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We are LIVE! Talking Google, Tesla, IBM, Apple, Qualcomm, & GlobalFoundries – The Six Five Webcast
by Daniel Newman | July 19, 2022

Leading global tech analysts Patrick Moorhead from Moor Insights & Strategy and Futurum Research’s Daniel Newman are front and center on this week’s episode of The Six Five Webcast analyzing the tech industry’s biggest news each and every week and also conducting interviews with tech industry “insiders” on a regular basis.

The Six Five represents six (6) handpicked topics that will be covered for five (5) minutes each.

  1. Google Cloud Goes Arm With Tau T2A
  2. Tesla AI Leader Quits – Implications
  3. IBM Announces New Power10 Platforms
  4. GlobalFoundries and STMicro Build New European Chip Plant
  5. Apple M2-Based MacBook Air Lukewarm Reviews?
  6. Apple Blaming Qualcomm For Modem Woes?

For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

Watch the episode here:

Listen to the episode on your favorite streaming platform:

Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Daniel Newman: Hey, everybody. Welcome back to another episode of The Six Five Podcast. I’m your host, Daniel Newman, joined by my always esteemed cohost, podcast partner in crime, Mr. Patrick Moorhead. Look at that smile. And both of us are not at home today, but Pat, you are still in the same place, so at this point it’s no longer cool to talk about where you are. I’m somewhere much cooler, but I’ll just call it an undisclosed secret bunker location somewhere that’s not Austin, Texas, but equally as awesome. Morning, buddy.

Patrick Moorhead: It might not even be the same country, Daniel.

Daniel Newman: There’s a chance that I have left the country, but yet probably not even as far away from home as you.

Patrick Moorhead: I don’t know. You’re in the favorite place of Ted Cruz and our Mayor Adler here in Austin, so…

Daniel Newman: I don’t know. I saw a lot of… Let’s just say I saw a lot of those fancy people planes as I was coming in. Apparently there’s a lot of people hanging out down here.

Patrick Moorhead: It must have been a climate conference, right? If there were a bunch of jets.

Daniel Newman: Oh yeah, some big ones. I saw them coming in. You’re like, “Whoa. Where’s all that?” Anyways.

Patrick Moorhead: Someday, Daniel.

Daniel Newman: Someday, buddy. Big week. It wasn’t necessarily a huge week for our typical kind of enterprise and consumer tech news, although there is some, and we’re going to talk about those today, but overall just a pretty big week with markets. You had some big inflation data come out two weeks in a row now. Market seems to be a little bit waffling. You got some news, the CHIPS Act came back up, maybe going to get passed after all that pork and fat going to get pulled out of the bill. We’re not going to talk about that today because it didn’t get passed, but it is seemingly moving along and we are heading into earnings seasons, Pat, which means wherever we’re going to be, we’re going to be busy talking about is this the moment that tech has to reset.

I know Bill McDermott had some comments in his press discussions this week and it caused a massive sell off because he said the sales cycle had slow down. But you know what? We’re doing fine.

Patrick Moorhead: Earnings start soon. Next week, right?

Daniel Newman: Well, for tech. This week the banks all came out and a few of them missed, unfortunately, but you know what did happen this week, and we’re not going to talk about it in depth on the show, but TSMC did come out, and TSMC had some record numbers. By the way, record numbers based on demand for Apple iPhone. So, I guess we’re going to see. Is that discretionary dollar going away or are people… Maybe nobody’s watching the news, Pat, so people are just like, “Oh, I got money. I got to spend it.”

Patrick Moorhead: Well, unlike Florida and Texas that the lockdowns ended like 18 months ago, a lot of parts around the country and around the world really experienced their first summer or first season of not being completely locked down, and if you’ve been locked down, you’ve been putting off weddings, you’ve been putting off seeing your family for the first time, you’re getting out there and you’re spending a ton of money. Look what happened to American Airlines, right? They revised guidance. Their stock went up 10% because people frickin’ want to… I was listening to the other besties, the less than bestie besties.

Daniel Newman: Yeah. The All-In guys.

Patrick Moorhead: The All-In guys talking about even Heathrow is now limiting the airport to 100,000 people a day, so it’s kind of funny. You have consumers, 70% who think we’re in a recession, yet they’re still spending a ton of dough on things.

