E-commerce – Look East.

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In mobile, China is more developed than USA.

  • Comparing China’s Singles Day against Brown Thursday, Black Friday and Cyber Monday in USA reveals just how much more advanced the development of the mobile online consumer economy is in China.
  • The first figures for Brown Thursday Black Friday are coming in with Adobe estimating that $7.90bn (Gross Merchandise Value, (GMV)) was spent online with another $6.6bn expected to come on Cyber Monday.
  • Of the $7.90bn, 37% of the revenue was produced by a mobile device of which 70% was transacted via a smartphone (26% total turnover).
  • While these figures are the best ever for the USA in terms of total turnover and smartphone share, they pale into insignificance when compared to Singles Day in China.
  • Between them, Alibaba and JD.com make up 87.2% of all B2C e-commerce in China and on Singles Day they racked up $44.7bn in GMV.
  • In just one day Chinese e-commerce turned over 5.7x in GMV than the two US days put together.
  • If one includes the expectations for Cyber Monday, then the total US holiday shopping period is dwarfed by a factor of 3 to 1.
  • Furthermore, 90% of all of Alibaba’s GMV was transacted on a mobile device and AliPay handled a total of 1.5bn transactions.
  • It is clear that a big discrepancy here is that Singles Day a recently created, online-only event whereas Black Friday has been going since 1952 and remains mostly an offline event that’s is slowly migrating to online
  • However, the scale of the difference between the two clearly demonstrates that when it comes to online transactions and mobile, China is far more developed than USA or other developed markets.
  • I have long believed that there are two main reasons for this:
    • First: the offline experience in China is very poor.
    • This is the case for many sectors but particularly in retail.
    • Chinese offline retail is a fragmented and frustrating experience where decent service and information with regards to inventory, product lines and so on is routinely not available.
    • When an online offering appears where this information is clear and one is able to easily purchase goods and know when they will be delivered, shoppers quickly adapt.
    • Hence, Chinese consumers have very quickly adapted to online shopping as the experience and ease of use is far superior to offline.
    • Second: China is a mobile first market.
    • Cellular connectivity in China has better penetration of broadband connections, higher throughput and lower latency than fixed Internet (see here).
    • Consequently, mobile is the first choice for Chinese users as it almost always offers a better user experience.
  • This is also why we have begun to see reversal of the direction of innovation in mobile services.
  • Historically, Chinese companies have copied ideas pioneered in Developed Markets, but this hs changed meaningfully.
  • For example, many of the innovations that are being put into instant messaging platforms by Facebook, Snapchat, Apple and so on are already available in WeChat, LINE, Kakao-Talk etc.
  • This is a trend I expect to continue going forward.
  • China remains dominated by the BATmen of whom I have preferred Tencent for the last 15 months.
  • However, given its rally and its apparent slowness to monetise its ecosystem fully, I am beginning about switching into Alibaba.

 

Uber vs. Lyft – Blood in the water

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This is Lyft’s best chance to catch Uber. 

  • With yet another skeleton emerging to hinder Uber, Lyft is increasing its recent fund raising by $500m as I think it has realised that now is its best chance to reel in Uber.
  • Lyft has increased its recent $1bn round that was led by Google and CapitalG by another $500m bringing the total post-money valuation to $11.5bn.
  • The extra money will be invested in passenger and driver products which I think basically means reducing the fares and increasing driver take-home in a bid to gain market share.
  • 2017 has been a great year for Lyft but only because Uber has pretty much had the worst year imaginable.
  • Constant turmoil, management turnover, bad press, unhappy drivers and a series of scandals has led to the company focusing on anything but its core business in 2017.
  • This has taken another downward lurch with the disclosure that it suffered a data breach on 57m users and failed to make the users aware that their data had been compromised.
  • This is exactly the kind of bad press that Lyft can capitalise on when it comes to tempting existing Uber users to consider trying Lyft.
  • So far in 2017 this has been very successful as Uber’s lack of focus has led to Lyft being able to confidently expect to improve its market share to 33% from 20% at the beginning of the year.
  • This leaves Uber on 66% which based on my rule of thumb for network based businesses, is still enough to eventually win the market, but its margin for error has been substantially reduced.
  • This rule of thumb states that a company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit (see here).
  • Coming into 2017, Uber had a 20% cushion before Lyft could really start causing it some problems, but this cushion has now been reduced to just 6%.
  • Furthermore, with Google is now backing Lyft as the best way for it to get its self-driving technology (Waymo) to market, this gives Lyft much deeper pockets than it had previously.
  • This combined with how much it has closed the gap on Uber over the last 9 months, means that Lyft is now a real threat.
  • If Lyft can take another 6% or more of market share from Uber, Uber will have lost its hallowed status and as a result I would expect its financial performance to deteriorate materially.
  • All of this plays in Lyft’s favour as Uber’s reputation is now in such a bad state that it has to tread very delicately wherever it goes.
  • This means that the aggressive expansionism that gave Uber its dominant share is no longer possible handing all the initiative to Lyft.
  • I have been very negative on Lyft to date as its position looked hopeless but with Uber constantly shooting itself in the foot has given it a fighting chance.
  • There is no way I can justify a $70bn for Uber given this outlook, and if Softbank is offering this to shareholders to build its stake, I think this represents a great opportunity to exit.

