Prepping for today’s Zoom with Ben Bajarin

If you’re attending and you aren’t familiar with Ben’s work, this excerpt from one of his recent Tech.pinions posts will help orient you.

From “Apple Silicon, Race Cars, and Industry Implications” ($) posted January 19, 2021:

I have been extremely bullish on Apple’s custom silicon efforts since before Apple silicon began showing up in iPhones. My analysis at Apple’s time acquiring PA Semiconductor stated the writing was on the wall for deeper vertical integration by Apple into more of their products. I vividly recall being at Intel not weeks after Apple’s acquisition of PA Semiconductor. The consensus was quickly established that Apple would make custom silicon a cornerstone of their differentiation and competitive advantage.

Since Apple has now proven they are a force to be reckoned with when it comes to custom silicon, a trend I’ve long predicted is about to accelerate.

Competing in the Race Requires Components Built In-House

A great analogy came to me as I was watching AMD’s [Consumer Electronics Show] CES keynote. AMD CEO Lisa Su invited to the stage, virtually, Formula One race car driver Lewis Hamilton. Hamilton’s presence on stage was mostly to talk about his love of gaming and how AMD helps push the bar in PC and console gaming.

While trying to affirm AMD as an innovative technology company, he also made a fascinating point by remarking on how his own industry consists of highly customized components. He stated that all Formula One cars, which extend to all professional race cars, consist largely of components all built in house. The obvious reason for this is a competitive advantage. Every race car driver wants an edge above the competition, and the industry itself has established the only way to do that is with highly customized parts, not stock ones.

To establish this analogy more clearly to the tech industry, Apple products are more like Formula One race cars, which compete against a field of competitors using off the shelf components. As Apple goes deeper into in-house parts for their products, it will inevitably cause others to follow whether they compete with Apple or not.

This is the trend that will accelerate that I mentioned above. While it will be harder for most tech companies to go as deep as Apple in verticalization, I anticipate a much more widespread move to customization.

Preregistered? See you at 3:30 p.m. Eastern, 12:30 Pacific.

Not registered? There are still a few seats left. Write me at ped@ped30.com (subscribers only). Not an Apple 3.0 subscriber? Click here.

See also:

2 Comments

  1. Gregg Thurman said:
    Demands on my time these past few weeks have increased substantially as the economy opens more and more (ignoring the Midwest big freeze that will be over in less than 10 days).

    For that reason I missed the majority of today’s presentation. I think this phenomenon is going to accelerate from here with the economy virtually set free by Memorial Day. As much as the government may want to, the politicians aren’t going to be able to suppress people’s desire to get out into the sunshine.

    I see a broad expansion of the world’s economies and Indexes by July, especially among theaters, restaurants and outdoor entertainment. This may lead to a rotation into those sectors as the technologies won’t benefit as they have from the lock downs.

    This may have a negative impact on AAPL in the near term.

    0
    February 21, 2021
    • John Butt said:
      I endorse your comments – from NZ where we came out of lockdown almost 9 months ago and are finishing a cold summer, but a hot market.
      Our economists are unable to see out the window so have not noticed the level of commercial traffic on the roads, but a “truckometer” is at present being measured by a bank at around the 6% higher than last year, ie hinting that GDP may be as high, NZ GDP is not dissimilar to US in normal years, but this year everyone is spending up large.
      Hold onto your hats, and find a suitable retail outlet for gains in your coming market. Apple is not such a retailer, lockdowns increased their profits, the big gains here have been for box retailers like those selling TVs and Whiteware.

      0
      February 21, 2021

Leave a Reply