There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focus and brief.
Search Barclays Brief wherever you get your podcasts. I will say, I think it might be like an iPhone 11. It is definitely on its last legs because in the past two days, I can only charge it when it's standing up and plugged in like that.
And so I've been creating elaborate like Jerry Rig systems at my desk to actually get this thing to charge. So I got a new one. So you know what? You don't have to get a new one. If you go to like any one of these like little random like sort of Apple fix it shops, they can like take care of that in 10 minutes.
Wait, I have the right to repair my iPhone? Is that true? They take put a little vacuum cleaner in there? That's what you should always do. I don't think that's it because I tried it already.
I think the battery is like legitimately dying. I had it for like eight years. Well, I've had my... Okay, so I think I have no idea what iPhone I'm on. I think I've had it for about four years.
I have no like, I don't know anything. But there was a point in my life in which I could have answered. I said you don't know anything about my phone. But there was a point where I could have answered, right? Like if it's some point in the early 2010s for sure, if someone would say like what iPhone do you have your phone?
Oh, I got the iPhone 4. I got the iPhone 4. Whatever it is. And that was just part of like, I would say pop culture, like knowing like what generation is. And it's been so long.
You know, there's Apple presentations. Everybody would like tune in like a world cup game or something like that. Like it's been so long since like these were like top of mind. Most people. So I've never been an Apple watcher as evidenced by the state of my phone.
But I think part of the issue is also like the products got pretty good, right? To the point where you don't need to place them literally every two years for the latest upgrade. Or maybe it's just Apple can't think of the enticing upgrades that people need to see in order to buy. Something that I had forgotten about until someone I think pointed out recently there was a period in which was very common to see like people like very cracked iPhone screens, right? Yes.
That was just like, oh, and it was just like, look, and they were so usable. One of the last time you saw like a badly cracked iPhone screen. Yeah, they never and like you can drop them now and they're very likely to. You remember I dropped this phone from the stands at the Jackson Hole rodeo. Oh, yeah.
You were there. It fell all the way down and it was fine. It was probably like 15 years of like they work really well. Anyway, I think setting aside the fact that, OK, Apple is still a huge successful company. But we should talk about Apple because it is actually one of these things that it's at the intersection of so much that we're interested in right now.
It's at the intersection of, you know, the future of manufacturing China. It's at the intersection of memory costs and the degree to which that's bleeding into consumer prices. It's the primary way so many people interact with computers at the internet. And yet it's not a major player like building AI models. So like how will AI change our relationship to just like either like computer?
It sits at the center of so many like important topics right now. So I sort of want to know like what's going on with Apple. The thing I'm really interested in are the recent price increases. Yes, because you think like the story in consumer tech for decades now has been deflation. Yeah, right.
Things get cheaper to buy and at the same time, you know, it becomes more expensive to live because food prices go up and health care and whatever. But the story in tech is that prices have been going down and suddenly we have this sea change announced by Apple, I guess a few weeks ago or a couple weeks ago now saying that actually they're going to raise prices pretty much for the first time ever on a bunch of their products. It's really wild. Like we think that there should just be some like mechanical law that if it's like a gadget, it goes down in price and for years, I mean, it was just a thing. And so it's extraordinary to see like this actually reversing.
So I don't know. I want to know what's up with Apple. It's a good time to talk about Apple. Well, I'm very excited to say we do literally have the perfect guest, someone outside of probably Tim Cook. There's probably no person in the world.
No, including employees at Apple. There was probably no person outside of Tim Cook that knows the company better. The ultimate Apple watcher, not Apple Watchers and Apple Watch, the Apple, the ultimate Apple Observer knower for years and years, literally the man who watches Apple and he is a colleague of ours at Bloomberg. I don't think we've ever had him on the podcast before, which is a shame. But we are now going to be speaking with Mark Germing.
He is the managing editor of Consumer Tech at Bloomberg. He's the author of the Power On newsletter, which everyone should subscribe to. So Mark, thank you so much for coming on Outlots. Yeah. Thank you both for having me.
Really appreciate it. Good to be here. I noticed you have the orange iPhone. Yeah. And like, it's what?
It's a tank. It's a tank. But can you explain like, what is it about the orange iPhone specifically? Because, you know, it's a thing. Yeah, it is.
It is a thing because I noticed that like, you know, in the old days, you get lots of colors, but all the cool people and all the people who like actually like have like regularly refresh their phones, they all have that orange iPhone. There is something special about it beyond just being one of the Apple colors that they've always had. So here's the backstory, right? For years, the iPhones, they came in black or white and then back in 2013, they added gold for the iPhone 5S. Why did they do that?
They were trying to break into China. Everyone knows gold, a lot of color in China. They were trying to break into China. That's what my one is. It's called.