Apple – No Nirvana

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Vrvana unlikely to accelerate Apple’s AR.

  • Apple’s acquisition of Vrvana is the best sign yet that it is intending to get involved in hardware for augmented and virtual reality, but Vrvana is extremely unlikely to be able to accelerate its time to market.
  • Vrvana is a start-up based in Canada that launched a headset called the Totem which received good reviews but never shipped.
  • I suspect that the device never shipped because the company could get its headset to a high-enough level of quality and reliability to make it in the marketplace.
  • Its Kickstarter campaign was pulled as the company realised that its product would never meet the funding goals.
  • Furthermore, the Totem headset itself looks like a lot like a DIY project and is nothing that I would ever expect Apple to ship.
  • Hence, I suspect that Apple’s interest in Vrvana is more about the technology that Vrvana has used to create the Totem which includes:
    • First: the Vrvana Totem is capable of both AR and VR in the same unit.
    • It is able to do this by superimposing the real word onto the virtual which is the opposite of how almost everyone else does it.
    • Instead of having transparent lenses through which the real world can be viewed, it uses cameras to record the real world and superimpose them onto the virtual.
    • There is one camera for each eye such that depth perception of the real world can be maintained through standard stereopsis techniques.
    • Second: because the real-world images are being digitised before being mixed in with virtual images, the virtual images can be completely opaque.
    • In every other AR system I have seen, the virtual images are always somewhat translucent which reduces their ability to appear real as one can always see the real world behind them.
    • Consequently, using this set-up there is scope to mix the virtual and the real world more realistically.
  • This is what I think has interested Apple as the hardware itself is clunky, cumbersome and unattractive to look at.
  • The issue with implementing AR this way around, is that the user is still completely closing himself off from the real world and the head unit used is likely to be far more obstructive than a simple pair of glasses.
  • Consequently, I see this acquisition as highly speculative on Apple’s part with a high probability that this technique for AR ends up being discarded.
  • Given the difficulties being faced by everyone in the AR field (see here), I do not see Apple being ahead of the field nor do I think that this acquisition will accelerate its time to market.
  • The net result is that while Apple is right to explore the possibilities of AR, I suspect that there is no concrete intention to launch a unit.
  • I see this activity much like the vehicle or the television which were experiments that failed to stand up to the scrutiny of market reality.
  • Consumer AR is likely to remain a prisoner on the smartphone for the foreseeable future where no one looks capable of effecting a prison break any time soon.

Sonos – Sounds of sameness pt. III.

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Sonos is now just another speaker maker.