Daniel Newman: I’ll give you one more stat. Prime Day. Amazon had its biggest Prime Day ever. It was interesting because I took a few press calls about this, and I know you and I, we jibber jabbered back and forth on Twitter a little bit about this, but interestingly enough it was a record Prime Day. Record savings, record business for their small business partners, but one of the things I said it’s going to be really interesting to come out of the wash as we start to get into the depths of the analytics around Prime Day is was it more diapers and potato chips, meaning were people stocking up on things that they could get on sale that they were going to have to buy anyways? Or was it more of that discretionary and unnecessary spend that often comes when people see a sale? I think it’s going to be interesting to see what the mix is and how that compares to past years. We’re not going to be able to hit that right now but good for Amazon, another good result for them coming into the quarter.

Look, I think everybody out there can agree we want things to go well. Nobody wants things to go badly. It’s just the policymakers right now seem to really have no idea how to make this better. You got the blunt force demand destruction of the Fed, and now you’ve got pumped up manufacturing, which is likely going to cause an issue on the supply side. We’ll come back to that, though.

For those of you watching Six Five for the first time, six topics, about five minutes each depending how much of a rush Pat and I are in and how much we decide to go on our soapbox about various topics. This show is for information entertainment purposes only, so while we will be talking about publicly traded companies, sometimes about their stocks, we are not giving anybody financial advice, so please don’t use anything we say for that purpose.

All right, today we got a good show. We’re going to talk about Google and Arm. We’re going to talk about Tesla, IBM, global foundries, and then we’ve got a little bit of a rundown on Apple and the ongoing Apple conundrum with Qualcomm. Can Apple actually make a 5G modem? I guess we’re going to talk about what we think about this.

Patrick Moorhead: They’re certainly going to. Yeah.

Daniel Newman: We’re going to talk about that. And by the way, I read those crappy articles that people wrote about it, and I’m sorry, they got really… Some of them have typos. It was bad. Especially if you’re writing stuff for lawyers. But anyways, all right, so rock and roll. Let’s talk about I think Arm’s momentum continues and Google Cloud is now the last, I think the last of the mega hyperscalers just to come out with their version of an Arm-based instance. Pat?

Patrick Moorhead: Yeah, so I had a kind of snarky tweet that Google Cloud was last to the party with Arm-based public cloud instances, better late than never. I was just kidding but I was taken seriously. I had a couple people messaging me. But the fact is that they are last, right? We had AWS kick it off. We had Oracle Cloud. We had Azure. Heck, even HPE released or announced… It’s not GA, and by the way, either is Google Tau T2A instances, but still directionally people find a requirement to do this. And it’s interesting. This isn’t about the Arm ISA. This is really about this architecture was really built for public cloud instances, right?

First off, it took out anything that didn’t make sense, and whether it’s ABX 256, ABX 512, maybe it’s certain elements of security that are handled better in the offload, but one of the most interesting things, and shout out to Ampere, who’s the actual chip maker of this, is one CPU equals one thread. And you might be thinking, “Well, wait a second. With IBM Power, you’ve got four threads per CPU. With AMD and Intel you get two threads per CPU.” Well, what happens with cloud native workloads is they’re looking for consistency of performance versus things like turbo mode and hyper-threading or multi-threading. So, ironically having less threads per core is actually an adder, and it’s something that they appreciate.

I did finally get briefed yesterday, which I appreciate this. There is some distinction between the AMD Tau instances and the Ampere ARM based Tau instances. There aren’t as many features with Ampere Ultra, and I would say it’s less enterprisey. So, you can’t run an SAP instance on the Arm instance, because quite frankly it’s very simply that SAP doesn’t support Arm. And also there’s a lot of pieces of software that don’t support Arm. But if you have a cloud native, let’s say using JavaScript, there’s almost no work that goes into moving those over from let’s say AMD or Intel instances.

One thing I was super impressed with is they actually had customers or people who were using these instances to talk about it and I think that’s important. Typically, an announcement you won’t have anybody talking about anything. It’s basically just saying, “Hey, we’re going to do this.” But I think Google had to do this because they were, like I said, the last hyperscaler cloud provider relevant, and I would say large. I mean, IBM is relevant for a public cloud, but they are no longer trying to compete head to head with the top four anymore, so there we have it. Congratulations to Ampere. Congratulations to Arm. And I’m really interested to see that we now have another horse race here, right? Now every single hyperscaler cloud provider has an Arm-based instances, and heck, even HP does.

Daniel Newman: Yeah. You didn’t leave a lot there, so I’m not going to dive too deep into this. What I’ll say is-

Patrick Moorhead: You’ve written papers on x86.