Right. And then over time, they started coming out with new variations of the iPhones, the cheaper phones. You had the 5C, you had the 10R. Now the base phones, like the 14, 15, 16, those had a lot of fun colors, bright colors. You had yellow, you had green, you had blue, purple, pink, whatever.
But the people who bought the top end phones, the pro phones, these were the $1,000, $1,500 phones, they were like, I'm kind of getting tired of just black every year, white every year, gold every year, silver, these muted colors. Yeah. And so people that started complaining to Apple, we want more colors. And Apple said, what can we do unique for the iPhone pros? And it just so happens that for the pro phones, right, the 17 pro, pro Mac series, they needed to move to a new material.
OK. So the big deal with the iPhone 15 back in 2023 was they moved to titanium. OK. And they started this ad campaign around titanium that your phone is using the same materials that they use on outer space. Yeah.
They always come up with some interesting marketing to you. But the problem with titanium, and they only seem to realize this was such a big deal after the phone shipped, was that titanium doesn't dissipate heat well. It dissipates heat about a tenth as well as aluminum. And Apple obviously was famous for aluminum products for many years. And so for the 17 series, they ditched titanium went back to aluminum.
Aluminum not only dissipates heat much better, but you're able to get color to stick to it much better than you can on titanium. And so they wanted to do a bunch of fun colors for this first generation aluminum pro phone. And so they've got orange, they have classic silver, which I think is really hot. And then you have a dark blue, but orange to hot color to other marketing materials. Everyone wants to show, hey, I have the new one.
The easiest way to know you have the new one is to get this bold orange phone. They call it cosmic orange. And then in China, the orange in particular is when a hot seller, the word on the street is that's because the orange is kind of like Hermes orange. To my eyes, I'm a little color blind. I don't think this orange looks anything like Hermes orange, but it's close enough.
It's close enough. And then this year they're moving to a red from orange to red or like a dark wine color. And why is red important in China? The dragon, right? Obviously very popular there.
So in other words, I think they know what they're doing, what comes to color. Well, Hermes orange, iPhone, sports apple come back in China according to random post on Reddit. Well, okay, since we're talking about China and pop culture to some extent, the other big piece of Apple news recently is that Tim Cook got a world cup LeBubu from the popmart CEO. I saw that I saw that this morning. Tim Cook's not going to have too many more of those opportunities to have people come visit him at Apple Park and take pictures with him.
It's all about John Turnis. His successor very soon. We're just a few weeks away from the new CEO taking over. And this is something obviously I'm watching very closely. If you had me on your podcast two and a half years ago, I could have told you this was a guy.
No one else other than me saw it coming, but did a big deal. You did write some profile pieces that like definitely hinted at it. Yeah. Well, tried to do more than him, but wrote a few about him the last couple of years because I knew he was the guy. And I think it's going to be an interesting time at Apple the next three years.
Well, this is another way that things have changed, which is that Steve Jobs was a pop culture figure. Tim Cook became a pop culture figure after taking on the mantle of CEO. And I suspect that he went around and asked 100 people, who is the person that they named as the replacement. They wouldn't I am curious if you went on the streets of Manhattan, you asked 100 people who's the next CEO of Apple, how many would know one? That's not one seems I maybe you ran into me.
If I ran into it, maybe this is good because obviously frame is what is the apple that he is inheriting. But before we get to that, what is it about him that either you recognized two and a half years ago and then the board and the company decided like, this is the man to take Apple into its next year. Oh, it's actually quite simple. Believe it or not, two factors. Okay.
Factor one is the products when you doing your not monologue, but your speech at the beginning of the show, Tracy, you remarked that you don't know which phone you have, you know, you stop counting which number you're at. But I think the big difference is that there's nothing remarkable about the new numbers anymore. The iPhone looked identical for six years up until this big change with the orange phones and what have you, right? So I think the board recognized or the consumers recognized people in the company recognized that the product is just lacking in, I would say, sexiness, right? For lack of a better term, lack of success.
Success. Success. But remember in the Steve Jobs days, right? In the early Tim Cook days, every other year you were getting this break through a new phone. Like when was the last time you went and picked up a new Apple product and you were like, holy crap, this thing is totally different, totally amazing.
It's been a while. And so I think Apple needed to resuscitate its product design, its hardware, its product genes, coming up, innovative new things. And John Turnis, he was the senior vice president of hardware engineering. He was the guy actually in charge of product development. And so for a company looking to shake itself out of a product bulb, putting your new, he's quite new in his senior VP role, your new product person in charge of things, that makes a lot of sense.
You don't want another operational person. You don't want a marketing person. You don't want another finance person. We've went down that road now with Tim Cook for 15 years, hugely successful. Time for a new era.
