Guysborough

I’m not sure exactly when my grandfather took his schooner and left Guysborough for the bright lights of Halifax (it was definitely before 1900), but if he had stayed, he would have welcomed Glynn Williams–who seems determined to restore the original glory of this town and region.

Glynn Williams, proprietor of Authentic Seacoast Co., has announced plans to open an artisan distillery in the seaside community of Guysborough. (File)

Glynn Williams, proprietor of Authentic Seacoast Co., has announced plans to open an artisan distillery in the seaside community of Guysborough. More than 350 years after Nicholas Denys built Canada’s first commercial brewery in Guysborough, a local entrepreneur wants to tap into another emerging trend.

Glynn Williams, proprietor of Authentic Seacoast Co., has announced plans to open an artisan distillery in the seaside community.

“(They are) rapidly growing in the United States, and you can just see the beginning of the wave of artisan-scale distillers, and the reason for this is that consumers, who are ever-discerning, are looking for goods and products where they can connect what they’re consuming to the people and the place from which they originate,” Williams said in a telephone interview Thursday.

The Authentic Seacoast Distilling Co. Ltd. is being added to Williams’s stable of businesses, which include Full Steam Coffee Co., the Harbour Belle Bakery, and the newly renovated and rebranded Skipping Stone Cafe & Store.

“I’m hopeful that consumers of our (spirits) will embrace them as they are embracing our coffee, our baked goods, as well as our beer,” Williams said.

He also spearheaded the redevelopments of the DesBarres Manor Inn, Osprey Shores Golf Resort and the Rare Bird Pub & Eatery.

“To my knowledge, we’re the only distiller that one, owns a coffee company, two, owns a craft brewing business, and has the culinary expertise to create some quite amazing and unique products.”

The distillery will be built at 76-78 Main St., between the Rare Bird building and Skipping Stone, and will double the number of Authentic Seacoast employees to 70.

On Wednesday, it was announced that Williams had purchased an additional 1.2-hectare parcel from the municipality that is just down the road.

“That will accommodate future growth in the distillery, as well as anticipated growth in our coffee roasting business and our other businesses.”

The design of the $2.7-million project is being finalized, with construction expected to begin in the first quarter of 2013.

The provincial government said Thursday that it was extending a $1-million forgivable loan and a capital incentive of $191,000 to Williams that would be used to fund the building construction.

Williams said opening an artisan distillery is the logical next step for his company.

“We have been making beer here for several years. Our brewery operations are dramatically taking off.”

APPL: India and China

Good comments on lower-end competition from Chinese and Indian phone makers.

 

Sneha Shah: Seeking Alpha

 

Apple (AAPL) stock has been stuck in a range after falling precipitously from its all time high levels. The stock has been trading in a range between ~$400-450 as the general market exuberance and a big stock purchase plan has helped protect the downside. However, the fundamentals have deteriorated for Apple, as the company has not come out with any major new products even as the competition in the core markets has increased rapidly. Major competitors have come out with a large number of new products in ever shortening product cycles.

The most serious threat has come not from the established Tier 1 global mobile device companies such as Sony (SNE), Samsung (SSNLF.PK) etc. but from relatively unknown Chinese and Indian companies. These companies have been rapidly expanding market share in their domestic markets at the expense of Apple and others. US investors may not understand the rise of these companies as major players in the Indian and Chinese markets. From the low end of the smartphone segment, these companies are now starting to introduce products for the mid range of the market and it would not surprise me if they soon came out to challenge Apple in the premium upper end of the market (some already are).

As the scale of these companies increases, it is inevitable that they start to expand into developed markets as well. Though the success of these companies in foreign markets is far from assured, it does present a threat to Apple. There have been rumors that Apple is preparing to launch a cheaper priced iPhone model for the emerging markets. However, there has been no confirmation from the company so far and no release date as well. I think that Apple has no choice but to introduce a cheaper smartphone for strategic reasons. It should do that soon or it could face BBRY’s fate due to complacence.

Indian Smartphone Companies see a huge surge in market share, especially Micromax

The Indian smartphone companies such as Micromax and Karbonn have managed to rapidly increase their smartphone market share in the current quarter, despite stiff competition from Tier 1 vendors such as Samsung and Apple. Micromax has very successfully marketed its “Canvas” smartphone models and they have now become almost as popular as Samsung’s Galaxy models. Local companies understand the local culture and preferences far better in my view, compared to the global giants. Their product range is tailored to customer needs rather than being a global “one size fits all” as the iPhone. The combined smartphone market share of local Indian companies has surged to an amazing 30% in the current quarter, which means that these companies sold almost 3 million smartphones and generated more than $3 billion in revenues (assuming a price of $120 per smartphone). Apple, Samsung and others have fought hard for the Indian market and have introduced large discounts, exchange schemes and EMIs to lure the Indian customers. They have also outmatched the local players in their advertisement and marketing spend. But these local companies have increased their market share as their products are sold at much lower margins than the Tier 1 vendors.

