Monday, Oct 19th 2020

Three Things: Apple launch event edition


“We try to develop products that seem somehow inevitable.” - Jony Ive, designer of the iPhone and iPad

Yesterday, Apple held its annual launch event for its latest generation of iPhones.

In today's edition of Three Things, we explore our three biggest takeaways from the event.

1. “5G just got real” - Verizon CEO Hans Vestberg

The headlining “reveal” of this year’s iPhone launch event was the introduction of 5G network capabilities, which should enable the latest generation of iPhones to experience faster download speeds and lower latency in congested environments such as stadiums. To help introduce the launch, Apple even brought out the CEO of Verizon, which will be rolling out 5G coverage to 60 US cities by the end of 2021. While we still see 5G as in very early stages in terms of coverage and practical use cases, we believe this first step by Apple will be key in unlocking the mainstream adoption and new possibilities 5G capabilities can enable.

2. iPhone Mini pricing is a bet on the ecosystem

We believe the $699 starting price point for the iPhone 12 Mini will be a gamechanger for Apple, as it should dramatically expand its Apple’s addressable market while helping drive upgrades from earlier small form factor iPhone models. Most comparable 5G-enabled Android phones exist above the $700 retail price point, so it’s likely the Mini may drive many former Android users to switch ecosystems. When viewed in context with a similar pricing surprise during last year’s iPhone launch, we believe this points to Apple’s newfound focus on expanding its adoption of its flagship hardware to drive aggregate value creation across its entire hardware + accessories + services ecosystem.

3. Apple’s hardware lead appears to be rapidly widening

Despite the broader ecosystem bet that Apple appears to be taking with its pricing strategy, its underlying lead in hardware and silicon appear to be wider than ever. The latest slate of iPhones will all boast Apple’s recently unveiled, leading-edge A14 bionic chip, which is said to be 50% faster than the next fastest smartphone chip and sports a Neural Engine capable of processing 11 trillion operations per second. While this improvement might be less visible versus the iPhone’s more consumer-facing features, we believe this underlying technology will be key in enabling Apple to occupy a leadership position in machine learning and augmented reality, fields that have the capability to dramatically reshape the way consumers interact with their devices.

As of this writing, AAPL was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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