Daniel Newman: I have.

Patrick Moorhead: And competition, x86 versus Arm, and I think the listeners would love to hear your thoughts on this.

Daniel Newman: Well, there’s just certain workloads that are still some of the densest workloads in the enterprise that are still very x86 dependent. And until that changes, you’re going to continue to see x86 have a real meaningful place to play, both in the public cloud and obviously on prem. The long and the short of it is, though, is that Arm’s doing two things. One, it’s showing a very good competency and capability to offer hyperscalers something that they can deliver to their customers across the continuum, smaller businesses to enterprise. They’re also playing the long game that the overall cloud market is growing, and so as we look at how and where all this growth comes from, AWS proved that there’s a lot of demand, and has done very well, their Graviton as well as with their AI instances, Trainium, Inferentia, and these other cloud providers realize that they need to be participating in this space. Arm has enabled this.

We’re going to watch the market continue to create more competition, and so the real question is I think for x86 is it’s about protect and about differentiate. Find certain instances and workloads that people will continue to prefer to run on x86, and you know, we highlight a number of them in our most recent papers. Having said that, though, the Arm contribution should not be underestimated in any way right now. Usually you go, “Oops,” one company got into the game. Maybe they think there’s an opportunity. Maybe they’re testing the waters. The fact that every one of these hyperscalers is playing in this game is because they know something and they know that this is a trend line that they want to be a part of.

Patrick Moorhead: Yeah. You know, I’m wondering, Daniel, if this is a tweener to have an Arm-based CPU that you buy, as opposed to developing an Arm-based data center SOC like AWS is, right? Are you really saving money? What are you really getting? Is the lack of supply, let’s say for AMD and Intel, contributing to that? I’m really thinking about the long game here, and listen, I don’t have the answers. This is a real question, not a fake question.

Daniel Newman: Yeah. No, I think you bring up some really great points. The supply chain issues have caused market shifts for multiple companies. The ability to produce enough product has led people to other product and as they’ve been able to utilize and fill gaps, they’ve stuck with those products. That is what happens. That’s caused people to switch between PC makers, between server makers, and throughout this pandemic companies have had to implement enough compute. And if they couldn’t get it from one source, they were figuring out how to get it and make it work from another, Pat, and it’s been a very… The period’s been an anomaly for many, but the fact is as we come out of it, people changed behaviors. And changing behaviors is often the hardest thing and in this case it was a forced behavior change.

I think it’s just going to be something to watch, Pat, but the one thing I think people do not want to underestimate as you see Arm come in is that this isn’t like the death of x86. It’s actually the growth of compute. So, x86 has its challenges, and they’re going to have to keep fighting, but the overall demand for the amount of compute out there is going up and it will continue to go up, and so it gives opportunity for more to participate. So, spent a little more time on that one, but that was big news. Let’s go onto the second topic, Pat. This is a little bit more broad. Twitter, Elon Musk is in the news about Twitter mostly, but at the same time some things in the backdrop have been happening over at Tesla, where the company, basically one of their biggest leaders in their AI and their whole self-driving, I think it’s Andrej Karpathy, left the company. Basically, he’s out. He was a direct report to Musk. He spent about five years leading the company’s autopilot efforts and he’s out. He’s not there anymore.

And so, again, while everybody’s paying attention and watching the war being fought between Musk and Twitter, which by the way I think is going to die a fiery death. I don’t see any way that that ends well. I don’t know what’s going to happen when the data gets revealed. It’s funny, Pat. By the way, I know this is a sidebar from the topic, but when I hear all the pundits talk about what the legal case is, I’m like, “You know, if this thing turns out that it is like 40% bots, is there a case to be made?” And if Twitter has to reveal that, don’t they just implode? Aren’t they absolutely just outing themselves? On the other hand, if they only are really 5% bots and they’re right, then they should just reveal that data and this thing’s over. Sorry, sidebar, right?

Anyway, so I think the kind of interesting thing here is that Tesla sort of gets a great rep for being at the cutting edge and the front edge of ADAS, of EV, of connected vehicle. At the same time, Pat, some data came out, they were talking about that Tesla’s report accounted for something like 70% of the crashes involving advanced driver assistance. So, we’re kind of on this line, so I don’t think the news itself is of this person leaving, but it’s kind of like what’s going on at Tesla? Maybe what I’ll throw back to you is Musk is now, what, two, three years behind on truly having a full sell-driving system that people can truly use as self-driving. The robo taxis he promised are behind. And by the way, he says sometimes he falls behind but ultimately that he delivers, but at the same time he got people leaving. He left California. You’ve got supposed layoffs and cuts at Tesla. You’ve got production problems because of supply chain. You’ve got factories that are burning money.