“Micromax, which ranked second by shipments, and fifth-placed Karbonn are growing faster, according to IDC. Micromax increased shipments to 633,000 smartphones in the last quarter of 2012 from 9,990 a year earlier, while Karbonn grew to 304,000 from zero, according to Gurgaon-based Consumer Media Research. Karbonn introduced smartphones in April 2012”, said Shashin Devsare, executive director at the handset seller.

Source – LiveMint

Coolpad rises in Chinese Smartphone rankings

The Chinese smartphone market is a much larger one than India and has many more players. The Chinese companies dominate the market along with Samsung. The most surprising thing is that small smartphone focused companies such as Coolpad have managed to increase market share beating bigger Chinese and international rivals such as ZTE, Huawei and Apple. The same domestic and smartphone focus has helped these companies grow at a faster pace than rivals. These companies are much more nimble and agile and operate on much lower margins. ZTE and Huawei are already aggressively targeting western markets using their existing distribution networks. ZTE launched 6 new smartphones in India while Lenovo and Huawei are also not far behind.

The Chinese-produced smart-phone Coolpad is now the third-biggest player in China’s smartphone market, surpassing both international and domestic superstars such as Apple AAPL -1.58% and Huawei. A report in May by Sino Market Research attributed 10.2% of China’s smart-phone market to Coolpad in the first quarter of 2013, coming only behind Samsung and Lenovo. That beat Apple by nearly 4 percentage points, and Huawei by 0.2.

Source – Forbes

Apple is missing out on the fastest growing segment

The western smartphone companies have made a strategic error in my view. They have not tailored their products to the emerging markets which needs lower priced quality products. It is impossible for 99% of the Indians to afford an iPhone 5. Apple has now belatedly realized this and is now aggressively discounting the iPhone 4. But at nearly ~$300, even the iPhone 4 remains far more expensive compared to the average smartphone price. BlackBerry (BBRY) too has totally lost the plot by pricing its new smartphones at a crazily high price and is now being forced to eat humble pie. Nokia (NOK) seems to be the only western mobile company which seems to understand the demands of the emerging market customers. Its Lumia 520 is a great product in terms of the price it is sold at and it was not surprising for me to see Lumia smartphones surge during the most recent quarter. I think Apple is being too slow in introducing the iPhone mini, as product cycles in this industry have become amazingly short. Apple cannot afford its one year long product cycle anymore in my view. The company is still powerful and huge, but it seems to be lacking these days in strategic direction. The smartphone market is no longer Apple’s playground which it dominated through its iconic iPhone. It has become a tough super competitive business, and unless you are fast in meeting your customer needs, others will eat your lunch.

Apple is Losing Global Market Share

Top Five Smartphone Vendors, Shipments, and Market Share, 2013 Q1 (Units in Millions)

Vendor 1Q13 Unit Shipments 1Q13 Market Share 1Q12 Unit Shipments 1Q12 Market Share Year-over-year Change
Samsung 70.7 32.7% 44.0 28.8% 60.7%
Apple 37.4 17.3% 35.1 23.0% 6.6%
LG 10.3 4.8% 4.9 3.2% 110.2%
Huawei 9.9 4.6% 5.1 3.3% 94.1%
ZTE 9.1 4.2% 6.1 4.0% 49.2%
Others 78.8 36.4% 57.5 37.7% 37.0%
Total 216.2 100.0% 152.7 100.0% 41.6%

Source: IDC Worldwide Mobile Phone Tracker, April 25, 2013

These players are attaining critical mass and could soon threaten Apple’s western bastions

Many of these smartphone startups are approaching the billion dollar mark in revenues and some like Coolpad have already crossed it. Their scale and size gives them the ability to expand into foreign markets as well. Micromax is already planning an African expedition and you can find some Chinese brands such as Gionee in the Indian market. The brand value of these companies is also increasing as more and more customers start to recognize and appreciate their products. Xiaomi has a good reputation of making high quality premium smartphones which are much cheaper compared to the Tier 1 flagships. Apple needs to be more aggressive with cheaper products even if it decreases the overall corporate margins. It should not become a prisoner to Wall Street’s quarterly fixation, but pay more attention to the long-term strategic implications.

Valuation and Stock Performance

Apple’s stock has not gone anywhere in the last 4-5 months and has disappointed investors who were looking for new product launches. The declining margins have also scared investors who think that Apple may become the new Microsoft (MSFT). I have been positive on Apple stock given its low valuation, large cash reserves, huge buybacks and a decent dividend yield. The company is also growing its software and services revenues rapidly as the iTunes subscriber base continues to grow. However, the product launches have been a bit slow in my view.