  • Sonos has finally enabled Alexa voice control and Spotify support in its speaker systems thereby ensuring that it will now be competing purely on the quality of its hardware.
  • The Sonos One is Sonos’ first voice-activated speaker which has received rave reviews for its sound quality, but very little else.
  • This is because this device uses Amazon’s Alexa to control its functions and is adding support for streaming services like Spotify and Tidal with increasing regularity.
  • While this is exactly what is required to sell speakers in this day and age, it is confirmation to me that Sonos has completely lost its mojo.
  • Sonos was very early into digital music streaming around the house and developed a suite of software that made multiroom music possible.
  • While this was a novelty, Sonos achieved differentiation and was able to charge a premium price for its high-quality audio products with this functionality.
  • Unfortunately, Sonos has squandered the lead that it had and instead of using its lead to maintain its differentiation, it focused on trying to lock users into its products.
  • It tried to do this by only allowing users to access popular services such as Spotify, Amazon and so on via its own app.
  • The idea was to create a compelling user experience such that users would choose a Sonos even if something of equivalent quality was available at the same price point.
  • Unfortunately, this is where it has all come unstuck as Sonos’ ecosystem delivers a frustrating, buggy and substandard user experience that I think users would not use if they had a choice.
  • By enabling both Spotify Connect and Amazon Echo, Sonos has removed the requirement for users to use its software which I think is a sign that it is giving up on trying to create user preference around an ecosystem.
  • Because Amazon Echo and Spotify Connect are keen to work with any speaker on the market, Sonos’ differentiation now becomes: audio quality and design.
  • Multiroom functionality is now table stakes in the home speaker game.
  • Hence, I see Sonos’ only chance is to either
    • First: invest in cool new hardware features and stay ahead of its competition to maintain its price premium or
    • Second: to go for volume and gain scale advantages by significantly outselling its rivals.
  • Both of these will be extremely difficult to achieve as much bigger and stronger rivals are all investing in producing great audio quality in a small package and the market is rapidly fragmenting given the low barriers to entry.
  • Given Sonos’ current position, I think that both of these options would have required a bold strategic move from Sonos that would probably have had the most chance of success if it had appointed an outsider as CEO rather than its COO.
  • Hence, I think Sonos now has nothing to differentiate it from Apple HomePod, Google Home Max and so on meaning that its only weapon will become price.
  • I think that this is big problem because its larger and more powerful rivals are more than capable of subsidising these products in order to push their ecosystems deeper into the home.
  • The net result of this is likely to be a weakening of Sonos’ financial position to the point where one of the larger players is able to buy it at a discounted valuation.
  • I see Samsung, Apple, Sony, Tencent and Amazon as potential acquirers.

Google – The colour purple.

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Fuchsia could replace Android Auto and Android Wear.  

  • Google’s mysterious operating system Fuchsia is starting to take shape with the addition of a user interface as well as support for programming languages that are used to create both Android and iOS apps.
  • What was first noticed as a few lines of script is gradually reaching the point where it could be suitable to run a large range of digital devices leaving me wondering whether this is its answer to the endemic Android fragmentation problem.
  • Fuchsia was first noticed on GitHub in August 2016 and differs from Android in that it is not based on Linux but on a kernel called Magenta which looks more like a kernel that is typically used for embedded systems such as vehicle infotainment units, white goods and so on.
  • Fuchsia is also a real-time operating system (RTOS) which tend to be used for smaller systems which are typically embedded where response time is critical to the user experience.
  • Windows, Linux, Unix and so on are less time critical and are designed to run multiple tasks at the same time on much more powerful hardware.
  • This is the one thing that makes me question the suitability of Fuchsia to replace Android as other factors make it look a lot like an Android replacement:
    • First, user interface: the user interface (Armadillo) that has been added looks a lot like what one would expect from a smartphone with a touch-based input system and card-based user experience design.
    • Second, Swift support: Recent code contributions by Google indicate that it is working to include support for the Swift programming language which can be used to create apps for all of Apple’s operating systems.
    • This is a significant step as it implies that Google is working to make it as easy as possible for developers to have their apps running on Fuchsia.
    • Developers often develop for Apple before turning their attention to Android due to the better economics that exist for them on iOS.
    • This support could allow them to publish on Fuchsia at the same time with no incremental effort.
    • This kind of support has been promised many many times in the past but no one has really delivered it in practice.
    • Third, obsolescence: looking at the history of Symbian, it became unusable 12 years after its creation as the core upon which it was built become obsolete and impractical to upgrade.
    • Android will be 12 years old in 2019 raising the possibility that it, too, may become obsolete requiring a complete rewrite from scratch.
  • My take home from this analysis is that Fuchsia looks most suited to be used in embedded systems such as vehicles, white goods, machinery, wearables and so on.
  • Consequently, this could be a single replacement for Android Auto and Android Wear, both of which are not ideally suited (because they are Android forks) for the use cases for which they were designed.
  • Hence, I think that it is unlikely that Fuchsia will replace Android on smartphones and tablet, but the possibility is there should Android start to struggle with obsolescence.
  • Given, its current stage of development, I would expect Fuchsia to make a real appearance in 2019 rather than 2018.
  • In order to solve the Android fragmentation problem Fuchsia would need to be closed down by Google and used to replace Android on smartphones which at the moment looks like a big stretch.
  • Therefore, I still think that a complete closing down of Android to become a proprietary OS is how Google will solve the fragmentation and updating problems that are crippling the user experience on Android.