The simpler answer is that John Turnis is 50, 51 years old. Every other person on the Apple executive team who could have theoretically replaced Tim Cook with their experience, 60 plus, okay, some of them 65 plus. And Apple, the way they run is they run for the long term. They wanted to avoid Bob Iger to Bob J. Pec situation where you're putting someone in who you know is going to fail or you know is going to retire in three to five years.
The Verizon hiring Dan Schulman at 67 years old to be their new CEO. That's a one to three year thing. Apple does not operate in the short term. They operate in the long term. So who's the person you can appoint that's going to be CEO for the next 15, 20 years?
John Turnis, the only option. I'm not saying that he's the perfect choice in the world, but he's the perfect choice for Apple because he really was the only choice. And maybe they fell backwards into him being the only choice. Maybe they didn't. Maybe this was all calculated years ago.
I don't think it was. But long story short, I think this is the man for the job at the right time. Well, so I don't know anything about John Turnis other than what you just said and some of your pieces that I've read before. But do we have any evidence that in terms of product design, like he can be quite creative and he can come up with the sexy new features that might get people interested in iPhones again? Because if he's been doing it for a while, then I would say maybe not.
He's not particularly known as an innovator or hasn't been particularly known as an innovator inside Apple. Some people call him a treadmill runner doing the same thing over and over again. But he also has the awareness to know that Apple needs to do things differently. And he has the credibility and charisma to let Apple do things differently. And quietly, the last three to four to maybe five years, Apple has been working on its most impressive and packed product lineup, product overhaul in its history.
The next three years are going to be the biggest three product years in Apple's history. There is so much stuff coming. I'm having a hard time wrapping my head around it and I've already removed my credit card from my wallet and put it in my drawer, locked it in through the key of the window. Not really. I'm going to get all of it.
But point being there's a lot coming. If you're an Apple fan, boy, like myself, I'll admit it. If you are a tech enthusiast like myself, this is so freaking exciting. There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and just want to know what's moving markets fast.
That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focus and brief. Search Barclays Brief wherever you get your podcasts. All right.
So we obviously have to talk about the next three years what these products are, but just one quick question before we get into that conversation. You know, there was a time when I think everyone ever went agreed that from a smartphone perspective, the iPhone was unambiguously the best product in the world, that there were other phones that like maybe on a price, you know, adjusted, standpoint, maybe were better deals or whatever, etc. There are really good phones now being made by other companies, including Chinese manufacturers who like I saw the foldable phones and things like that. They're actually really cool and they're good. And I think in some cases, maybe the camera quality is better for some of these others, though. I'm not sure if you take by the most expensive iPhone that you can buy right now,
is it unambiguously the best smartphone in the world? And what is the gap between that and the next biggest, best? In the Western world, the iPhone is unambiguously the best smartphone when you factor it into a tally. But they're not the most creative phone. They don't have the best form factors.
They don't have the best screen technology. I would probably give that to Samsung by a small margin. Don't forget Samsung designs and develops, you know, all those components, right? From a camera perspective in the Western world, you're talking about Google. Google identified a decade ago that the magic to making a better camera isn't necessarily the sensors and the hardware.
It's the AI and Apple, as we've undoubtedly know, has not been exactly a leader in the AI space. Yeah. But when you're talking about the combination of design, hardware, accessibility, right? Like a product that people understand how to use ecosystem, customer service, the whole nine yards, Apple is certainly in the lead. You go to China, it's a whole different world.
I don't think people understand that China is just literally a different planet when it comes to technology. They have foldables, they have tri-folds, they have that, they have glasses, they have bigger tablets, they have these tabletop robotic devices on people's desks. The cameras on the phones in China, you're talking about Vivo, talking about Xiaomi, Huawei, they will destroy Apple. It's a big, big difference. And so Apple needs to step it up in China when it comes to hardware.
I think the iPhone Air and the iPhone 17 Pro Max were good steps in that direction. But if you want to talk about the product roadmap, we can dive into that. I think the foldable phone, I'm calling it the iPhone Ultra. Apple's coming out with it in September, October timeframe is going to be really hot, really successful in China. It's going to be a status symbol.
People are driven to status symbols in China. It's going to be $2,500 roughly. And so I think it's going to be a big seller there. I think it's going to be a big seller there. I think it's going to be a big seller there.
I'm certainly going to be first in line because I have been waiting for a foldable iPhone for a number of years. Samsung absolutely the pioneer in the category. They've been working on them for a long time now. They finally got really suitable for daily use a year or two ago. Apple will be there from day one.
I would just not want to non-ISO on it. I mean, yeah, right. That's still a huge thing. I'm going to save the rest of the product launches for the end of the podcast. So we entice people to listen all the way through.