Summary

Local Chinese and Indian smartphone companies have performed extremely well despite lacking the advantage of global technology giants such as Apple. These companies are lean and mean as they don’t have the technological or marketing heft of the giants. They have to depend on their street smartness to survive in this cutthroat market. I think many of these companies will become aggressive in the western markets. Though the competitive barriers are higher because the telecom carriers control the smartphone sales, these companies make good products at an extremely small fraction of the profits that the Tier 1 companies make. It is estimated that Apple and Samsung made more than 90% of the smartphone industry profits. Apple needs to rethink its strategy and look to fight aggressively in the low and mid end of the smartphone industry. Its little known rivals are starting to encroach on its territory, while it does not have the products to fight in theirs. Currently I am positive on Apple’s stock, given its low valuation and the start of a major product cycle. However, I will watch the smartphone market carefully to see whether Apple is losing more ground to its competitors.

APPL & Suppliers

WILL FARLEY:::Seeking Alpha.

http://seekingalpha.com/article/1558162-how-to-play-a-recovery-in-apple-the-same-way-one-profited-off-the-boom?source=email_rt_article_readmore

In September 2012 Apple (AAPL) could do no wrong. It was the darling of Wall Street as the buy recommendations and $900-$1,000 price targets rained in. Today, investor sentiment for this same stock has done a complete 180. No investor likes to catch a falling knife, but it seems that Apple may be finally emerging from the distaste of Wall Street. If Apple does recover in the coming months, there will be a lot of money to be made, and not only just by buying Apple itself.

A Brief Look at Apple’s Valuation

As you can see, compared to peers of the computer hardware industry Apple may appear fairly valued at its Thursday closing price of 431.76. However, Apple trades much cheaper than the S&P average P/E of 18.42 and it also yields a 2.83% dividend, which is superior to the S&P, average yield of 2.10%. Apple also has some of the best profit margins in its industry, and a very sound balance sheet. With billions in cash overseas, Apple recently decided to issue debt paying only 1.85% interest. This minimal amount of newly issued debt allowed the company to avoid $9.2 billion in corporate taxes.

What’s Next?

I’m not going to put a price target on Apple, but I do believe its current levels are too cheap. The company is losing market share in the smartphone market, and bottom line revenues are falling. However, Apple still maintains some of the top profit margins among its peers, and future products should bolster revenues and share price. The company’s product pipeline in the near future appears prepared to boost revenues with a new iOS 7, iTunes Radio, Mac OS X Mavericks, and a wearable device. The management of Apple, led by Tim Cook, has not undergone major changes since its glory days in September. The major shift here is investor sentiment. The stock now only has 56.80% institutional ownership, and when investor sentiment shifts again I believe Apple’s stock price will ascend steadily at a gradual pace.

Preparation For the Ascent

As Apple’s stock price rocketed from $400 to $700 in the earlier months of 2012, there were a few stocks that tagged along for the ride. These stocks known as “derivative stocks”, produced returns similar to or superior to those of Apple. These stocks rely heavily on Apple for a substantial amount of their revenue.

Cirrus Logic (CRUS): Valued with a similar trailing P/E of 9.68, Cirrus Logic once traded at 45.49 on September 9/7/12, around the same time Apple had soared to all time highs. Anticipating a drop in revenue from $207 million to $160 million, the slowdown in demand from Apple has greatly affected Cirrus’ bottom line. It is speculated that a whopping 85% of the company’s revenue comes from Apple. This is the most obvious play on a pickup in Apple’s earnings, and increased demand for the chipmaker’s products as Apple engages in new product cycles.

Skyworks (SWKS): Another company trading on the lower end of their 52 week high/low (19.21-31.44), Skyworks Solutions provides radio components and power amplifier chips to smartphones and tablets. The company trading at 18x past earnings, provided two power amplifying chips in the iPhone 5 in contrast to only one in the iPhone 4. Skyworks’ revenue stream is more diversified than Cirrus however as it supplies components to Android smartphones as well. The board also deemed its company’s shares undervalued as it announced today that it will engage in a $250 million share buyback plan. Skyworks will benefit in the continuation of the smartphone revolution as well as a shift in investor sentiment toward apple and its suppliers.

The decision to buy or sell Apple is highly debated. However, I believe Apple will soon recover, and when it does use a recovery in the Apple suppliers to maximize return.

Small is Beautiful. Badges for the Committed.

