$AAPL Earnings Sneak Preview: Comparing Apple’s Indirect Guidance vs. Wall Street Consensus

Let’s get right to it.

Here’s what Wall Street consensus, as gathered by Yahoo! Finance (data source: Refinitiv), thinks of the March quarter:

You’ll notice the consensus hasn’t moved that much from the post-earnings whopper of a $111.4B holiday quarter, perhaps due to almost 33% estimated rev growth from a year-ago base of $58.3B being kind of insane. When I checked at the end of January, expectations stood at $76.8B.

Still, it’s what I would call a rather bullish consensus, given Apple’s implied range guide of $75.2B – $76.6B (based on sequential seasonality of FY17-FY19). Wall Street’s thinking is three quarters of a billion higher than that “guide”.

Let’s “normalize” Apple’s FQ2 2021 not-a-guide guide to establish something of a baseline:

• $75-77B revenue (it would be an exceptionally narrow range during normal times)

• Gross margin between 39 – 39.5% (FQ1 2021 GM was 39.8%, yes, Luca Maestri did say to expect “similar” gross margin sequentially)

• OpEx of $10.7B – $10.9B (actual guidance)

• Tax Rate of 17% (actual guidance)

• OI&E of…was it something comically low like $50M? I just remember it was so “low” compared to Apple’s revenue scope that it was immaterial, and it basically is.

Anyway, just add your favorite best guess on diluted share count (I went with 16.9B shares), and you end up with an “implied EPS” of around $0.90 to $0.97.

You can, of course, disagree with my assumptions. If you assume Apple can manage GM of closer to 40%, then the top end of “implied EPS” at 16.9B diluted shares rises to 99 cents. Assuming a percentage less in tax rate makes maybe one cent’s worth of EPS difference.

There is, of course, the matter of Apple shattering the FQ1 2021 Wall Street consensus of $103B revs by an insane $8B and change. Is there some wild “whisper number” of 6-8% over Apple’s “top-end guide”, which would put “true” expectations in the rev range of $81-82B?

A strange world where under $80B in revenues for a March quarter would ever be considered a “disappointment”, in the middle of a pandemic where every vaccine dose administered counts. But that’s the equities market for ya, I guess.

See you on Wednesday for a much-anticipated earnings call!

$AAPL FQ1 2021 Post-Earnings Extra (“Guidance” Edition): How Does One Sentence Equal Billions of Dollars in Additional Expectations?

Apple’s Non-Guidance Guidance

Remember how Apple wasn’t giving guidance during the pandemic? Well, it depends on how strict your definition is. The one sentence I referred to in the title is this one, from Apple CFO Luca Maestri:

“For total company revenue, we believe growth will accelerate on a year-over-year basis, and in aggregate, will follow typical seasonality on a sequential basis.”

[Apple FQ1 2021 Earnings Recording/Podcast, available at https://rss.art19.com/apple-quarterly-earnings-call until around Feb. 10, 2021 or so, about 21:50 in]

The great news is, unlike, say, Wearables (well, at least the link still works, right), there’s actually little work to do to further unpack this clue, thanks to a very useful clarification from Luca based on an analyst question later in the call.

In reply to well-known Wall Street Apple (plus other companies) professional analyst Toni Sacconaghi, of the apparently-recently-renamed AllianceBernstein,

who asked Luca about iPhone channel inventory and “above-seasonal iPhone growth” (y’know, because iPhone didn’t actually begin to ship until FQ1 2021, which is both the latest and earliest an iPhone has ever shipped…it’s a fiscal/calendar quarter thing),

Luca answered in part:

“At the end of December, we exited with a level of iPhone channel inventory which was slightly below a year ago. So … we still had some level of supply constraints which we believe we’re going to be able to solve during the March quarter.” 

“In terms of the sequential change [that] we talked about, during the prepared remarks we talked about total company average, and we said that we expect that sequential progression to be similar to the typical seasonality that you’ve seen in past years. Certainly last year is not typical because of COVID. But if you go back, you know, fiscal ’17, ’18, ’19, you know, that’s our typical seasonal progression.” (emphasis mine)

[around 37:30 into the earnings podcast, link above]

A Potential “Revenue Range”

After that, it’s just the matter of a quick visit to the Apple Investor Relations website. Or, you can just check out my quick chart:

I mean, I just did the maths the way Maestri suggested: “if you go back, you know, fiscal ’17, ’18, ’19…that’s our typical seasonal progression.”

Since Tim and Luca are generally pretty intentional with their guidance and commentary, here you go: A “range” of between 30.8% and 32.5% sequential drop in revenues in that three-year measuring period.

FQ1 2021 actual was $111.4B, so that yields $75.2B given FY17’s seasonality pattern (lowest number), and $76.6B given FY19’s pattern (highest number).

And now you know why the Wall Street consensus (I track Yahoo! Finance, YMMV) went from around $74.5B just before the earnings release to $76.8B just before the weekend:

(Screenshot from Yahoo! Finance.)

Thesis Defense: “Are You SURE Luca Intended to Be THAT Bullish?”

I am. “Well, could you have misread Luca’s commentary?” There’s always that chance, but I doubt it in this case.

Yes, “first principles” of Luca’s guidance was expressing management’s belief that rev growth will accelerate YOY. The most sensible read of that, given the sheer bullishness of the results alone plus iPhone 12-series’ first full shipping quarter, is “YOY rev growth rate for FQ2 2021 will be higher on a percentage basis than that of FQ1 2021”. FQ1 2021 saw Apple revenue grow a somewhat impressive (🥴) 21.4% from an incredibly high holiday quarter revenue base. So, if you apply a base-case 22% YOY rev growth rate to the March quarter, that yields around $71.1B…which, you know, for a company this big, is also kind of totally bonkers.

But Maestri didn’t stop there. He specifically added, and later reaffirmed, that company growth in the aggregate would follow typical revenue seasonality on a sequential basis. And then pointed out three specific fiscal years as examples. The intent could not be more clear, at least in my humble opinion.

It’s not to say management never gets guidance wrong…I can count two or three occasions in the past 5-6 years. But you really can’t interpret this “guidance” any other way, even if Apple did go out on a limb (which I will assume Apple didn’t do, given recent-past miscues).