But you mentioned Apple and AI. So I think we should talk about this. But like, why does it seem that Apple has in large part, I guess, missed the boat on AI? Tim Cook, his worst decision in his history at Apple was who he hired to manage artificial intelligence at Apple. Bless his soul, perfectly nice guy.
Bless his heart. Yes. Yes. He's that bad. John, by all accounts of a thought leader and artificial intelligence, but also a skeptic AI.
And so John G, JG, as he goes inside of Apple, he was the senior VP of AI at Apple. He was hired in 2018. This was the guy who was supposed to make sure that Apple became dominant in AI. And generally, they I totally missed the boat. Apparently didn't see it coming or if he saw it coming, they not put the right staff and resources on it.
So clearly that was a big mess and Apple should still be embarrassed about it. I think there's word noting by the way here, Apple is trading an all-time high and actually some of the other Mac, like some of the companies that are among the really big tech companies that have invested more in AI are doing quite better, are not necessarily. Yeah. But you know, Apple, I'd be happy for them if this was a strategy. No, no, no.
Ask back to it. I'm totally, I totally get it. But what I'm saying is that the market has not really penalized them for the fact that they're not really a player in AI. Whereas you have these companies that are very serious players in AI and I'm taking like Google and Microsoft and they're like, the market has not rewarded them for having technology that is near the AI frontier. Now, when we talk about AI at Apple, I think there's sort of like two different things that we could be talking about.
So one of them is what we'd say like edge-based AI is their AI that's like on the chip that can make a photo render much better than say like a traditional camera architecture. That's like one kind of way we talk about AI. It does a better job of like capturing what the user wants to capture using artificial intelligence. And then there is this other question of like, well, is the company building something that we call a language model, which is a very separate conversation. And it's a different way of like understanding what we're talking about with AI.
Right here, right now, 2026. So it's like, OK, inside Apple, we want to correct our past 10 years of like missing out on AI. What do they want to achieve with AI? Well, there's a lot here. And I think I'll take it back to why Apple is at an all time high.
I think investors are smart and they actually have a good understanding of what kind of company Apple is. Yeah. And Apple is not an AI company. It's not a hardware company. It's not a software company.
It's a product company. The magic of Apple and this was Steve's big thing is bringing it all together in one package. Apple may not have the best phone in terms of the technology or the camera, but the complete package unambiguously the best. I think consumers realize that AI is going to shift into products and products that combine hardware, software, services and AI. And you're going to see some great stuff from them coming in the future.
We'll get back to it in the road back section of the podcast. But I think that's their goal to create products that merge all these things together, or the AI disappears into the background. Now, I want to go back 12 years ago, 12 years ago, Apple started this big project. The idea was to compete with Tesla and build an autonomous car. And that project was canceled in February of 2024.
So two and a half years ago, they spent well over 10 billion on it, hired thousands of people, reorganized the company around it and closing a project of this magnitude is not something that has a comparison in Apple history. This was unprecedented. It was a complete disaster, a huge failure. But there was one piece of the pie there that is actually really interesting. It's called the Apple Neural Engine.
And so in order to do self-driving cars, you need to process a ton of data at very high speeds in real time. See the world around you, process it. And so the car knows where it's going. And the magic sauce that Apple was trying to create for the Apple car was the smartest onboard computer or chip in order to do level five autonomous driving. That chip they started working on around 2014 eventually got shrunk down into what they called the Neural Engine and the Annie and they put it in the iPhone 10 in 2017.
And that's what allowed features like Face ID and Animoji and Augment to reality to work. So the only reason that Apple has some of the more sophisticated AI hardware on device processing in their phones and computers and what have you is because of the Apple car project 12 years ago. And so that's a little secret background. If it wasn't for the Apple car, Apple would be even in a more terrible place when it came to artificial intelligence. Okay.
But it seems like I was kind of accidental, right? Well, it's all accidental. Yeah. Right. Okay.
It feels like the common thing with Apple is that they're looking out a lot. Yeah. Okay. But when we expect that, they would say that strategy, but I don't think so. But do we have a sense of what they actually want to achieve in AI?
Like, or are they just going to experiment with some stuff and maybe it'll stick? Maybe it won't, maybe it'll be useful 10 years later. You know, monetizing AI, you know, the jury still out on how exactly you do that. Yeah. I mean, you see the amount of money that open AI is making versus how much they're losing.
It's not entirely clear yet. But I think Apple has a proven business model. It is hardware with very high margins. Right. And you can talk about that with the price likes later, but Apple wants to roll out AI hardware products, air pods with cameras, uh, pendant with cameras, well, cameras, air pods with air pods, appendent, smart glasses.
Is that like a thing you'd put a necklace or put on your pocket here? Is in here for your phone, AI cloud processing in order to feed context into your phone, your iCloud account to do AI tasks. Those are going to sell and those are going to make money. And so Apple has a proven business model there. The other thing is they have this new Siri AI.