Here’s an entrepreneur working to popularize the market garden vision. Joe Wirtheim wants to give some badges this month (July 2013).  All you have to do is go to Facebook and find the Victory Garden of Tomorrow.

https://www.facebook.com/victorygardenoftomorrow

Enlist in The Future: VGoT Badges
There’s great power in small places.
VGoT badges are easy to sew           
            I can’t help but to smile when I touch one of these new graphic badges. They are substantial to hold and are so expressive, like little vintage toys. And when I think about the story of badges, I think about wilderness pioneering or space exploration–they represent the spirit of adventure to me. Take a look at our 3 new embroidered felt graphic badges. Each one comes mounted to a letterpressed collector’s card: Now Available: $7+SH Made in the United States.
VGoT Break New Ground badge           
Each one of these first edition badges are special. “Break New Ground” has been a rallying cry for people interested in trying something new in their neighborhoods, cities and lives. “Farmer’s Market Community” represents the sea change in how folks can get fresh foods outside the supermarket, as well as how neighbors connect. And the flying beet “Victory Garden of Tomorrow” badge, for me, represents the exuberance of discovering new modes of life and community in America.
VGoT Farmer's Market Community badge           
            I want to give away a bunch of these badges in July. All you have to do is go to Facebook and give “The Victory Garden of Tomorrow” Page a “Like.” Then look for announcements over the coming weeks.
Thank you for your support! Please stay in touch
           
Poster Prints
VGoT Badges           
Graphic Badges
           
Limited Edition Screen-Prints
           
Postcard pack

APPLE Clouds: Part Two.

Here is the follow-up from Manness. And there will be a Part 3.

Nobody knows what Apple is planning: but this makes a lot of sense.

Build a Cloud Unit for the large army of I-Fans, and make the I-experience available to many millions more by pricing the Cloud Unit at $399. For the Introduction to all this, see Part I: https://dglikes.wordpress.com/2013/07/02/aapl-convergence/

It’s all pretty nerdy, but it provides a way for Apple to quickly develop a new “killer-product”.  What J.M. Manness calls MacBook Ether is a thin computer with storage handled by the cloud. Think of an I-Phone large enough to have a useful screen and a keyboard for speed-typists.

PART II

Apple (AAPL) has disrupted several industries over the last decade or so. Most recently, the introduction of the iPad has launched the meme “the death of the PC.” If the iPad was right hook to the gut, knocking the wind out of the PC, will a new “MacBook Ether” be the knockout punch?

In my previous post, Apple Developing New MacBook Ether?, I noted that web site Quartz suggested that Apple might ditch Intel (INTC) chips in its MacBook Air line in favor of its own A-series chips.

I responded that I think Apple would more likely preserve the Air series as a low end “full-powered laptop,” and create a new line of lower priced “internet appliance” type computer. I have fancifully dubbed this hypothetical product the “MacBook Ether.”

1- Background

I repeat from my article:

The MacBook Air, first released in 2008, ushered in the era of ultra light weight laptops. It began as an expensive toy for the executive and airline warrior, but as the Price of SSDs (memory based “hard” drives) came down, the Air now represents the entry level laptops in Apple’s Mac lineup. Apple’s Air pretty much defined the Ultrabook category of computers, several years before the name “Ultrabook” was used.

Today, it dominates the “thin, light laptop” product space with a whopping 56% market share. [source]

Another popular form factor, a subset of the “thin, light” category, is the Chromebook, a set of laptops running Google’s (GOOG) Chrome operating system, and designed to act as an “Internet appliance.” That is, they are used mostly to interface with the internet for browsing and email, and to run cloud based applications, specifically Google Docs, but any other web based apps will do. While the new Samsung (SSNHY.OB) Chromebook Pixel is a powerful machine and costs over $1400, most are low priced devices, such as Acer C7 C710-2847 Chromebook which sells on Amazon (AMZN) for $252.

Some Chromebooks use low end Intel CPUs, other use ARM Holdings (ARMH) designs system chips which are used in a majority of smartphones and tablets. And herein lies the crux of the issue.

2- Technical

A brief explanation: ARM Holdings does not make chips. They have intellectual property of a set of designs for chips. If you want to use a CPU of their design, you must either buy one from someone who does make them, or make them yourself and have a foundry produce them for you. Existing chips from ARM designs are the Snapdragon line from Qualcomm (QCOM), and the Tegra line from NVIDIA (NVDA). Samsung also makes ARM based chips both of their own designs as well as Apple’s own design – the A-series line.

For smartphones and tablets, the ARM CPUs are typically not produced all by themselves. They are produced in a single, complete package with many other necessary components in what is called a “system on a chip” – or SoC. This contains virtually the whole computer portion of the device in one package, the CPU (central processing unit), GPU (graphic processing unit), RAM memory, communications controllers, etc. etc. (That is to say, parts such as a camera, telephone radio components, motion detectors, etc. will still be separate units.)