Alibaba – Offline grab.

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Alibaba is very different to Amazon.

  • I think Alibaba’s investment in Sun Art has nothing to do with Amazon’s strategy with Whole Foods, and everything to do with the woeful state of the offline transaction experience in China.
  • Alibaba intends to invest $2.9bn in Sun Art, a hypermarket operator which has 446 stores in 224 cities across China and turnover of around $16bn.
  • Alibaba will acquire a 36.2% stake in the company which to date has operated as a j.v. between French retailer Auchan and Taiwanese conglomerate Ruentex Group.
  • Offline retail in China is still massive at $4.5tn despite the rapid expansion of e-commerce and is a great example of why online and mobile have been so successful in the Chinese market.
  • Chinese offline retail is a fragmented and frustrating experience where decent service and information with regards to inventory, product lines and so on is routinely not available.
  • Consequently, when an online offering appears where this information is clear and one is able to easily purchase goods and know when they will be delivered, shoppers quickly adapt.
  • It is the terrible offline experience with regards to almost everything that has allowed so many other goods, services and activities in China to rapidly migrate from offline to mobile.
  • I think that Alibaba’s strategy with Sun Art is all about turning it into a high quality and efficient retailer using the technologies and logistics expertise that it has gained with the development of its e-commerce business.
  • This is very different to Amazon and Whole Foods as Whole Foods already provides a pretty good and reliable retail experience with good logistics.
  • I think that Amazon’s interest in Whole Foods is about ensuring that there will be enough volume in perishable items to give it the scale to push more and more groceries through its site.
  • In effect, Amazon has acquired a huge customer for that business to give it critical mass so it can economically expand groceries to its online customer base.
  • In contrast, I think Alibaba is doing something very different in making a play to take a big piece of the Chinese offline market.
  • If Alibaba can make Sun Art and its other partners like In Time and Lianhua Supermarket superior to then these stores should begin to gain market share over their rivals.
  • Given that Chinese retail is such a vast market, steady market share gains here has the scope to keep growth going at Alibaba (albeit at lower margins) once e-commerce begins to slow down.
  • It also offers Alibaba the opportunity to move other sectors of retail online once it has licked them into shape.
  • Hence, I think this move makes complete sense for Alibaba as there is a very clear opportunity for it in China which is completely different to that being followed by Amazon.
  • I am warming up to Alibaba as it is beginning to understand the importance and opportunity presented by the data its digitall assets generate.
  • While it is behind Tencent in Digital Life coverage, I am increasingly of the opinion that it is moving more quickly to understand the opportunity offered by the digital ecosystem.
  • Hence, when Tencent runs out of steam, I will be considering this one very carefully as a possible switch.

Google vs. Facebook – AI dividend.

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Google’s AI already paying dividends