Also, Luca added the very important assumption that the COVID situation would not significantly worsen in the March quarter, and pointed out that it wasn’t all favorable YOY compares down the line (the games subsegment of GC’s Services business would be a tough compare in the March quarter, for instance).

So yes, provided the global COVID situation is “same-or-improving” vs. Apple’s assumptions, Luca fully intended to be that bullish in his “management” of Wall Street expectations. And incredible as it seems during this awful pandemic, Wall Street (1) took Maestri’s deliberate cues, (2) noted that their reasonably lofty $103B December-quarter consensus (which Apple had to have known about) was just beaten by eight freakin’ billion dollars, and (3) rather logically bumped their consensus numbers higher than ever to nearly $77B for FQ2 2021.

This 32% YOY projected growth to $76.8B, by the way, exceeds Apple’s YOY growth rate (~30%) and total revenue ($74.6B) from Apple’s then-mindblowing FQ1 2015.

In other words, Wall Street is expecting a March quarter that beats the holiday kick-off quarter of the iPhone 6 Supercycle Year. To repurpose a quote from new Apple Senior VP of Hardware Engineering John Ternus: “That’s just nuts.”

Prelude to an Extremely Strong Apple First Fiscal Half…and More

Note, this isn’t necessarily related to stock sentiment, given the not-without-justification argument that Apple may still be relatively overvalued given current ttm P/E of about 35.7 (post-earnings “disappointment”) being at levels not seen since…maybe 2007.

However, management guidance absolutely hints at a thunderously bullish March quarter that we’ve never seen before…

…and an Apple First Half of the fiscal year with a half-decent shot at clearing OVER $190B in revenue, a level that Apple didn’t even approach in a full fiscal year until around FY13 ($170.9B) and FY14 ($182.8B).

Even though the back half of FY21 is bound to be weaker by comparison (it historically always is), that still puts Apple in position to reach a tremendous revenue milestone. Likely “by default” since Apple’s 2H FY20 revenues were about $124B (and no one serious on Wall Street thinks Apple’s growth wave ends with the March quarter).

Which milestone? After a mere six fiscal years “languishing” (heh) in the $200B-ish revenue range (FY15-FY20), Apple is all-but-certain to vault into the head-spinning $300B+ annual sales strata, with lots of room to spare (Wall Street’s actually thinking $330B in Apple revenue for FY21).

It’s an insanely large revenue number for a consumer tech-centric company, with the next closest consumer-ish tech company, Alphabet[FN1], likely over $75B in annual revenues away.

For what we all hope will be a year marking the start of a cautious-but-lasting pandemic recovery in terms of global public health, mental health and personal finances by the summertime, Apple’s fiscal 2021 and overall business trends are somehow looking…not bad, to say the least.

_______________________

[FN1] Oh I agree with all of you incredulous skeptics. Alphabet/Google, a “consumer-ish” tech company? That’s one heck of a stretch. But the next closest tech company is…well…Microsoft, which analysts project to reach around $160B or so in annual sales for its fiscal 2021.

$AAPL FQ1 2021 Earnings Quick Preview: A Record-Breaking Quarter Amidst a Terrible Pandemic

The Cognitive Dissonance of Unimaginable Public Health Crisis With Stock Markets at All-Time Highs

It’s far above my pay grade to even attempt to make sense of this COVID-19 nightmare, but of course I have to take a moment to acknowledge the tremendous amount of suffering and loss

…fortunately though, multiple bright lights are at the end of the tunnel, in the form of effective, surprisingly adaptable mRNA vaccines (in the US, Pfizer/BioNTech and Moderna’s vaccines available under FDA emergency use authorization). May the global vaccination campaign proceed as swiftly and safely as possible as the horrible winter wave of COVID-19 appears to have plateaued or crested for now.

In the meantime, we’ll need all the natural defenses against rising new case counts that we can get (if they indeed help mitigate this pandemic).

Apple Proves Itself in Fiscal 2020, Setting Expectations High for the Holiday Quarter

Wait, the Mega-Pricey iPhone Max company? Which is suuuuuper anti-competitive, to hear some tell it?

Never mind $299+ education-pricing iPads or a $399+ iPhone SE sporting a rather capable A13 SoC (y’know, the A13 Bionic in iPhone 11, 11 Pro, and 11 Pro Max). Or that M1 chip offering jaw-dropping performance starting at $699 for the Mac mini.

Undying memes and narratives aside, yes, Apple proved surprisingly pandemic-proof amidst economic conditions that devastated other swaths of industry. Starting with FQ2 2020, more-or-less covering January through March 2020:

FQ2 2020

Apple didn’t grow revenues much year-over-year, but grow it did ($58 >> $58.3B), despite worldwide lockdowns mostly in the month of March. Revenue declines in mostly iPhone (-$2.1B, -6.7%) and iPad (-$500M, -10.3%) were overcome by the usual strength in Services and Wearables (although Wearables growth has been relatively modest recently).

Of note, $AAPL stock had already bottomed out at a split-adjusted $56 and change in March (oh, right, there was a 4-to-1- stock split on Aug. 28, 2020…about 200 years ago), and was already in the middle of a tremendous, still-ongoing rally as of the March-quarter earnings release.

FQ3 2020

Work-from-home (“WFH”) begins working its magic on a bunch of tech companies around the world…along with WFH’s cousins “shop-from-home” (Amazon likely the biggest beneficiary), “watch-from-home” (any given Major Streaming Provider™), and “play-from-home” (Nintendo, etc.).

Apple was no different, with Mac’s slight -$160M/-2.9% YOY revenue drop from Q2 2020 reversing to $1.26B/21.6% YOY growth, marking a new all-time Mac revenue record for the June quarter at $7.08B. iPad growth was even more impressive, going from $500M YOY revenue decline to $1.56B/31% revenue growth in a single quarter…narrowly beating out Wearables, Home and Accessories’ $6.45B revenue total by over $100M.

In fact, in this traditional Apple “nadir” quarter, every single revenue geography and every single product line, even iPhone, showed YOY revenue growth! $59.6B in June quarter revenue? That used to be the stuff of December-quarter legend.

FQ4 2020

Apple strongly hinted at a dip in iPhone revenues due to future iPhone shipping delays during the June-quarter earnings call, and they were right – iPhone line revenue dropped a massive ~$7B YOY, from $33.4B to $26.4B.