Apple has been producing their own ARM based SoCs for several years now. Their first in the A-series line, the A4, was introduced with the iPad in early 2010, and the iPhone 4 later that year. The most recent release is the A6X used in the latest iPad. Apple surprised most people when for their latest chips, the A6 and A6X, they moved to their own in house core designs. They licensed only the instruction set from ARM, and redesigned the layout of the chip. This allowed them to build, at a very fine grained level, a chip that was tuned to exactly their specifications. (AnandTech has great reviews here and here.)

It should be noted that Apple acquired P A Semi in 2008, and Intrinsity two years later. Both were small, high performance semiconductor design houses. More recently, MacRumors reported just weeks ago that they have “hired at least a dozen former AMD graphics engineers.” Thus, they clearly are aiming at beefing up their design division. The new graphics hires for a special Orlando, Florida team is particularly interesting.

3- Why

Apple is happy with their Intel based products. Currently, all their full scale laptop and desktop computers run on Intel chips, and they have a cooperation on the ultrahigh speed Thunderbolt cable interface system, that far outperforms USB.

The difference here is cost. For the current MB Air, Intel’s Core i5-4250U lists for $345. While I am sure that Apple does not pay that much, is still more than the ARM based chips. Research firm iHS iSuppli estimated that the A6 processor in the iPhone 5 costs only $17.50.

By moving to its own processor, Apple could easily cut the price of an entry level model by at least $300. Other savings could cut it even further. (For complete financial analysis, see the follow up article New MacBook Ether – #3 Financial Implications.)

4- Design – what would it look like?

I think that the new MB Ether would look quite a bit like the Air. Apple has two conflicting issues here. They want to maintain their high end brand image, yet differentiate strongly from the Air.

Visually

For the above reason, the Ether would continue the aluminum frame, but would likely add some colored highlights. Ostensibly to add style, the main purpose here is so that people can easily determine that the model is not the more premium Air. This would help to cut down cannibalism.

Internals

The new MB Ether would include a new entry to the A-series chop line, the A7XX. Every year Apple has more or less doubled the power of its processors. The A7 group will do that once again, by bringing a quad core to the processor.

The ‘X’ denomination of the A5X and A6X processors signify that they have extended graphics capabilities to handle the larger screen area of the tablets that they serve by adding more cores to the GPU. Similarly, I envision an ‘XX’ notation to signify further increased graphics to service not only a larger screen, but the capacity to handle an add on external monitor via a Thunderbolt interface. This capability would distinguish them from the competition.

Operating System

The big question is what operating system would it use? The first thing one would think is that it would be iOS – what runs the iPhone and iPads on other ARM based systems. The big problem here is that iOS is a touch based system. This would not be the case for the laptop Ether. Therefore, the system would be standard Mac OSX. Perhaps this is one reason that the new version Mavericks is so oriented towards performance optimization. This leads to not only quicker running programs, but significantly better battery usage.

Some have noted that OSX does not run on the ARM based architecture. But this ignores the fact that both operating systems are based on the same BSD Unix cores. Therefore it would not be terrible difficult to port OSX to the ARM processors. In fact, I would be rather surprised if they have not done this a couple of years ago.

Cloud

Any computer that can access the internet can access any of the browser based storage and apps-in-the-cloud resources. These include storage such as Dropbox, Amazon Cloud Drive, Microsoft’s (MSFT) Skydrive, and also applications such as Google Docs, and Microsoft Office 365. These provide user applications that reside on the internet for editing text documents, spreadsheets, and presentations. Each app – typically written in HTML5 – is run from a compatible browser. The user need not install the application on his personal computer. This saves the user disk space, and harnesses the compute power of the hosting server. Windows 8 provides integrated access to their Skydrive and Office 365, while Chromebooks favor Google Docs. (Neither operating system excludes the use of the other’s cloud services.)

Apple, however, just announce at the last Worldwide Developers Conference (WWDC) that their own productivity suite, iWork, will now be available in a cloud version. While currently the three apps (Pages, Numbers, and Keynote) are available only to registered developers, a demonstration was given at the conference keynote presentation that included access via a Windows 8 PC.

The presentation was absolutely striking. Whereas Google Docs and Office 365 look very staid, the iWork interface is clean, clear and open. Its presentation is vibrant. Whether working on a document, a spreadsheet or a presentation, you can just drag an image file off your desktop and drop it into the open document. The system downloads it and places it smartly into place, performing complex word wrap if required. MS Office documents can also be opened by simply dragging and dropping into the browser. It is slated to be available in the fall of this year.

Clearly, if Apple really is ready to market an MB Ether, then they will soon be ready to host their own users with style.