And what they've done is they took their artificial intelligence models. Those are called AFM or Apple Foundation models. That whole team just basically got blown up over the last year. A bunch of them went to meta for $50 million pay packages, but they went to Google and Thropic Microsoft, you name it. So Apple opened up the hood of their models for paying billions of dollars to Google to have redeveloped the underpinnings of their models.
And so now Siri, now Siri is competent. Wait, wait, so this is, I mean, this is one of the ironies is that Apple is truly one of the pioneers in talking to computers and plain language. Well, they launched Siri. Yeah. They launched Siri in 2011.
And I was on another show here the other day and the host was telling me that he asked Siri, he's not the old Siri still. One is the next Fed meeting. How do you guys like talking about that in Siri's response was there are no Fed meetings in your calendar. Okay. I have the new Siri AI.
And so I said, when's the next meeting? Next meeting gave me the date. Wait, so sorry, what power is Siri AI is intelligence today? It's Apple Foundation models that have been rebuilt with Google underpinnings. It's Gemini.
Okay. Okay. Okay. Okay. So, and then going forward is the idea that Siri will just be a Gemini skin as they would say, like, is that a small?
Sort of just from the language, sort of the way we all talk about AI today is like a model, whatever this thing you talk. Yeah. It's like a reskinned Gemini. Okay. That has access to your personal data.
So you can ask it about your text messages, your photos, your emails, especially pretty nifty. You know, one thing I've been doing, people send you calendar appointments on like my work computer. Yeah. I take a picture of my work screen with the phone and then just adds it to my calendar through Siri. Oh, that's useful.
Yeah. So, you know, how many people have that use case? I don't know. But it does work. It's extremely competent.
I would say you guys know video editing software. Okay. You know, I movie. Yeah. So there's like, I movie versus Final Cup, bro.
Yeah. Yeah. All right. So before Siri AI, Apple had nothing. Now they've got iMovie, JET GPT is Final Cup, bro.
Got it. They've got a competent product that 95% of the world can use, but they don't got that step up, which allows you to do hardcore research, documents, drafting, editing, etc. Travel planning, everything you want to use, JET GPT for and do all of it. Well, let's talk about the price hikes because this was a pretty big sea change, both for Apple, the company and I guess in a macro economic sense, right? So we're told that the increases are because of memory shortages and component shortages and competing with the hyperscalers for all these things.
How much of that is true? 95% of it. Okay. I think that the other component of this, uh, speaking of components is that inflation real thing over the last, you know, five, seven years, Apple product prices really have not increased over that time as other components got expensive. And as, you know, inflation has gone up.
And so I'm not one of those people who think this is a conspiracy theory to finally, you know, raise prices and blame memory. Memory is a real thing. If you look at the price adjustments that they've made, it is entirely in line with how much more they're paying for memory on a product-based basis. For instance, the vision pro went up by $200, right? Six percent.
Nobody's buying the vision pro. They're not going to do anything to lose 1% of their margin. And so they probably said they had an encounter several months ago and they said, we're going to use our cash balance and whatever. We're going to use our margins to eat the additional cost and memory up until this date. They'd hit, they flipped the switch, they did the price hikes and you'll see them do more price hikes in September for these new phones.
It just occurs to me. It's on the AI component. It's like you see these huge budgets that the alphabets and the Amazon's and the Microsofts of the world are spending. If there's one company that knows about why we let someone else do the big capital expenditures, it's Apple, right? They're doing this.
But their core history from partnering with Foxconn is essentially, you know, there's this really expensive aspect of the process. It was very physical. Let's just get another company to do the really high capital expenditure. You're spot on it's straight out of that playbook, but AI is pretty darn fundamental. And I think eventually they're going to have to rebuild the AI research team and spend the money to rebuild AI.
Now I'm saying you can do it with Altho's hyperscaler expenses. Apple never wanted this. Apple's vision for AI and they talked about this two years ago was on device model processing. It was about using Apple Mac chips in the cloud, not this whole hyperscaler situation within video you're seeing from opening eyes or I'll pick Google, you name it. And so the irony here is that this is not a world that Apple was trying to push.
They want it all on the phone. And I think eventually these LLMs are going to be able to shrink to the point where you can put them on the phone. But for right now, cloud is the game in town to make better artificial intelligence. Do they have other options for getting chips and components? I know they've been trying to source out of China, for instance.
So they are testing memory from CXMT and YMTC. Those are two Chinese memory providers. There's actually, but you can count on your fingers. That's the number of memory suppliers. There are in the world.
There's about five, right? You've got Micron, SKHynix, Samsung, and the two Chinese companies I named. They already use the other three, the Korean one and the American ones. They're going to do this. Like I'm convinced that they're going to start using Chinese memory instead of Chinese iPhone SKUs.