But overall Apple revenues still grew over $650M anyway! This was largely thanks to astounding WFH-fueled revenue growth in iPad (+$2.1B/+46% YOY) and even Mac, which grew to an all-time-high $9B in revs for the quarter (29.2% rev growth) despite the pre-announced, not-yet-begun Apple Silicon transition.

Now, it’s not like Apple didn’t launch anything in the first three calendar quarters. Of course the second-gen iPhone SE and MacBook Air + MBP13 refreshes helped. But Apple launched a huge amount of product in September, October and November…which is near-certain to reflect in Apple’s fiscal first half of 2021, if nothing else.

And it all starts with December-quarter results due Wednesday.

“Sneak-Previewing” a Blockbuster FQ1 2021 by Reviewing the Wall Street Consensus

Apple doesn’t give guidance due to the pandemic, but Wall Street analysts continue to estimate their collective best anyway.

And this quarter’s projected to be a doozy. According to Yahoo! Finance (after 1/25/2021 market close), the consensus of 27 professionals is for Apple to ring in $103B in sales, which would be 12% YOY rev growth over the year-ago, then-all-time-high quarterly revenue record of $91.8B.

Over. One hundred. Billion. Dollars. In the middle. Of a pandemic.

Seriously?

Unlike most quarters, I’ll just be providing a “meta-commentary” on that top-line estimate, and devise a WAG scenario that gets us to the $103B consensus to serve as a base for comic relief further discussion.

First, let’s review the limited guidance Luca Maestri provided for the December quarter. From my contemporaneous earnings call notes:

To organize those thoughts a little + in case that tweet link didn’t load right, Maestri:

  • assumed a certain baseline for COVID-19 (which sadly set all kinds of awful records over the winter instead)
  • guided to iPhone rev YOY growth vs. FQ1 2020, despite iPhone 12 and 12 Pro shipping on Oct. 23 and iPhone 12 mini/Max shipping on Nov. 13
  • made a confident prediction that all other revenue categories (iPad, Mac, Services, and Wearables/Home/Accessories) would be up 10% or more YOY

Next, here’s my for-entertainment-purposes-only “derivation” of the $103B consensus into a sample estimate.

  • iPhone: $59.2B (up 6% YOY)
  • Mac: $8.7B (up ~21% YOY)
  • iPad: $8.4B (up ~40% YOY)
  • Wearables/Home/Accessories (“W/H/A” as VERY helpful shorthand): $11.5B (up 15% YOY)
  • Services: $15.2B (up ~19% YOY)
  • Sample Combined Revs: $103B (up ~12% YOY)

While “working with” my trusty Excel spreadsheet to get this post ready, I ended up with nearly $103B without trying very hard or specifically having the $103B number in mind, so I’ll take that as a sign that I can reasonably approximate “the consensus view”. So let’s run this sample estimate, category by category.

iPhone

Granted, Maestri’s “we expect iPhone revs to grow YOY” guide could mean anything, but mid-single-digits sounds reasonable, because:

>> Apple’s “mainline” iPhone 12 and iPhone 12 Pro phone launched in late October 2020, around a full month later than we’re used to (in the past, Apple tended to ship and sell new iPhones with mere days or slightly over a week until the end of the September quarter)

>> Apple’s “niche” (?) iPhone 12 mini and 12 Pro Max (which showed early signs of strong demand for a $1099+ device) launched mid-November, the latest any iPhone has ever launched…in a calendar year, that is (around the middle of the to-be-reported December quarter)

This means that Apple’s first full quarter of iPhone 12-series sales is FQ2 2021, and Luca’s guidance implies that overall iPhone 12 demand is just that strong (iPhone 12 mini supply chain rumors aside). That leaves a little room for upside surprise for the December quarter, and a lot of room for optimism for FQ2 2021 (a little more on this later).

Mac

WFH continueth, and the New Age of M-chip Macs beginneth! I don’t think the consensus would expect (meta-commentary, get it) all-time-high Mac sales since the December quarter’s well past the typical seasonal back-to-school peak. On the other hand, Macs are riding a major WFH wave (even as some Mac buying may be paused in anticipation of further M-chip changeover) and it may well be foolhardy to bet against it…yet. So why not go with 21% growth, which I think Maestri would describe as “strong double-digits” in his inimitable style.

So about Mac’s recent growth streak. We all remember the iPhone 6s lesson, right? I wouldn’t be too surprised to see “lackluster” Mac growth at some point, given WFH’s inherent effect of “pulling ahead” Mac demand, whether it be from individual consumers or Fortune 500 corporations making massive IT purchases for employees. Everyone buying a Mac in 2020 or 2021 won’t be upgrading all that soon…that’s just how it goes with Mac/PC replacement cycles and macOS software and “extended security” support lifecycles (easily 7 years in many cases).

All that matters longer-term, IMHO, are

>> customer satisfaction (which, Touch Bar and recent butterfly keyboard walkbacks be damned, is a reasonable 93% in the New-and-Improved Scissor-Switch Keyboard Era™) and, relatedly,

>> installed base growth, which will continue as long as Mac users don’t leave the platform for iPad, x86-based Windows, or perhaps other ARM-based non-Apple compute platforms like Qualcomm’s 8cx.

But who knows? Maybe the Intel-to-M-chip transition supercycle will drive an accelerated migration away from Intel Macs. I mean, aside from Win10 support, which Parallels is feverishly trying to address via Microsoft’s ARM64 fork of Win10, Apple’s first M1 Macs have shown themselves to be quieter, cooler, considerably-longer-running on the same battery, reasonably compatible and performant with Intel Macs apps, all that and much faster than any PC in their class. As long as you’re not locked into a mission-critical Intel app/plug-in/workflow situation (a situation that should largely fade away within a year or two), what’s not to like?

iPad

I’m guessing that iPad is going to have a triumphant banner year, as it continues to rebound from a relentless multi-year slide in revenues that finally troughed around calendar 2016-2017 (in part because of its insane initial success). Two points first: One, whatever the formerly unsustainable sales pace, iPad is minting all-time highs in installed base in the here and now. Two, even though a projected 40% YOY growth rate to $8.4B in revs is still short of the all-time high of ~$11.5B set in FQ1 2014 (thanks for the quick assist, Statista!)…well, it’s still 40% growth, right? iPad just might be on a comfortable $25B-and-rising annual revenue trajectory before long.