(Click to enlarge)

[Keynote promo]

5- Contrary opinions

There have been two major push backs on this idea. First, that Apple does not want to enter the low end market, for reasons both of image and economics. I will address both of these in the financial analysis of the next article.

The other major objection is that the whole thing is impossible because this whole hypothesis is based on the idea that Apple will be buying new A-series chips from TSMC, and these can compete with new offerings from Intel. As noted in the previous article:

A report from Digitimes state:

Taiwan Semiconductor Manufacturing Company (TSMC) and its IC design service partner Global UniChip have secured a three-year agreement with Apple to supply foundry services for the next A-series chips built using 20nm, 16nm and 10nm process nodes, according to industry sources.

This was further elaborated by the Wall Street Journal.

Yet some have replied to my initial post that this cannot be true since TSMC will not be able to move to the designated processes in time. (Note: the nomenclature 20nm or 16nm refers to the size of transistors etched into the silicon on a chip. Obviously, the smaller the transistors the more you can get in a given space, or the smaller you can make a given design. Additionally, typically a device on a smaller technology requires consumes less power.)

Arnold Frisch (former Tektronix and Intel engineer) writes that TSMC, GlobalFoundries, And Samsung Can’t Save ARM And AMD From Intel’s FinFETs. (FinFET is a particular type of chip technology.) According to this, ARM technology has no future.

This is echoed by Intel chief of mobile Mike Bell in a very interesting post by Sebastian Anthony of Extreme Tech. Bell tells the author:

“I see no data that supports the claims that ARM is more efficient.”

Anthony continues:

…I finally ask the question I’ve been gagging to ask: Where does this leave ARM, ARM’s licensees… and the foundries? If Medfield is already competitive on power consumption and processing power, and Intel has such a dominating technological lead, where does ARM go from here? “I think,” Bell begins slowly, picking his words carefully, “Moving forward, it will be difficult for anyone who doesn’t have an end-to-end capability to keep up with us. I took it for granted before I joined Intel, but this really is rocket science. When you see people working on 9nm – I see the guys in their bunny suits, doing the mask generation for the chips – you realize this is probably one of the most difficult industries I’ve ever seen. There are very few companies on Earth who have the capabilities we’ve talked about, and going forward I don’t think anyone will be able to match us.” [emphasis added]

In short, Bell says that there is no future for ARM technology.

Yet, if Digitimes and WSJ are correct, then Apple (not known for being blind fools) has signed up TSMC to do precisely 20nm and 16nm FinFET production. Jean-Louis Gassée (former Apple exec) writes for the Guardian as to why Intel has not jumped on a chance to manufacture Apple A-chips.

The first explanation is architectural disdain. Intel sees “no future for ARM”, it’s a culture of x86 true believers.

He continues:

And they have a right to their conviction: With each iteration of its manufacturing technology, Intel has full control over how to improve its processors. They can reduce x86 power consumption by using smaller building blocks (they’re already down to 22 nanometers wide). They can micro-manage (literally) which parts of a complex chip will be turned on, off, or somewhere in between – in a kind of hibernation.

So, while he does say that they may have a point, it does not completely free the argument from heavy personal bias of the “x86 true believers.” Even if, as Bell states, it is rocket science, there really are more “rocket scientists” than those who work for Intel.

Gassé points out:

  • As evidenced by the A6 processor running inside the iPhone 5, Apple goes to great lengths to customise the basic ARM cores, adding graphic processors, memory, and large amounts of support logic, and even resorts to aggressive hand-optimisation [sic] of the silicon layout – as opposed to just letting CAD software tools do the job.

He feels that this is a bad mix with Intel’s culture, and hence the lack of partnership here.

But this is an aside. My point here is just that this is something that remains to be seen – whether or not ARM production techniques can keep up with Intel’s.

Conclusion

Apple certainly is able to build serious new laptops based on it ARM-based A-series CPUs that will provide a quality experience. Doing so, they will finally enter the low cost computing world, opening up a whole new market.

They have the technology. They have the overall ecosystem – particularly with the new iWork in the cloud suite. So two questions remain:

  1. Do they have the desire to do so?
  2. What are the economics?

The first is something few outside of Apple (or even inside) can know. The economics question is what I address in the third (and final) post in this series.

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Related Articles:

Apple Developing New MacBook Ether?

Ultraflops?.

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Technical note:

It should be noted here that there are two ways that a customer can purchase ARM designs. They can purchase complete chip designs, more or less ready for a fab facility to produce or to be used as a portion of a more complex package; or they purchase only the instruction set and then design their own silicon to implement the instruction set. Most ARM based chips do the former, use complete core designs. Apple breaks this mold with the latest A6 chip and created their own, original core design according to their specific priorities.

