AI Doesn’t Solve Everything

Serenity Cladwell reviewing Apple’s HomePod, Sonos One, Amazon Echo and Google Home Max.

The Google Home Max is an embarrassment of a speaker for its cost

So it appears either that

  1. Google’s AI prowess does not extend to audio, although it worked for cameras. Maybe they didn’t have an advantage in data, and in order to get the data, you may need to have special acoustic facilities designed by real experts in the field.
  2. For Google’s AI to deliver top notch performance, it needs to be on more or less an equal playing ground in regards to hardware. For image processing, both Apple and the Pixel probably source the hardware from the same vendor (Sony) so Google had an easy path to high quality hardware. Not so with audio.
  3. Google rushed it and released an inferior product but priced it high anyway.

Without further information, I would say all are plausible at this point. It does suggest however that there are certain important pre-requisites that are not always under Google’s control, which would be required for their AI to produce top notch results.

iPad Turnaround on Track

In Apple’s latest earnings call for the 2017 October to December quarter, the iPad was reported to see an increase of 1% in Units and 6% in revenue year-on-year. Given that the quarter was for 13-weeks versus 14-weeks a year ago, the growth in units per week would be something line 8-9%.

This is very much in line with a prediction that I gave in 2-Aug 2017 in which I said that 2017Q3 (Jul-Sep) would show strong growth YoY (actual 11% growth in units), whereas 2017Q4 (Oct-Dec) would decelerate (8-9% growth in units). I attributed this to holiday sales being mainly driven by the “entertainment” segment, which is still declining, whereas the “productivity” segment is showing steady growth irrespective of seasonality. Here I would like to illustrate my point further.

I would like to use the excellent charts prepared by Macstories (shown below). Here we see the historic iPad unit sales in green, and we notice that the seasonal spike in Apple’s fiscal Q1 (Oct-Dec) is decreasing almost to the point where it is no longer noticeable. Instead of looking like the extremely seasonal traces for the iPhone or the iPod, the iPad is looking more like the smooth, non-seasonal line for the Mac. In fact, when we look at what drove the decline in iPad sales, it is mainly the Oct-Dec spike that was decreasing while the base sales were not suffering so much.

This clearly illustrates that the iPad is becoming more of a PC-like productivity device which is necessary for work or study (and hence purchased around the year whenever needed), rather than an iPod-like entertainment or iPhone-like social network/communication device the purchase of which can be held-back till the holidays. Going forward, we can expect the seasonal spike for iPad to almost totally diminish, and the unit sales trend to lose most of its seasonality.

Importantly, the iPad sales growth that we saw in 2017 came strong in the Apr-Jun and Jul-Sep quarters suggesting that the base sales – the “productivity” segment is gaining momentum. We can therefore make the following prediction for iPad sales in 2018.

  1. For the quarters from Jan to Sep 2018, we can expect strong double digit growth in units YoY similar to what we saw in mid-2017. This will be the base sales from the “productivity” segment. Like PCs, “productivity” also includes education and so we might start to see “back to school” surges in the Jul-Sep quarter like we see for Macs.
  2. For the Oct to Dec 2018 quarter, I expect YoY growth to be somewhat dampened but still close to 10%. At this point, even in the holiday season, very few people will be buying iPads for “entertainment”. “Entertainment”, that is watching movies/TV or playing games, is something that can be done comfortably on smartphones, and is not something that people will go and buy a tablet for.

All in all, I see the state of the iPad to be very healthy. Apple has been pushing the productivity of the iPad in recent years, and the market has been responding to this. Apple’s efforts into collaborating with enterprise-oriented partners like IBM, improving the multitasking and inter-app sharing of iOS, and just marketing in general, have borne fruit. Although many pundits dismiss the iPad as now just being flat in terms of growth, I see the current quarter as strong proof that we will see very good growth and excitement over the iPad in 2018.