also confirms Apple's determination to enter the automotive field in the future.

　　Just a few days before and after Apple acquired VocalIQ, Apple acquired Perceptio, a company that specializes in creating image recognition technology for smartphones. Perceptio developed "deep learning" technology for smartphones, which allows mobile phones to independently recognize images without relying on any external database.

　　Since then, Apple has continued to make efforts in the field of real-time motion capture and acquired Faceshift to continue to build and improve its own facial recognition technology. It is worth noting that Faceshift's technology was once used in the Hollywood movie "Star Wars" to capture the motion of non-human intelligent creatures.

　　不仅如此，2016年 1 月，苹果收购了创业公司 Emotient，该公司利用人工智能技术对人类面部表情进行分析，解读其情绪。有专家分析指出，该项技术应用广泛，广告商可以用来评估观其广告的反应，医生可以藉此解读那些无法进行自我表达的病人的痛苦表情，零售商也用它监测购物者在商店走道里的面部表情。

　　At present, the technologies acquired by Apple are still being used to improve the future applications of its terminals. However, with the multi-dimensional development of technology, how Apple integrates these cutting-edge technologies into one terminal is also facing challenges. Does this mean that Apple will expand new product lines?

　　model

　　Is the business model a continuation or a change?

　　For Apple, to embark on the path of autonomy and control, on the one hand it must constantly strengthen itself, and on the other hand it must constantly compete with its opponents. In the process of strengthening itself and competing with external opponents, Apple's business model is also facing a huge test.

　　From a financial perspective, Apple has a cash flow of $250 billion. Technology acquisitions are the best way for the company to preserve and increase its value. In addition, due to the U.S. overseas tax law, Apple is not in a hurry to transfer overseas revenue back to the United States. Instead, local acquisitions are the best option.

　　However, on the other hand, the decline in Apple's mobile phone sales also suggests that Apple needs to continue to cut costs to maintain its existing performance. Public information shows that Apple's performance is entering a "downward" channel. In the second, third and fourth fiscal quarters of 2016, Apple's operating income and net profit both declined to a large extent. It was not until the second quarter of 2017 that these two indicators showed a slight increase at the same time. At the same time, the main products in Greater China, the Americas and the European market also encountered the challenge of declining market share.

　　Or, it can easily help people understand why Apple broke up with Qualcomm.

　　Public information shows that Apple and Qualcomm are engaged in an epic war. According to Yahoo Technology, Qualcomm has long been adhering to the strategy of "no chips if no license is purchased" and charges certain patent licensing fees to companies that use its technology. According to this logic, Qualcomm requires Apple to pay part of the iPhone's revenue as its patent licensing fees.

　　Apple, which has always been famous for its strict cost control, is obviously no longer willing to tolerate Qualcomm's "unreasonableness", not to mention that Apple is experiencing a market decline in recent years. In order to reduce costs and increase profits, Apple sued Qualcomm in the United States, the United Kingdom, and China.

　　On June 20, Apple once again delivered a fatal blow to Qualcomm, pointing the finger at Qualcomm's chip licensing model and accusing Qualcomm's smartphone chip licensing agreement of being invalid. The good news for Apple comes from the Lexmark case ruled by the US Supreme Court in May. According to the precedent of the case, Qualcomm can only charge one fee, either a patent licensing fee or a fee for chips. It is worth noting that in the antitrust investigation launched by China against Qualcomm, Qualcomm was able to preserve its existing "business model" by accepting a fine of 6 billion yuan. Whether Apple can shake this model is currently attracting much attention.

　　However, competing with competitors is Apple's consistent strategy. Whether it was Samsung in the past or Qualcomm now, Apple needs to rebuild its own advantages in each competition. As the saying goes, growth requires either self-transformation or subversion of competitors. At present, for Apple, the journey to subvert competitors is still a little long, but the challenge of self-transformation is already in sight.