AAPL: Convergence & the I-Cloud. July 1st-2013. Part I.

Convergence is an old term getting a new twist in the Apple world. The I-phone has been a great success and so has the Macbook Air, which has taken over half of the ultralight computer sales in the first half of 2013.

In the past week, AAPL shares have taken a big jump (following a lousy June) mainly because of the pair of analysts from Raymond James whose recommendation is right below. Their AAPL target is $600, a 50% jump from current levels. More importantly, however, is the direction the technology is heading and some reasons AAPL is well-positioned.

I’m entering this post at the Prevost farm, where I have strong internet, on a five-year old laptop, and as I pop versions up to the cloud I’m checking it on my smart phone, but I would never try to write this on my phone.

The PC, the smart-phone, the laptop and the ultra-thin share many characteristics now. The key differences are size of keyboard and screen (input and output) and where’s the storage?

What Manness outlines following the Raymond James duo is a big hole that Apple is uniquely positioned to fill, quickly and effectively. Think of a phone with all the functionality and software of a laptop but thinner even than a Mac Air and hopefully more rugged than the average laptop. Big difference is storage: no hard-drive (not built-in to be more precise). Your data is in the cloud. Because I move about so much, all my data is in the cloud.

What are Apple’s advantages in this market? They have all the manufacturing bits (as Manness details), plus the software bits which Samsung lacks, plus the installed base of users and potential users. They have productivity software (native and borrowed) and they have great graphic software and they have music and books and video (sort-of).

They wouldn’t lose their Macbook Air crowd because some people just like to be tethered to their workspace–but probably half of those would buy an I-Cloud.

However, the key market for a $300 entry machine would be the first time user; the person with a smart phone and finger cramps. It’s worth while looking at these two commentaries in parallel. The brokers probably don’t know who Manness is and they concentrate on autos etc, but they instinctively know that Apple has certain capabilities which mean they could do very well as the phone and the computer merge more fully with each other and the ubiquitous giant servers of today.

RAYMOND JAMES. McCourt & Toomey

Apple As An Investment Into Mobile

Raymond James analysts Tavis C. McCourt and Daniel Toomey issued a report to investors today saying that they believe the company’s “near-term financial trends will stabilize and then improve” after its June quarter. They see Apple Inc. (NASDAQ:AAPL) as “an investment into the mobile computing revolution.

The analysts said phase one of the revolution as they see it is now maturing, and phase two has just begun. They include the smartphone and tablet markets in phase one, and they said the maturation of these two markets is marking the end of phrase of the mobile computing revolution.

Apple’s Place In Phase Two

They see phrase two of the revolution as the expansion of smartphone chipsets and ecosystems into automobiles, televisions appliances and “probably uses not currently thought of for computing devices.” They believe that since Apple Inc. (NASDAQ:AAPL) dominates high income consumers and because it has a vertically integrated model which they predict will make it easy for the company to take the biggest profit share as the mobile computing revolution moves into phase two.

Raising iPhone Estimates

Raymond James said that unlike others, they are actually raising their iPhone estimates. They said even though the smartphone market is maturing, they believe that the trade-in programs are keeping Apple Inc. (NASDAQ:AAPL) strong in the U.S. They actually raised their iPhone unit estimate for the June quarter from 27 million to 28 million units.

Overall, in the near term and year over year, they expect that Apple Inc. (NASDAQ:AAPL)’s trends “will be choppy,” but they say that the trends in revenues and earnings per share are upward and that believe the company’s user base is growing about 30 percent year over year.

Earnings Per Share Estimates For Apple

The analysts said they raised their earnings per share estimate for the June quarter very slightly to $7.89 per share. They kept their fiscal year 2013 earnings per share estimate the same at $40.11 but slightly lowered their fiscal year 2014 earnings per share estimate to make up for the margin impact of currency price moves. Their new 2014 earnings per share estimate it $46.13 per share.

The analysts note that right now, Wall Street’s view of Apple Inc. (NASDAQ:AAPL) is bad, but they see that as a good thing for the stock.

“Sentiment is bad,” the analysts wrote. “Make that horrible, in the institutional investor community, they said, but ultimately they see it as “feedstock for outperformance.” In addition to upgrading Apple Inc. (NASDAQ:AAPL) shares to a strong buy, they also maintained their $600 per share price target for the stock.

J. M. Manness

Seeking Alpha. http://seekingalpha.com/article/1530502-apple-developing-new-macbook-ether?source=email_rt_article_readmore

Apple (AAPL) has disrupted several industries over the last decade or so. Most recently, the introduction of the iPad has launched the meme “the death of the PC.” If the iPad was right hook to the gut, knocking the wind out of the PC, will a new “MacBook Ether” be the knockout punch?