It certainly won’t hurt that the 8th-generation iPad (A12) and redesigned iPad Air A14 launched in September, just in time for iPad’s seasonally strongest quarter.

As with Mac, there is a chance that the iPad WFH Effect could dampen sales momentum in the shorter-term. But iPad Pro and iPad mini are both due for refreshes. And consistently high iPad customer satisfaction, combined with iPadOS’s continued evolution, all bode well for iPad’s future.

W/H/A

Wearables, Home and Accessories had a relatively quiet year. The only new products in calendar 2020 were HomePod mini (Oct. 2020) and AirPods Max (Dec. 2020), so AirPods Max will barely impact sales for FQ1 2021, higher price aside. Fine, there was Watch Series 6 and maybe some new Beats gear, but AirPods wireless audio has been the biggest apparent driver of the audio category (AirPods gen. 2 – Mar. 2019, AirPods Pro – Oct. 2019), and Watch may not be quite the growth driver it once was (we’ll have to see if management gives any Watch-specific clues on Wednesday).

Fine, maybe there’s a few other things, including MagSafe accessories, but c’mon, “dongles and such” have never been particularly large segments of Apple’s overall business.

That’s some pretty “dour” commentary for perfectly respectable double-digit growth, isn’t it? I’m hardly bearish on AirPods or Watch, and HomePod mini seems nice for $99, but I just can’t see any catalysts for W/H/A segment growth without some new AirPods in the mix, and $550 cans alone won’t do the job.

Services

Perennial, not-very-seasonal performer is perennially performing. App Store, Watch-From-Home, Apple One combining iCloud, Music, Arcade, tv+, News+, and now Fitness+ into packages that often save family users money each month…

Apple Pay and Apple Card also chipping in, and AppleCare actually doing very well when various locales have allowed in-person shopping…

Momentum has always been there, and looks to remain there absent some major inflection point. Apple device installed base growth still happening? Check. Increasing Services engagement from Apple users over time, including some who may or may not have rented a movie or two or ten since…well…circumstances? Check.

If a $15B all-time record of a quarterly number isn’t achieved in FQ1 2021, it should be very soon.

Uncurbed Enthusiasm for FQ2 2021, Thanks Mostly to iPhone

Finally, a very quick look at FQ2 2021. Long story short, analysts are expecting iPhone 12 momentum to carry over to the first full shipping quarter in a big way.

How big? $74.5B overall revenues big, representing a whopping 28% YOY growth. It would be the highest-revenue March quarter for Apple by far, and would actually be very close to the sixth-best Apple quarter by revenue for all time. Just in case a $70B+ non-holiday quarter for a consumer tech-centric company didn’t sound bonkers enough right out of the gate.

Let’s just set a few parameters to better visualize how the consensus might be thinking here:

  • Mac +15% YOY rev growth (to ~$6.2B)
  • iPad +15% YOY (to ~$5B)
  • W/H/A +12% YOY (to ~$7B)
  • Services +15% YOY (to ~$15.3B)

Solve for iPhone, and it seems the Wall Street consensus may be expecting iPhone revenues to improve slightly over 40% YOY. Even if you assume one or more of the not-iPhone Apple business lines outperform my control baseline, it really doesn’t change the lofty consensus expectations for an incredibly strong iPhone quarter.

Will a soft compare from the prior March quarter, plus a running production start from the December quarter, help? Is $AAPL stock, with a trailing P/E of over 40 (remember when it was more like 10?!), now “dependent” upon meeting unsustainably high expectations? If nothing else, these storylines could be brief, hopefully welcome distractions from the pandemic.

Thanks as always for reading. Stay safe, stay well, and I’ll probably see you online on Wednesday for Apple’s biggest earnings release ever amidst these truly unprecedented times.

What the M1 Apple Silicon Platform (Generally) Is (and Isn’t), From a Home Gamer’s Perspective

In semi-particular order…

A Redefinition of Low-Power PC-Paradigm Computing

The reviews from tech journalists, the social media tech set, and users are in – and reaction is about as positive as I can remember for any previous Mac launch.

Heck, The Verge (a generally “tough-but-fair” reviewer when it comes to Apple) gave the carryover-design, non-touchscreen, two-TB3/USB4-port-only MacBook Air a 9.5/10, where recent, more “technologically-advanced” iPhones (5G, LiDAR on Pro, U1, non-potato-cam, etc.) get a 9/10.

So it’s not just because of the much-better-received second-generation scissor-switch design (alas, poor butterfly keyboard, we hardly knew thee). It’s “so much more” – mostly due to a single, incredibly savvy change-of-chip from space-heater Intel to an unnervingly-cool, winter-unfriendly, 5nm-process, energy-efficient 16B-transistor M1 SoC. That Rosetta 2s its way through Intel Mac apps with generally impressive ease.

That also somehow boasts single-core performance better than any Intel Mac ever shipped, and exhibits (albeit in brief sprints for the fan-free Air) multi-core CPU potential that’s a little bit better than…the state-of-the-art (albeit 14nm) Core i9 CTO option on the $2800+ (US) MBP16. Among other surprising feats of speed.

Suddenly, the humblest of Macs…fine, in overall PC context, semi-premium $1000+ fairly-mobile and moderate-priced $700+ small-form-factor PC computing…just got a lot faster. And just as suddenly, the competition is left with some serious catching up to do – yes, even on price. Because Apple has made a powerful statement on value.

Compare a base model Mac mini to the Lenovo SFF PC I tweeted about two weeks ago, and you can kind of see how Apple’s timing and choice of target market (the broadest demographic of the Mac installed base, by far) couldn’t have been better:

A New Definition of the Limits of Low-Power PC Computing

Sure, in most use cases (and post-ARM64-software optimization, pretty much all use cases), the M1 Macs change what’s possible all the way from energy consumption to prosumer-and-up workflows that would cause a Core i5 MacBook (or worse, a Core i3) to recoil in terror.