  • Both Google and Facebook have a fake news problem but Google’s leadership in AI means that it is likely to have a better solution and will not have to materially impact the financial performance of the company to fix it.
  • Over the last 2 years, Google, Facebook, Twitter and so on have become far more important when it comes to delivering current events to users.
  • This is particularly relevant when certain events occur that result in regular citizens present at these events uploading videos and commentary long before the more established media outlets can arrive on the scene.
  • As a result, important information often appears on Google, Facebook and Twitter first, meaning that the accuracy and veracity of this information is of paramount importance.
  • Unfortunately, during these sorts of events, there is often a scarcity of information available making it the easiest time to successfully propagate fake news.
  • This is the problem with which both Facebook and Google are wrestling, but from looking at how both are dealing with it I think there is a huge gap between these two players.
    • Facebook: To combat this problem, Facebook has announced that the total number of employees working on safety and security will be doubled from 10,000 to 20,000.
    • Given that the total number of employees at the end of June 2017 was 20,658, this implies that 50% – 60% of all Facebook employees will be working in non-revenue producing positions.
    • This will mean that costs will meaningfully outstrip revenues leading to a “significant” decline in profitability.
    • These humans are being shipped in to deal with the problem because Facebook’s AI is not even close to being good enough to deal with it
    • Furthermore, I think that this is a problem that humans cannot really solve given the velocity that is required.
    • Google: to be fair to Facebook, Google’s data tends to be somewhat more structured than Facebook’s making it easier to analyse but this does not come close to explaining the difference in AI ability.
    • Although Google remains reluctant to discuss the methods it is using to combat this problem, this is something that it has been dealing with for many years and there has been no sudden increase in current for forecasted headcount.
    • There has also been no sudden decline in gross margins (current or forecasted) which would indicate that Google had taken on contractors to help fix the problem.
    • While Google does use fact checking services to ascertain the veracity of some of the content that appears in its searches, I think that almost all of its efforts are going into closing the loopholes in its algorithms that allow fake news to surface.
    • This is why there is no financial impact on Google from this problem compared to Facebook.
  • Furthermore, I think that using humans to combat fake news will end in failure.
  • This is because it takes the human system around 2-3 days to reliably label an article or item as fake by which time is has trended and already been seen by millions of users.
  • Consequently, I do not think that having tens of thousands of humans scouring Facebook for fake news will actually solve the problem.
  • Hence, I think that this will result in $1bn+ of shareholders money being wasted in every year that humans are being used.
  • This highlights the gravity of the AI problem that Facebook is trying to deal with and think it is one that Google is much closer to solving.
  • Hence, I see Google being able to far more effectively manage this problem and at a fraction of the cost.
  • From a shareholder value perspective, perhaps it is time to consider switching from Facebook to Google.

Tencent Q3 17 – Time purchase

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Mighty core business buys time.

  • Tencent reported strong results driven mostly by its content offerings which gives the company time to work out how to fully monetise the vast the community it has created.
  • Q3 17 revenues / net income RMB65.2bn ($9.8bn) / RMB18.0bn ($2.7bn) nicely ahead of estimates of RMB61.0bn / RMB15.8bn.
  • Tencent called out smartphone games (especially Honour of Kings) and its online video platform (which it now believes has overtaken Alibaba and Baidu to become China’s No. 1 place for video streaming) as top performers during the quarter.
  • Most revenue streams grew between 45% and 50% YoY but it was the contribution from other businesses such as first-time monetisation of WeChat Pay and cloud services that really drove the numbers above expectations.
  • Overall, these revenues grew by 143% to RMB12.0bn which pushed the corporate average revenue growth rate to a 7 year high of 61% YoY.
  • While the core businesses continue to defy the slowdown I have been expecting, the laggard in the company remains the monetisation of the ecosystem that it has created.
  • This is what Baidu and Google are really good at and what Alibaba has been showing increasing signs of getting to grips with.
  • The vast majority of Tencent’s revenues come from selling content like games, in app purchases or streaming subscriptions making it more like Netflix and Amazon rather than Google or Facebook.
  • Tencent has created a community of 980m users at least half of whom regularly interact with Tencent in multiple Digital Life segments.
  • This creates a substantial revenue opportunity for Tencent but one I think that it has struggled to really get to grips with.
  • Online advertising is still just 18% of revenues which I calculate is between one third to one half of what it should be for an ecosystem with 980m active users.
  • It is here that I still see the real upside for Tencent as it has done little in the last 15 months to address this opportunity.
  • To be fair to the company, management time has been very successfully invested in growing the existing businesses but the time will come when it will need to monetise this opportunity to keep growth going.
  • Here, I think that Tencent has a lot of work to do as its score on RFM’s 8 Laws of Robotics is pretty low, particularly against Laws 5 and 6 which focus on the integration of services and user data.
  • To monetise the ecosystem effectively, I think a good score against these measures is required and Tencent has so far shown little sign of grasping the importance of integration.
  • However, while the core business continues to defy expectations, this is not a problem from a share price perspective and buys management time to get to grips with integrating its assets into a single place where users can live their Digital Lives.
  • This is how I can continue to like Tencent as an investment despite its apparent slowness to move onto the next stage of its development.
  • While the core business continues to deliver, the valuation remains underpinned with the potential further upside coming from monetisation of the ecosystem.
  • This is why Tencent remains my preferred pick globally.

Android – Downward slope.

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Fragmentation getting worse not better.