Apple already has a unique SKU for China. So being able to add the Chinese memory into that and carve that out, I think, is not that big of an operational standpoint. The bigger issue for them will be the PR campaigns for Micron and Korea, trying to make Apple look bad for using Chinese memory. If you're using Chinese memory in Chinese phones, I think people don't try to know the deal there. I'm not really sure why it's the problem with any other country.
If Siri is reskinned, Gemini, a little bit more than that. Does that create issues for China in terms of like using Siri in China? And do they like, are they going to have to use like deep-seak or something like that for the Chinese use? How are they handling that? Okay.
And this is actually a timely question because earlier this week, after a two-year delay, Apple finally got Chinese government approval to launch Siri in China. And we're talking about the old-school Siri, not the new Siri AI. But here's what they've done. So there's basically two components to Siri that you can break down. You've got the Apple models and then you have integration with Google and you have integration with OpenAI.
That's the situation in the United States. And so in China, you've got Apple models and then the outside partners by do, they're the big Google equivalent for search. And so that makes sense to have them instead of OpenAI in China, which both don't work in the region. Yeah. But there's also one other player.
It's a company you may have heard of Alibaba. And so what Apple's doing with Alibaba is they've got Alibaba models in the system. And it serves as what I call a censorship engine. And this censorship engine is constantly calling back between Apple and the Chinese government getting Chinese government approval on updates to the models on the phone. Yeah.
Because the censorship announcements like get updated really, really quickly, right? Like keywords are now problematic that weren't five minutes ago. But that model from Alibaba is essentially a way of keeping the Baidu model in check. And the Apple model. OK.
OK. And the Apple model. But yes, that is what Alibaba's there to do is to is the censorship engine. Isn't that crazy? Yeah.
It's models on top of models. Yeah. Well, that's the ultimate vision for Apple intelligence and for Siri is to make the model interchangeable. Now we haven't even talked about this big war between Apple and opening up. Oh, yeah.
Yeah. But the phone, as you know, it has Chet GPT baked in as a Siri extension. Basically, if you ask Siri something that Siri doesn't know the answer to, it'll fall back to Chet GPT and grab the answer from there. With the new Siri AI, it's going to know the answer to basically everything you ask. You don't really need Chet GPT.
These current iOS 27 betas have Chet GPT still as part of that system. But the ultimate goal, and I think this is going to happen more quickly because of the lawsuit, Apple is going to pull the Chet GPT exclusivity, in my opinion. And they're going to allow you to install any third party LM onto your phone to use through Siri. Interesting. Wait, okay.
Talk to us about the lawsuit because this seems, seems dramatic. Two years ago, three years ago, do name Ting Tan, vice president of iPhone product design, Apple Watch product design, AirPods, Acoustics, accessories, all sorts of stuff. One of the most senior executives at Apple and by all accounts, the number two under John Turnis and the hardware engineering organization comes to turn us, comes to Apple and he sits him out of here. I'm going to start up. This is early December of 23.
They're like, okay, well, you have your tentacles tied up in so many different areas, you can't leave immediately. So they're like, okay, stick around until February. So he's stuck around until February, but in behind the scenes, he's already cooking up a new AI devices company with Johnny Ive, the former Apple Design Chief and Sam Altman runs open AI, obviously at the time, still does. And there are whole goals to create a new range of devices that will destroy the iPhone, combining the engineering and design prowess of some of the best people who used to work at Apple with what at the time was widely considered the best AI, lethal combo. And Ting Tan has been hiring over the last year, two years, an exceptional number of people from Apple.
They've pillaged Apple's hard engineering ranks. They have 400 former Apple employees in their hardware division opening right now. My guess is that's between five and eight percent of the total opening AI employee pool is a former Apple employee kind of nuts. Okay. Apple has been beside itself for two years about this, the hiring, the poaching, the fact that they're trying to compete with them using their best former people.
Nothing you could really do about it. Reverse the beginning of this year, Apple finally had what they think is a smoking gun, an engineer named Changlu. He allegedly breaks into Apple servers and seals engineering presentations and such and gives them to open AI. And so Apple begins building a big case against Changlu and Ting Tan, who they allege was bringing Apple employees into open AI offices with prospective job offers and asking them to bring in Apple prototypes and other internal equipment to give them a look at what's coming down the road. What's open AI's defense here?
Because when you read the complaint, it seems pretty bad. Here's my take. Overall, the complaint is very thin, very thin. The stuff about Ting Tan, very thin. A lot of that is common practice in Silicon Valley for recruiting and meetings with employees that they've drummed up into an Netflix special.
That's my take. The Changlu stuff, if true, is extremely serious and he's in trouble, that's a big problem. Okay. So that is the delineation there. I say in terms of the recruiting and pillaging, Apple's hard engineering ranks.