And then there’s the small side benefit of Apple offering very performant, superior-battery-life machines for a somewhat important subset of the Mac installed base – y’know, millions of third-party iOS, iPadOS, watchOS and/or macOS developers running Xcode, without which there is no “developer ecosystem”.

But there are limits to being a pioneer in Strange New Smartphone-Inspired PC Architecture™, as it were. Intentional, but still limiting all the same.

Yes, the M1 is kinda, sorta an “A14X Plus”. That’s because Apple challenged itself to create the most performant SoC it possibly could within an enclosure (capped at ~10W sustained thermal envelope) purposely designed to eliminate active cooling (though M1 certainly benefits from a little “fresh air”).

Apple’s enhanced thermal constraint, along with the unified memory architecture, necessitated extreme restrictions on how much logic board space, GPU power, and sheer thermal/power overhead could be applied to the M1’s design.

As it turned out, we should have seen this coming around two years ago.

The intrepid team at iFixit was one of the first to make the discovery with the 7nm-process A12X:

Credit: iFixit (link above)

Computer, rotate and zoom in on the A12X itself!

Credit: Yep, still iFixit!

SoC on the left, two DRAM modules parked right next to it. The exact same basic layout as the just-launched M1.

M1 schematic. Credit: Apple November 2020 Special Event, ~7:40 mark

Given that DRAM isn’t process-shrinking anywhere near the rate of Application Processors like A14 Bionic, M1 and inevitable AMD/Qualcomm competition, it’s at least understandable – if frustrating – that this super-compact design would have a relatively modest RAM cap for the time being. There’s room to expand the boundaries of the M1 “Silicon City”, but that’s for future, higher-power-budget variants.

Long story short, the M1 can take you very far (comfortably meeting Johny Srouji’s “best-in-class” mandate for each M1 Mac vs. its relevant competitive set, I’d say), but it’s literally the absolute least that an M-chip can do, by design. So if you want features like:

• a 32/64GB-and-up RAM ceiling,

• 6+ performance CPU cores,

• a stronger GPU,

• more than 2TB SSD,

• 4+ Thunderbolt 3 / USB4 ports,

• a bigger display,

• being able to simultaneously run more displays,

or something else the M1 platform just can’t provide, then you might want to wait for the corresponding M-chip MBP16, iMac, or maybe i/Mac Pro 🥴 versions to launch, if at all possible. And maybe “Pro” versions of the Mac mini and 13″ MacBook already-called-a-Pro, who knows.

An Engine Swap That Was “Obvious in Hindsight”

First of all, everyone knows we’re still in the middle of a terrible COVID-19 pandemic, right? November 2020 being the worst month yet on a worldwide, newly-reported-cases-per-day basis?

And Apple still launched an impressive array of products, from Watch Series 6 and SE to iPad Air A14 and some mildly important iPhone 12 SKUs (which were delayed from “a few” to “several” weeks).

So yeah, perhaps some of Peanut Gallery Tech Twitter/Journopunditocracy can appreciate the overall context of 2020 here before complaining about the lack of shiny new things.

That aside, why did anyone expect Apple to start the Apple Silicon transition with radical redesigns anyway? It’s never been done in any past transition (Moto 68040 >> PowerPC, PowerPC >> Intel), in part because reengineering the hardware for a totally new chip architecture is probably tough enough as it is.

Aside from the other very good reasons others have given (for instance, Rene Ritchie points out that it’s much easier to work with existing design and thermal tolerances)…

and the fact that MacBook Pro (Late 2016) and MacBook Air (October 2018) designs aren’t that old (the keyboards are pretty new, in fact 🤣)…

…it’s really not a particularly good idea to “obsolete” the rest of the Mac lineup right out of the gate with major redesigns, especially when the remainder of the Apple Silicon Transition could take until sometime in 2022.

Apple’s Own Spin on “Modular”

I know, I know. Apple’s under constant existential threat from Android or WinTel or WinAMD or maybe even some more “open” flavor of RISC computing. Whether or not that’s looking particularly true anytime in the foreseeable or longer-term future, a theme you generally see with this line of argument is the spectre of “modularity” (y’know, Snapdragon 765 or 8cx this, Ryzen 5000-series that, etc.), a crashing wave of commoditization overwhelming whatever “high-margin moat” Apple has allegedly, tenuously trenched via integrated products.

Oddly, though, Apple’s making its next, bet-the-Mac big push on personal computing with

  • an M1 in a Mac mini
  • an M1 in a MacBook Air
  • an M1 in a MacBook Pro

Isn’t that…modular too?!

Why yes, yes it is! And if you think about it, it’s much more aggressively modular than anything we’ve ever seen in personal computing (a single SoC for three distinct form factors, including a desktop). And it’ll probably happen again with another subset of the Mac lineup.

It’s radically different from anything we’ve ever seen in any Mac, and yet this “one-size-fits-all” approach is really quite sensible (and exhibited in iPhones since the 6/6 Plus).

Also interesting is the complete lack of compromise (where RAM isn’t a major consideration, which it’s not supposed to be on “low-end” systems given classic usage patterns).

Sure, M1’s thermal bandwidth allows it to work just a little bit better on the top-end, and for longer when it has access to active cooling and/or unlimited power, but for the first 10-15 minutes of a person’s computing day, the overall speed experience will be probably be almost exactly the same.

It saves on costs to target a single SoC for three different Mac form factors, of course, but when the entry-level Mac SoC is this fast, consumers really won’t care much. It’ll just take a little getting used to from the customization fans among us, because for Apple, the concept of choosing a faster CPU for a given Mac trim level may now be a thing of the past.

Legitimate gripes about LPDDR4X RAM expandability and (impressively fast) SSD storage upgrade prices aside, this move to M-chip modularity is very likely to save Mac users money over time ($200 or more for the MacBook enthusiasts), because Apple’s goal is to never make you want for CPU performance on a brand-new system ever again.

The Beginning of the Inevitably Uncomfortable Intel/Apple Silicon Feature Divide

It’s bound to happen, and unfortunately, Mac users having bought a system within the past two to three years or so might be feeling a bit “left out” as they approach Year 5-7 of their particular Mac’s lifecycle, if not sooner.