  • Despite Google’s best efforts, the situation with fragmentation in Android devices appears to be materially worsening, further reinforcing the need for Google to take Android completely proprietary.
  • Fragmentation in Android comes in two forms:
    • First, vertical fragmentation: this refers to the number of older versions of software that are still active and is exacerbated by a failure to update existing devices to the latest version.
    • Second, horizontal fragmentation: this refers to changes made to Android by different device makers to bring their products to market.
    • This results in a differing and inconsistent levels of performance from one device to another despite running exactly the same version of software.
  • Both vertical and horizontal fragmentation have a substantial and deleterious impact on the user experience and in my opinion are the main reason why the user experience on Android continues to meaningfully lag that on iOS.
  • Analysis by programmer Dan Luu (see here) is the clearest indication yet that instead of getting better, it appears to be getting worse.
  • I had already partially noticed this when I calculated that at the rate at which Android 8.0 is being adopted, it will take 5 years to fully penetrate Google’s own user base (see here) compared to 4 years for other versions.
  • Dann Luu’s analysis is much more granular and his chart clearly shows that for the latest version (far right-hand side), the update trajectory is meaningfully slower than for all of the previous versions.
  • Previous versions have seen a much more rapid update pattern leaving me to conclude that either the number of devices being updated has suddenly declined or that manufacturers have started making new devices using old software.
  • Either way, the effect will be the same which is more devices running older software meaning that Google innovations that require a change in the OS to function, will take at least 5 years to make it into the hands of all its users.
  • This will allow iOS to continue comfortably outperforming Google Android on the RFM Laws of Robotics that test the user experience leaving this as major point of differentiation for Apple.
  • Furthermore, it will also ensure that Google continues to underperform its revenue generation potential on Android devices leading to lower revenues and profits.
  • The more time goes by and the worse this problem becomes, the more I think that the only solution is for Google to take Android fully proprietary and put to bed the fragmentation issue once and for all.
  • This is how Google could begin to see significant revenue upside from its own Google Android devices as well as close the gap to Apple.
  • Its own efforts in hardware are unlikely to have nearly the same impact simply because its volumes are so small.
  • I continue think that Google’s shares remain pretty fairly valued and prefer instead Tencent, Microsoft and Baidu.

Apple – Tick in the box.

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Hacking of Face ID proves its security.

  • The inevitable hacking of Face ID has been achieved but I think that the lengths that the hackers had to go to crack the system proves that, for all practical purposes, it is a worthy upgrade from fingerprint recognition.
  • Vietnamese cyber security firm and Android phone maker, Bkav Corp, has managed to reliably bypass Face ID (see here) by creating a 3D mask of the user’s face with special attention being paid to the eyes, nose and mouth.
  • However, it is pretty clear that a huge amount of work went into the creation of this mask as:
    • First: it was designed using expert cyber security knowledge and an intricate understanding of how Face ID works.
    • Bkav first demonstrated a bypass of facial recognition on laptops in 2008 and has been a player in the field ever since.
    • Second: 3D printing, 2D printing and hand-made artistry was used to create the mask indicating just how intricate the process was.
    • Third: each mask costs $150 to produce.
    • Fourth: it took 9 days to crack (even with at least 10 years’ experience) and I suspect Bkav was working on this flat out.
  • The net result is that Bkav continues to advocate for the fingerprint being the best method of authentication for an electronic device.
  • However, I think that the intricacy and cost of this hack combined with the fact that a detailed 3D scan of the user’s face is required, is actually an endorsement of Face ID as a verification system.
  • Taking this with surveys that suggest that 60% of users prefer the system over fingerprint (9to5 Mac) and the fact that there few reported issues with the reliability and speed of the system leads me to think that Apple has successfully ticked this box.
  • However, fast and reliable Face ID is clearly quite difficult and expensive to achieve (Samsung’s is awful) which leads me to think that Apple has set a standard for high end devices going forward.
  • I think that this will trickle down through the tiers with time, but it looks like fingerprint sensors may have a limited life span.
  • Furthermore, Apple now has a clear point of hardware differentiation over its competitors that is likely to last for a generation or two.
  • In the ecosystem, Apple is still miles ahead largely due to Google’s inability to deal with the endemic fragmentation, security and updating issues that continue to hamper the Android user experience.
  • Hence, I remain unconcerned for Apple’s iPhone gross margins for the next 12 to 18 months.
  • That being said, I think the shares continue to price in a larger iPhone X driven cycle of replacement than I see as likely.
  • This combined with excellent price appreciation so far this year, leaves me indifferent to the shares.