The Opportunity for Apple (Premium)

In two weeks, Apple will host WWDC 2020, and while the rumors have been flying in recent days, I see two key areas of opportunity for the firm.

The first is search.

Apple, with its installed base of over one billion active devices, should acquire DuckDuckGo and sever its final remaining major connection with Google. I’m not the only one recommending such a thing: Bernstein analyst Toni Sacconaghi argued this week that Apple could cost Google billions each year by doing so.

Here’s the math: While Google pays Apple $7 billion to $8 billion per year to be the default search provider on iOS, Google currently commands 70 percent share in that market. And that exposure to Apple’s well-heeled customers pays Google $15 billion per year. Those profits would disappear overnight if Apple pulled the trigger on DuckDuckGo.

How much would DuckDuckGo cost Apple? About $1 billion, according to most estimates, or what Apple delivers in cash flow in a single week. And the messaging on this couldn’t be better: Apple has positioned itself as the most trustworthy and privacy-centric technology provider out there, and Google’s many privacy violations are just now finally catching up to it. You can imagine the carefully articulated outrage that Tim Cook could deliver during a keynote, stating that he just can’t stand by while Google harms its cherished customer base.

The second is bringing its A-series processors to the Mac.

As Mehedi reported earlier this morning, Apple could announce this shift as soon as WWDC 2020, with plans to start the transition away from Intel and to its own chipsets starting in 2021. The timing makes sense since WWDC is a developer show, and the ensuing year could give developers the time they need to understand and evaluate what they need to do to bring their wares to these new ARM-based Macs.

Ideally, they won’t have to do too much: Xcode, Apple’s developer IDE, will no doubt be updated to allow developers to simply recompile their apps to native ARM executables. And ARM-based Macs, like ARM-based Windows PCs, will no doubt run most/all existing Mac apps using emulation.

Apple has made several processor transitions with the Mac over the decades, the most notable coming in 2005-2006, when it moved from PowerPC to Intel. At the time, Apple CEO Steve Jobs bragged about how quickly his firm had made this transition. But like Jobs’ many lies, this was untrue: Apple had in fact been building Mac OS X for Intel in secret since the product was first released in 2001. And it has likewise been building macOS for ARM—its A-series chipsets—for years by now as well.

But there’s one big difference this time: Where the Intel transition required Apple to partner with Intel, this time Apple controls both the software and the hardware. So where Apple was forced in the past to adapt its OS to whatever Intel chips were then available, this time Apple can also adapt its processors so that they can handle macOS more effectively.

This is a problem that Microsoft and Qualcomm belatedly came to understand when they collaborated on bringing Windows 10 to the ARM-based Snapdragon family. The original plan was to simply use the same chipsets that Qualcomm provided to phone and tablet makers. But when those proved to be too slow to run emulated applications effectively, Qualcomm and then Microsoft and Qualcomm worked to fork the chipsets into ever more aggressive versions that lost some of the magic of ARM—-battery life, especially—in order to become more Intel-like and deliver better performance.

Microsoft’s and Qualcomm’s struggles have been quite public, but Apple can simply come out of the gate with something that just works. And when you consider that macOS is already more lightweight and efficient than Windows 10, it’s not hard to imagine that the first version of macOS on ARM, and the firm ARM-based Macs, will work better than does Windows 10 on ARM.

But what’s the opportunity here? With just 7 percent of the PC market, one might argue that were Intel to lose even the entire Mac market, the impact would be small. And it’s more likely that it will lose only part of this market, since Apple’s Pro-level Macs will no doubt need to stick with Intel for the foreseeable future.

Apple will save billions in licensing fees by making this transition. But this isn’t just about money. Owning every level of the stack is in Apple’s DNA, and by moving to the A-series chipset, Apple would finally control the software and the hardware on all of its platforms. And this isn’t just about hubris, either. In doing so, Apple could make a credible claim that it has and will continue to optimize its hardware and software together. This is a key part of the value proposition for iPhones and iPads, for example.

This transition would also make it easier for developers to bring their iPad apps to the Mac. And, less well understood, the reverse is also true: This transition would pave the way for Mac developers to bring their more sophisticated apps to the iPad too. In short, it’s a win-win for virtually everyone.

We only have a few weeks to go before we learn what Apple will announce. But these are the areas in which I think the firm can make the biggest gains, for itself and for its customers.