To be clear, Apple will not, cannot possibly break its commitment to support Intel Macs “for years to come”. Big Sur support looks back up to 7 years (2013 MacBook Air, MacBook Pro, and Mac Pro), and I don’t see that support lifecycle changing very much when whatever macOS version in 2024 or 2025 launches. As many non-thrill seekers know, Apple also tends to fully support security updates looking back up to two macOS releases, so macOS software security support could easily extend up to and slightly beyond 2026 for any new Mac with a “model year” of 2019 or later.

But there’s security support, and then there’s feature support. And there’s already one giant difference between an M1 and most (all?) Intel chips: neural processing power. The A14 Bionic and M1 Neural Engines are both capable of 11 trillion operations per second. In the case of M1 MacBook Pro, it’s claimed to be 11x faster at ML vs. the 2020 MBP13 running an 8th-gen 1.7GHz Core i7 CPU.

Of course, neural-network-type tasks will be faster with 11th, 12th, 13th? gen Intel Core chips…assuming any of them are available in quantity and in time for the final Intel Macs yet to launch. But Intel’s and Apple’s approaches in the short term are just too different. Intel seems to be leveraging its existing CPU/GPU-centric platform to enhance neural-computing performance; Apple’s gone full-bonkers Moar Cores™ with a discrete NPU, the same strategy as major RISC chip players.

For now, the Neural Engine’s main benefits seem more related to specialized image/video processing tasks (Face ID which is “old hat” to Apple by now, Pixelmator’s ML Super Resolution), or machine learning academia. Other features it enables, from Siri Suggestions to object detection, are well within the capabilities of “lower-end” neural processing power (read: 11T ops/sec are slight overkill for these tasks)

But that’s definitely changing over time, given the quadrillions of operations being left on the table every single day (and a certain ex-Google AI Chief champing at the bit to move the AI/ML industry forward). With an on-device engine that fast, why not “teach it” to accelerate all kinds of anticipatory tasks in typical users’ lives, including finally making Siri…um…better, or even available on-device, no cloud required just for timers and alarms?

It’s also possible that allowing Mac developers and Mac-based researchers access to the Neural Engine will unlock use cases Apple hasn’t thought of…or can Sherlock/acquihire in the future. 😁

Those benefits…will not really accrue to Intel users’ benefit over time, since their AI/ML performance is vastly inferior to the M1’s NPU. And aside from inevitable Neural Engine improvements each M-chip generation, the feature upgrade gap could only get worse if the Apple Silicon platform continues to add new hardware functionality including:

• hardware 8K encode/decode

• Mac *touchscreen* support

• further image/digital signal processing improvements/other ways to make videoconferencing as battery-efficient as possible

• possibly moving up to a full-system 256-bit encryption base via a more powerful Secure Enclave

• supporting higher AirPlay screen mirroring resolutions than 1080p, and in HDR

• any number of things people much smarter/more well-versed in macOS than me could think of

Apple’s hellbent on making Macs as compelling as possible, now that it’s finally able to assert full control over the entire Mac widget for the first time ever. It’ll be interesting to see how macOS updates 3-5 years from now offer differing amounts of functionality uplift depending on chip platform.

Foreshadowing Apple Silicon’s Next SoC Family Member?

M1 absolutely does, I think. Next up: A bonus post with some quick, actually-somewhat-educated guesswork on the next M-chip to power the next Apple Silicon Macs.

What I’m Watching for as Apple’s First Silicon Macs Launch

From a home-gamer, albeit longtime-Mac-user, perspective.

I’m going to presume up-front (right or wrong) that Apple will have an “OK-to-good” hardware transition as a baseline. After all, Apple pulled off a generally-quite-successful transition to PowerPC, and Steve Jobs wasn’t even there at the time.

This isn’t like AirPower – this is much more like iPhone, in that Apple can’t afford to fail. At its most basic level, Mac is THE Apple Development Platform, and the 5nm technology platform that A14 Bionic is based on is a terrific place to start.

So, how to reasonably assess Apple Silicon Macs right out of the gate?

Performance, Power Efficiency

Just how “best-in-class” will each Apple Silicon Mac be?

We probably shouldn’t expect a MacBook Air to perform like an iMac Pro. Then again, we have every right to expect the closest thing to a MacBook Air running Apple Silicon SoCs to significantly outperform the current MacBook Air. Should we expect a 20-30% uplift in performance on the CPU side? Or even more? Will Apple deploy iPad-style performance cores, or can it also go bigger.LITTLE? Something more dramatic on the GPU side, since Apple GPUs (A11 and up) have been specifically billed as discrete-class GPUs?

Wait – shouldn’t we be expecting “revolutionary” Macs now that Apple has finally gone truly vertically-integrated? Sure…just not yet (see: Intel transition).

There’s a SKU or two more than ready for a full redesign – iMac in particular, with a design that dates back to 2012. So while the MacBooks we’ll probably (?) see tomorrow might look familiar, you’ll likely see a much fresher design from one or more Macs before the end of 2022.

Will we see dramatically improved battery life?

For now, that may boil down to two “simple”, though currently completely-unknown, quantities: (1) SoC power consumption, and (2) battery capacity in the case of laptops.

SoC power consumption is the single “easiest” metric for Apple to relentlessly optimize versus a “comparable” Intel chip. Speaking of, here’s some numbers to potentially refer to down the road (and I won’t keep you in suspense – these are TDP, or Thermal Design Power wattage figures from Intel chips you generally see in Macs today)

>> Ultramobile – MacBook (4.5W typical, up to 7W)

>> Mobile – Macbook Air (9-10W)

>> Mainstream Performance – MacBook Pro 13 (28W)

>> Mobile Pro – MacBook Pro 16 (35-45W)

>> Desktop – Mac mini (65W), iMac (65W for iMac 4K, 95W for iMac 5K)

>> “Big Iron” – iMac Pro (140W and up), Mac Pro Gen 3 (200W and up)

NOTE: These TDP figures appear to roughly correspond to “manufacturer’s suggested maximum power consumption”, or a measure of power used somewhere around maximum CPU load, all cores on.

Apple will obviously aim to improve on overall power consumption in all scenarios from idle-state to max-load and overall Mac laptop runtime must increase (or they’ll face the righteous wrath of consumers). However, Apple also has the option to convert a portion of SoC power savings into somewhat less battery capacity (saves on weight, charge time, and theoretically environmental impact).