MacBook Air

The MacBook Air, first released in 2008, ushered in the era of ultra light weight laptops. It began as an expensive toy for the executive and airline warrior, but as the price of SSDs (memory based “hard” drives) came down, the Air now represents the entry level laptops in Apple’s Mac lineup. Apple’s Air pretty much defined the Ultrabook category of computers, several years before the name “Ultrabook” was used.

Technical aside

A computer’s CPU is the electronic chip that runs the device. It takes a program or app and runs the instructions that make all the parts of the device function. (Geeks: Please excuse the simplification.) In mobile computing for a smartphone or tablet, one primary concern is the electric current needed to run the CPU. The more compute power you want, the more energy you need. If you want to haul a truckload of bricks up a mountain, you will need a lot more gas than if you are just riding a motorcycle. The more juice your CPU needs, the bigger, and heavier, the battery gets. So, for any given state of technology, there is always a trade off between compute power and the size/weight/cost of the system.

For this reason, most smartphones and tablets run on CPUs based on designs by ARM Holdings, plc (ARMH). They have designs that they license for chips that sip the juice very sparingly. Thus you can have a smartphone that is as powerful as a 10 year old desktop but weighs under four ounces and lasts for hours.

Still, this is nowhere near the power of a laptop such as a MacBook, be it a Pro or an Air.

Current state of affairs

The MB Airs have also been extremely popular. CNET just reported on Saturday (via Mac Daily News):

The MBA grabbed 56 percent of U.S. thin-and-light laptop sales in the first five months of the year, Stephen Baker, an analyst at the NPD Group, told CNET.

Also, for the last several years, the Air has frequently rated number one laptop on Amazon.com (AMZN).

That is, until very recently. Now the number one spot consistently goes to the Samsung Chromebook, a laptop selling for just $249. (The 13″ Air at $1094, is currently #3, right behind a MacBook Pro.) What distinguishes the Samsung (SSNLF.PK) product, is that it is built on a high end tablet Central Processing Unit [CPU] – their Exynos 5000 Series – instead of a typical, full scaled processor by Intel (INTC) or Advanced Micro Devices, Inc. (AMD). The Exynos is one of the most powerful processors available of the ARM designs.

The key to the Chromebook (this and others of its kind) is that they provide a level of use that is that of a good tablet, but with the form factor of a laptop. They provide a reasonable user experience because they have changed the model of usage. No longer does one rely on running full-blown applications on the computer itself, rather the computer is designed to do two things.

  1. Serve up web pages, email and similar internet services, and
  2. Provide access to productivity applications that reside in the cloud, specifically Google Docs.

Apple also uses system chips based on the ARM designs, but they use their own designs, what are called the A-series chips. The iPhone 5 runs their A6 chip, and the latest iPad runs the A6x.

Now…

Web site Quartz looked at a couple of recent news items in a post titled How long before Apple ditches Intel in the only segment that counts? First they note:

The first bit of news came from IT industry research firm Gartner on Monday. It predicted that the one category of “PC” in which sales are growing at a reasonable clip is the “ultramobile” notebook computer. That includes Apple’s MacBook Air, tablet/notebook hybrids, and some Chromebooks…

They then point to recent news from Digitimes that:

Taiwan Semiconductor Manufacturing Company (TSMC) and its IC design service partner Global UniChip have secured a three-year agreement with Apple to supply foundry services for the next A-series chips built using 20nm, 16nm and 10nm process nodes, according to industry sources.

Digitimes goes on to say:

TSMC will start to manufacture Apple’s A8 chips in small volume in July 2013, and substantially ramp up its 20nm production capacity after December, the sources revealed.

And that they will begin producing A9 and A9x processors in the third quarter of next year.

Quartz puts this together to suggest that Apple will replace the Intel processors in MacBook Air. With new faster chips, Apple could produce the Air with their own A-series.

Beg to differ

But I do not see this happening. The MacBook Air is solidly positioned as Apple’s entry level, full scale laptop. For every jump in A-series performance, Intel will do the same with their line. No, Apple will not do this to the Air.

They will do it to a new line – I hypothesize it will be the MacBook Ether. Like the Chromebooks, it will be basically designed to be an internet appliance, running low-key apps locally, and productivity applications in the cloud.

Conclusion

Steve Jobs always said that Apple was not interested in the netbook format because they provided an unsatisfactory user experience. But now times have changed.

Apple can indeed build serious new laptops based on its ARM-based A-series CPUs that will provide a quality experience. Doing so, it will finally enter the low cost computing world, opening up a whole new market.

In a follow up article, I will discuss the economics of such a move, and its new weapon to secure that market.

SEE: https://dglikes.wordpress.com/2013/07/03/apple-clouds-part-two/