　　"Faced with an increasingly large Apple, how Apple's management can maintain its existing management efficiency is becoming an urgent test. Cook is good at acquisitions, but resources are increasing. How Apple can find the 'exquisite configuration' that can best highlight its own value among so many resources and achieve better technological integration will be an issue that Apple cannot avoid," Li Beiheng told reporters.

　　observe

　　Big Apple risks

　　In 2014, Apple acquired Beats for $3 billion, creating a "huge deal" in Apple's acquisition history. Some people compared it with Swell, an online music radio station that Apple acquired in the same year, saying that Beats is 100 times that of Swell. Three years later, Apple continued to make efforts in the content field. On April 17, an analysis report from the Royal Bank of Canada stated that Apple would acquire Disney for $200 billion, with a specific transaction of $223 billion, including a 9% tax rate. If the deal is reached, Apple will become an unrivaled super giant company in the world, with a market value expected to reach more than $1 trillion.

　　Therefore, a huge Apple will not only be reflected in the "airtight" layout in the field of cutting-edge technology, but also include huge ambitions in content distribution.

　　Regarding Apple's strategy, industry insider Yu Yang once wrote, "There is no evidence that Apple wants to add video content to its product portfolio. On the contrary, Apple is still focused on being a content distributor under its IOS system." In Yu Yang's view, instead of purchasing original content from traditional content service providers or technology companies disguised as media companies, Apple will be more inclined to purchase good creativity and ideas, which is well reflected in Apple's music streaming.

　　Indeed, according to an analysis by Royal Bank of Canada, “Apple intends to build a content rival to Netflix by leveraging Disney’s TV and movie rights to bring them to the iPhone, iPad, and Mac platforms. In addition, Apple will unify all of its technology products and software into Disney’s various theme parks around the world.”

　　However, the next question is how Apple can strike a balance between its ever-growing hardware platform and its increasingly extensive content distribution? As we all know, Apple's hardware has contributed most of its profits for a long time, while the App Store has created added value for Apple's end users, increased stickiness, and is brewing a revenue model based on the future.

　　However, conflicts between the two have also begun to emerge. For example, after Apple removed Google Maps from its App Store in 2012, user reputation began to decline. Apple had to acquire new technology companies to continuously improve the experience of its own maps, but it is still unknown when the effect will be seen. In fact, maps are just an introduction case. As Apple acquires more and more technologies, it is expected to provide more and more of its own software products in the App Store in the future. Whether these software products can win the favor of users or have other conflicts with competing products remains to be seen.

　　At the same time, Apple's content distribution model has begun to face more and more challenges.

　　On June 1, Apple issued a notice to developers around the world: all applications in the AppStore are prohibited from using "hot updates". At the same time, Apple began to charge a 30% handling fee for in-game currency, game levels, access to premium content, or unlocking the full version of various APPs obtained through the "reward" function. This move was resisted by Alibaba (141.09, 0.28, 0.20%) and Tencent in China.

　　In fact, the content distribution model was established by Apple CEO Steve Jobs and has been continued ever since, that is, if Apple can bring a new subscription to a partner, it will get 30% of the share; if the publisher brings a new subscription itself, Apple does not take a penny. The "30-70" is the share ratio that has been continued between Apple and its partners, with Apple getting 30% and the partner getting 70%.

　　At the same time, Jobs also emphasized that if a partner's software application involves other authorized services, subsequent transactions must all be completed on the App Store and through Apple's transaction system "in-app purchasing". This time Apple's ban on "hot updates" is aimed at the problem of "subsequent transactions not being completed on the App Store."

　　Today, Apple's removal of tens of thousands of apps and its 30% cut of in-app "rewards" are seen by the outside world as an important manifestation of strengthening "platform rules", which highlights Apple's choice between "open" and "closed" paths. Obviously, Apple chose the latter.

　　A completely "selfish" apple will go further and further on the road of closure. The more "closed" it is, the more it needs to keep "expanding" and growing in order to maintain absolute or powerful control. At the same time, the bigger the apple becomes, the more self-identified it will be, and thus more "closed".

　　Trout once said, "A company's greatest weakness is buried in its greatest core competitiveness." Or, this is Apple's "destined" risk. Apple's fate was determined when Jobs returned to Apple and re-led the market's business model, and it is difficult for Cook to deviate from this track.

    The above is the introduction about the portable mobile phone - Apple: Why are they "getting bigger and bigger"? If you want to know more related information, please pay more attention to eeworld. eeworld Electronic Engineering will provide you with more complete, detailed and updated information.