How can we objectively compare the CPU/GPU performance of a CISC-based (Intel) Mac and a RISC-based (Apple Silicon) Mac, especially if common cross-platform apps may not be optimized for Apple Silicon right away?

That one might require a little time, then the glorious Photoshop Bakeoffs of old can begin anew!

But there are other good methods to get a general idea of Apple Silicon’s potential on Mac. As it so happens, the estimable John Poole of Primate Labs plans for native Apple Silicon Mac support in the upcoming Geekbench 5.3 release.

Form Factor, Feature Set

When will we see new Apple Silicon Mac designs?

I’m not expecting that much in terms of hardware design changes yet. But “quality of life” improvements such as Face ID, the massive (untapped) potential of Apple’s increasingly-powerful Neural Engine, the impending replacement of PotatoFaceTime™ cameras with something closer to an iPhone 11/12 system, better baked-in platform security, etc. should do fine in the meantime. Eventually, rounded, to-the-edge displays, stylus support, built-in 5G/ultra-wideband, and fun new form factors may follow.

Sidenote: I fear that only Mac Pro will be the only Apple Silicon Mac with user-accessible RAM, but to be brutally honest, most Mac users just don’t care anymore. Sadly, as an iMac user, I still do.

Pricing

• How on Earth will Apple price these Macs?

You can make the case for ANY scenario:

Much higher performance vs. the rest of the Intel/AMD/Qualcomm-ARM competitive class? Apple could fairly demand a price premium, consumer blowback aside.

Apple can also take an iPhone 12 Pro-type approach and bake Apple Silicon’s “added value” into existing Mac price points at no extra charge.

Apple could even take the “crowd-pleaser” option and provide great performance for $100-200 or so less than expected, sort of how iPad Air A14 and iPhone 12 mini provide best-in-class computing power for well under $1,000.

Ultimately, pricing should boil down to actual Apple Silicon Mac cost of goods sold (R&D, BOM, marketing expense, and so on). Why? Apple went “upmarket” with iPhone X, XS and the Pro-series…and gross margins have never budged. That’s because Apple, counter to narrative, simply takes development costs in stride – meaning that iPhone 12 Pro costs $999 and up for consumers because it’s just plain expensive to produce. For now, I expect Apple to “maintain” Mac gross margins at whatever the current levels are. Certainly helps that Apple Services “subsidize” hardware.

On Tuesday – the biggest change to Mac since the introduction of the Mac, as Apple decides to pursue its own silicon destiny. It’ll be exciting!

I Wanna Be Mad About iPhone 12’s Rumored Pricing, But…

Hi everyone! I’m surprised I’m blogging anything at all, too. Twitter’s just…easier. Even without an Edit button.

Anyway, about the title. Rumorology on the iPhone 12 lineup has changed quite a bit over the past several months. Back then, there was a sense that 5G would be a cost driver for iPhone (what 5G smartphone SKU hasn’t been more expensive than its LTE predecessor, right?), but the Pro/non-Pro distinction would be kind of the same as before.

In other words, pay a perfectly understandable ~$50US more for 5G, nice new form factor for all iPhones, but the non-Pros will have obvious signs of cost-cutting vs. the Pros (dual camera, no mmWave 5G, no LiDAR, possibly lower-spec OLED)

Here’s Jon Prosser’s tweet on pricing back in April:

Now, the “rumor consensus” (never fully accountable, but increasingly accurate and often-entertaining) is shifting towards a $799 iPhone 12 (non-pro 6.1), which would be the most expensive mainstream flagship iPhone to date.

But there’s some extra value for the (rumored) upcharge:

• ALL iPhone 12s will offer OLED with the same basic brightness/contrast specs as the Super Retina XDR (Apple-speak for 2,000,000:1 contrast ratio and 800 nits typical/1200 nits max brightness)

• ALL iPhone 12s will upgrade to a new glass screen

• mmWave 5G across the board in the US

Which, if you think about it, does make a kind of sense, if you accept the rumors that iPhone 12 is moving to a unified design across the lineup, versus the XR/XS and 11/11 Pro distinctions of yesteryear.

Yes, as a consumer I’m bothered by the iPhone XR’s technical successor improving in price one year ($749 >> $699), only to “regress” a year after ($699 >> $799). But Apple’s also bringing back not-so-phablet iPhone sizing with the iPhone 12 5.4, and quite possibly at the same $699 as the iPhone 11. (Note: iPhones 4 through 7 base-priced at $649 without carrier promo/subsidy in the US)

And as an investor/home-gamer Apple fundamentals tracker, I’m all but certain based on past history that Apple will see essentially zero gross margin uplift from the higher-priced iPhone lineup (see: iPhone X, XS, 11 Pro)…

…which seemingly violates The Law of Upmarket™

…which perhaps isn’t always applicable to consumer tech

…which really does spoil all of us when you consider tech pricing and accessibility 20, 10, even 5 years ago (say hi, Raspberry Pi Gen 4!)

I realize a Raspberry Pi base-prices at $35US. But paying the same-as-iPhone-11 $699 for a new-design iPhone 12 5G, with modern-enough OLED screen tech, that’s a little smaller than the iPhone 11 Pro?

I just can’t get too upset if that SKU and pricing pans out. Even if Apple doesn’t include a power adapter.

I’ve more or less moved to Apple News

(And here’s where you can go to visit the channel (requires iOS device in or set to US, UK or Australia for now), and hopefully add the ‘Tree to your roster of favorite channels: https://t.co/IWseKSCmDV )

The transition’s more or less complete, and I’m now able to post in “native” News format. I certainly wouldn’t have minded updating both this blog and the Apple News channel at the same time, but that apparently is impossible in the WordPress Free context – and I don’t have any current plans to “hire” a web host + get WordPress Regular + Apple News plug-in.

Well, not yet anyway. One thing at a time for this humble blogger.

For those dozen or so loyal readers, some of whom may not have an iOS device or be in an area where it’s practical to access Apple News, I apologize, but it’s difficult for me to “port” my Apple News posts back to WordPress. Basically it only kinda works on text. Hyperlinks and images have to be imported manually. The TL;DR blog syndrome I suffer from 😰 doesn’t help any.