I don't know how kosher that is. I'm sure there were some funky stuff going on. That strikes me as just business in California, but we'll see where this lands. But the one thing I'll say is if you read the Apple complaint, they say so many times in that complaint, we need to do discovery to know what's going on. This is a good seg to like the new form factors that we might expect before gadgets and do the Google glasses like 15 years ago when people hated them.
I'm still hate them. My old colleague at Business Insider, he like got beaten up or like got. What? Some people found it, you know, is just like very upset about it. People really hate that because of the recording.
Yeah, everything. Well, Apple has a high bar to cross there because their next big thing is glasses. So this is what I'm getting at. And there's a lot of interest in this. And we know that meta, obviously is like really pushing on this hard, et cetera, setting aside like market demand for some of these new form factors, it feels to me like we are very close to crossing a deeply uncomfortable cultural threshold with all of this stuff, where it's like people do not want, you know, if you had a little pendant on in your pocket right now, yeah, your body can like right now recording this.
And it's like, oh yeah, I have that like people will be very uneasy. Yeah, there's a high bar. So when we think about the range of like quote AI gadgets, setting aside even pure market demand, are we going to be in this era? We're like, we're really going to have to like have some serious cultural fights about what's acceptable for people to have on their person at any given time. I walked into a family members house a couple of weeks ago.
I got the new meta glasses for review and they were very upset that I walked in with the meta glasses thinking that I'm recording them, right? And how are they supposed to know? I could be recording them. I wasn't. I'm sure them as such.
But people like jail break the light. Yes, it's it's uncomfortable. You know, there are people who use a black sharpie to not rely on it. And if someone will sell a phone from China that doesn't have any light or any outward in DC, it's being looking like they will look there's no doubt it's the unknown short term. There will be glasses that are absolutely indistinguishable from normal glasses.
Yes. And then that is talking about what they call the super sense glasses right now, which are recording at all times versus the current ones where they record as you snap or ask it's record. Yeah, I don't know. Coming for sure from Apple. No, from all, there'll be a lot of these products.
You got new ones coming. We will not know. We will have no idea who's recording what's going on. Well, you know, Amazon's got new ones coming. Apple's got new ones coming or their first ones coming.
Google is working on this. Samsung is about to launch theirs. Everyone's doing this. And so, you know, meta has a lot of privacy baggage and they've sort of, you know, soiled the market for Apple and these other players ahead of time by making people uncomfortable with this stuff. And I think that gets a little bit too hard of a time.
Right. I think people go a little bit harder on meta than they should. But there are serious privacy questions that are being raised here, serious privacy questions that are being raised here. And it's going to be a very high bar for Apple to meet this moment and get people using these things despite those concerns. All right.
Well, other than the glasses that everyone seems to hate, talk to us about what we should actually be saving up our money for, I guess, in terms of new products launches. Well, this foldable phone, the Ultra is going to be really fantastic. Open it up. It's like an iPad mini. Pretty excited about it.
You know, it's not going to be as durable or priced as well as like a pro phone or the low end phones. But I think it's going to be pretty exciting. The AirPods, the pendant, the smart glasses are going to be very exciting. Smart home. So they're coming up with three different smart home products.
One is an in-home security camera system tied to a new Apple security system. I think they want to compete in some fashion with ADT or some of the home security companies. Interesting. There's a landmark smart home device, which you can put on your desk, put on the wall, and you can walk up to it and it'll know who it is. It'll basically bring Siri AI life, pull up your music, you can do video conferencing, you can do apps, smart home appliances, etc.
It's like a smart home command center. And then there's another device. It's a robotic version. So the one I just described has a seven-inch screen and there's a nine-inch screen version and it's going to be on a robotic arm. So it can move around on your desk.
So you can look at it, you can point it to look at people on a video conference. It's kind of nifty. I don't know how well that's going to do, but you know what? They're trying things at least. And then tons of new Macs, new MacBook Neo's, new iMacs, augmented reality glasses is the biggie.
Probably end of decade, early next decade, taking the glasses, but being able to give you information. A.R. Glass. Yeah, I was going to say, so, you know, people were talking about A.R. 10 years ago, 15 years ago and hadn't taken off.
What is going to be different than it's like, okay, now people actually like A.R. and find use for it. It's the visual fidelity. Okay. It's the quality.
Have you used the Vision Pro? No. Okay. So if you use the Vision Pro, I would encourage you to go to an Apple store. The visual quality is amazing.
It's a big headset. Yeah. Yeah. I saw someone say recently they watched it as in Canon, their vision pro. It's amazing.
It's amazing. Yeah. It's amazing. Anyways, it's a better experience than watching a big screen TV on your couch. If you don't have a family, if you find something so, just hope you're not like two people sitting on a couch with their glasses on.