And, believe it or not, when the post content or gravitational pull of the moon or the day is right, I bring in way more Apple News readers than I ever did WordPress readers.

So even though I feel WordPress is a better blogging platform overall, it’s really a no-brainer for me, in terms of getting readership anyway, to continue focusing on the News channel for the time being. No seriously, if you only knew how many daily visitors I can now get on a good day, you might straight-up laugh in disbelief. Granted, it’s still not much, but it’s better than the 100-ish visitors I used to get on a very good day in WordPress-land, and that’s when I was posting more regularly.

Hey, if it makes you feel better, I’m getting just about zero “advertising revenue” from this “iOS-only” experiment. Yeah, I kinda wish Apple News was compatible with the desktop Web too. Alas.

The blog isn’t going anywhere, but, just wanted to let you know where the new stuff’s moved to. As always, thanks for reading.

 

_____ Than Feared: iPhone 6s/Plus Are Mostly on Their Own for $AAPL’s Transitional FQ2 2016 (+FQ3 Quick Look)

(REMINDER: Please refer to the About + Disclaimer section. You won’t ever find actionable investing/trading advice here, just a humble home gamer in his corner of the Web trying to understand Apple and tech a bit better. As you know, no one has any clue what AAPL stock will do from day to day, quarter to quarter, year to year, even if earnings “seem good enough”.)

Also – TL;DR warning, more than usual. Don’t try reading this in one sitting. I know, the late posting doesn’t make things any easier.

A Relatively Glum Apple Quarter, Which, Like Many Before It, is Already in Wall Street’s Rear-View Mirror

As it so happens, the AAPL bears and skeptics were most correct about Apple’s FQ1 and its FQ2 guidance (yup, I’m more than fine admitting when I’m wrong) – though the stock itself had already bottomed out by that time of the late January earnings release.

Apple’s resistant, but not immune, to intense ForEx pressures and global macroeconomic uncertainty. Apple bulls (myself included) have had to recalibrate quite a bit, given the twin outliers of

(1) an incredible demand for iPhone 6/Plus (Apple’s very first BigPhone/HugePhone lineup), which may bear a passing resemblance to my “sales nova” hypothesis, and

(2) broad-based economic “nervousness” (since I don’t see any “world is in recession!” headlines in the news) putting a damper on global spending.

The question now is, has Wall Street crossed the line of overcorrection, or is the current consensus of around -3% revenue growth for the entire fiscal year actually giving Apple the benefit of the doubt? Continue reading

Part 2/2: With iPad Pro 9.7 and iPhone SE, Apple Gets “9-10% of the Way There”*

*(For the year; in annual revenue terms; maybe. More on this later.)

Part 2 of 2 covers iPhone SE, and “adds it all up.”

Part 1 of 2, in all its TL;DR “glory”, is here.

How Apple Got to 900+ Million Sold: iPhone, 7 B.I.P. (Before iPhone Phablet) – Present

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Prior to Apple’s September 2014, “extremely late” move to up-size iPhone (for the second time), it sold quite a few smartphones that were (1) iPod nanos by comparison and (2) really quite popular, despite blogger/pundit complaints spanning no 3G, no LTE, accursed sealed-in battery, insufficient SoC RAM and no expandable memory, to say nothing of the closed OS.

Continue reading

Ye Olde AAPL Tree Blog is Moving, Sorta!

You may have noticed me kvetching (am I using that right?) about the conversion from Apple News RSS (which…took a while to get on in the first place, because I’m a nobody) to the new-to-most Apple News Format (which…hopefully takes less than a month since I’m already on RSS, but then again, I remain a nobody).

I’m a bit excited to get started blogging on Apple News, given the newness of the platform and the small chance my posts find a broader audience. (As for the prospects of me making back any significant portion of my $99, um, “news developer fee”/earmarked tax write-off 😛 in iAd revenue…well, I should probably cut back on the coffee budget, anyway.)

For those few but much-appreciated regular readers of mine, a quick Q&A on the changes.

Are you “going premium”?

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

let me catch my breath

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

[POST-WWDC 2016 UPDATE – Well, Apple News now has subscription options added in as of iOS 10. So, leave me to my momentary delusions of getting even $20 in subscription revenue per year, TOTAL, for the moment.]

You’re telling me you might post more than once or twice a quarter? YOU.

Quite possibly. Maybe once a month! 😉 Actually got inspired to write up 2-3 posts in the span of about a week. So, depends on how things go.

Where will I be able to find your newest blog stuff?

On the “AAPL Tree” channel, same as currently, except it’ll be hosted directly from Apple as I understand it vs. the current RSS approach (unless I find my own Apple News-compatible host as a mirror).

Here’s the direct iOS-only link to my channel:

https://apple.news/TuY-CX_-jRziryK895rDu6g

What if I’m not in the US, UK or Australia? 

I have readers outside the US, UK and Australia? Kidding, I know I have a few, to add to that other few in the Apple News-supported regions, all of two countries. And I appreciate you all.

I’ll probably re-post most articles to WordPress within a few days after publication to Apple News (which, according to Apple, is a matter of seconds once you’re cleared to post in Apple News Format without restriction, vs. the 30-60 minutes or sometimes never via RSS). For stuff like Apple earnings, I’ll try to post to WordPress with a shorter delay. Apple News Format, unfortunately, is not nearly as “copypasta-friendly” as WordPress, though as you’ll see from my Hyper Light Drifter review (should it ever appear), Apple News Format does help make blog posts look better on a basic level without much effort.

If I feel so inclined, how might I support your work, should you be cleared to post in Apple News Format?

Well, shares, recommendations, and retweets are the lifeblood of my ego – er, this blog – it’s all related, isn’t it? 😉

If you’d be so kind to support me, indirectly, financially, well, I know I don’t have a fraction of the necessary audience for, say, Patreon, but rumor (read: Apple’s own public-facing stuff) has it Apple parcels out ad revenue to news content creators…and I have yet to see a single ad on the News app. But if you DO happen to see one near a post of mine – and you have the bandwidth/time to spare – I dunno, try clicking it now and then to see what happens.

Closing in on three years and a bit over 250 posts, I’m interested in seeing how my next “phase” in blogging goes. Thanks for reading, and I hope you can catch my newest posts on the News app in “native” format soon!