They have marketing around that. Like, and they're trying to make two people bring the Vision Pro have better interactivity. I guess you can hold hands when you do it. But long story short, the glasses of 10 years ago, when even today, they are glasses, the visual quality is garbage, right? You can hardly see what's going on.
Apple, their goals make a leapfrog A.R. products. They're not going to get anywhere near the Vision Pro quality, but they're going to get to a high quality place. OK, so the next three years, anything else? So it's like foldable phones.
So we'll start off with the foldable phone and the 18 Pro and Pro Max. This fall, you're going to get a new OLED iPad mini. I was going to ask, no one even cares about the iPad mini. It's not mentioned until now. Yeah.
So I'm excited about that. I wrote a story about it today. So you're going to get a new OLED display. So same visual clarity that you got on an iPhone, the current iPad mini stuck on old LCD next year, you're going to get some of the wearables. So you're going to get that foldable phone to actually in the fall, but you're also going to get the AirPods with cameras and you're going to get the smart glasses.
And then the other big one next year is the 20th anniversary iPhone, the iPhone 20 or the iPhone XX, whatever you want to call it. And that is going to be an all glass phone that meshes well with a liquid glass. The new software rolled out last year and update this year. The year after that, you're going to get things like the tabletop robot. I talked about the smart hall appliances and what have you.
So it's a big next three years for Apple and August re-out of the glass behind that. They've been playing with this big tablet, foldable tablet, foldable iPad with a 20 screen. And then that means smart home device I talked about, the smart home hub. That'll be in the next few months. So that's an exciting one.
Mark Gurman, thank you so much for coming on OddLods. That was great. I'm going to put it back. Good. Thanks for having me.
So Tracy, I thought that was very interesting. I needed that catch up on this company that once like occupied a little bit of my mind share, and now I hardly ever think at all. I do think it's interesting, like as a starting point for all of the, like, they're not the best phones in the world, especially when you bring China into it. They've been stumbling on AI for over a decade. Then it's like the one big tech stock that right now today, July 16th is an all-time high.
Well, I thought it's interesting. I mean, to some extent you can say, OK, they miss the boat on AI. But on the other hand, they've sort of stuck true to their ethos as a product company that often I don't want to say we just off the technology of others. But like it's very good about sourcing tech from other companies, right? Right.
I would say, you know, Mark described it's a product company, right? But the other thing is it's a supply chain integration story. Obviously that was like, that's what Tim Cook's expertise was, et cetera. You know, there's an interesting episode we did. I remember with Sam D'Amico, the impulse labs.
Yeah. He was talking about it. And he said that term, and I guess it's actually originally an Elon term, which is that the factory is the product, right? Which is really interesting. And so he was like, why have they been this unified experience that combines really good hardware with really good software?
The product is their ability to integrate. And it's not like a that's what they're good. That's their thing. They can integrate many different things by anyone else. And then people really like the product.
Yeah. But then on the other hand, I guess the question is if something like a camera, if the edge on a camera now comes from AI versus like actual hardware components, then are you going to get a big AI company, a hyperscaler that starts, you know, becoming a product company? Or you just have like one of these Chinese companies where AI is like one random thing they do. And even that is that time better than the, you know what I'm saying? And so I do think like pretty clearly from a pure product standpoint, there is probably a limit to your point of like, how far they'll go if their core technology is just not frontier.
And it's so crazy to me that like there are years ahead of everyone else in terms of conceiving of talking to your computer with your voice. And then they just like completely drop the ball on that. Well, I do also think the other thing, you know, we talked about their ability to entice buyers for these new products and a lot of the stuff, it sounds cool. A robotic arm that sits on your desk and points at people, I guess. But on the other hand, like how much of it do people actually need?
Yeah. How much is it going to cost given that as we were discussing memory and components are in short supply at the moment? I don't know. I also think who knows? I guess part of it may be, you know, other companies are all going to build a similar gadgets, et cetera.
Like again, the iPhone bringing together this entire ecosystem, like what are the I guess like, I don't know. I guess the flip side is like we don't care at all anymore about what iOS we're on, et cetera. And it hasn't hurt the company. Well, I was going to say one question we should have asked Mark and I forgot, but how much of a moat is iOS now? Yeah.
Cause people will say like, I don't want an on iOS phone. But on the other hand, you don't know what iOS you're on. No, all I know is that if I didn't have one on my friends would make fun of me for being green text in the group chats. Who's the who's the who's the Android person that's making the group tech show up in green chat? Expose yourself.
And so I don't want to be that person. All right. So we leave it there. Let's leave it there. This has been another episode of the Oddbots podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wysenthal. You can follow me at the stalwart. Follow our producers.
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