Tesla’s been a darling of Wall Street and Musk has been a polarizing yet eccentric and exciting character. What do you think? Does this mean anything?

Patrick Moorhead: Listen, I like what Musk does. I like the innovation that he brings to our country. He’s a South African immigrant, which makes it kind of even a better story. But listen, he is this generation’s Howard Hughes. Watch the History Channel or read some books. Howard Hughes was very, very eccentric, but he brought some of the biggest innovations to us. I mean, Thomas Jefferson was very eccentric. Thomas Edison. And this guy is a super eccentric guy.

So, in 2016, Musk said that he would do a coast-to-coast test drive of a fully self-driving Tesla by late 2017. So, that hasn’t happened yet, or it’s four and a half years late. Here is what I think is going on. I believe that the company under scoped the problem, okay? Now, I also have to say that this problem is a very difficult problem. The expectation is is this actually better than humans, which is could be looked at as a little bit unfair, but that’s just the way human nature is, and maybe Tesla doesn’t understand human nature. Folks are more comfortable around machines and engineers and things like that. So, with that said, those high expectations, I believe that the silicon is underpowered for those expectations. I do believe that they thought they had to get away from NVIDIA to have a higher performance chip, but they also had to rewrite their complete stack, so something is going on here. Either their silicon is underpowered or there’s something going on with the software.

I think combined with that, I think they made a mistake doing camera only for self-driving. They don’t use radar. They don’t use lidar. I actually think that’s dangerous, Daniel, by not using lidar or radar. I mean, how do you see through snow? How do you see at night? You can’t have perfect optics even with the best optics. You do need something that can see during non-peak times. Heck, even sun going straight at you is sometimes a problem there. In a way, I think they tried to shortcut the problem in order to reduce costs and I want this thing to be successful, Daniel, but I just think that they bit off a little bit more than they could chew here.

Daniel Newman: In about an hour, I’m going to have a chat with Austin Russell, CEO of Luminar. Actually going to get him on video, so I’m going to ask him about this, Pat, so we’ll have to send him over and clip him down to see what he has to say about this. But I think you and I have been out on that track enough times now to see the difference that camera only and then camera, plus radar, plus lidar actually delivers. And what also should blow everybody’s mind out there is that anybody’s trying to shortcut safety. It does really… It really just stumps me that we have technology that can be reasonably priced, that can be put into every vehicle, that could reduce the risk of a crash exponentially, but yet to save a few dollars we’re willing to forego that. It’s puzzling to me when you talk about the value of safety and life. I mean, geez. Let’s do something about that.

All right, man. Let’s jump onto the third topic here. IBM, new Power10 platform. You wrote a great Forbes piece about it. Let’s kick us off.

Patrick Moorhead: Sounds great. Little background, so IBM has two hardware platforms. One is the mainframe, which is called Z, and the other is called Power, which is a smaller configuration. But it’s not necessarily what I consider high volume. What it is is these are designed, the platforms are designed for mission critical, so the highest level of reliability, the highest levels of security, and have some super unique features in them. I made an initial mistake, actually the Power10 actually has eight threads per core, integrated machine learning, inference, heavy duty memory capabilities that really transcend what any other processor has out there.

Daniel, I talked to a couple Power customers at IBM’s recent event and they were complaining that after five years they had to reboot one of their systems, and I was just thinking, “You realize that if you had an x86 server you’d probably have to do that once a month.” But this is the type of expectations that these customers have. One of the key operating environments that Power10 and Power architecture as a whole does well in is SAP. SAP loves threads. It loves a huge memory planar surface and a huge… It eats memory up and I think we learned that especially when we looked at what Intel-based systems did with some of their non-volatile memory solutions.

But what was the announcement about? So, they already came out with what was called a 1080 before, but what they brought out was a new platform, an S1014, equivalent to the two-socket systems that really focused on a virtualized infrastructure. By the way, the other thing that I’ll put in there, that performance using containerized environments, it is an absolute beast. And it would make sense given Red Hat and what it brings to the table, that IBM would architect a system that’s focused on that. So, four new platforms, typically bigger configuration. You’ve got four socket, you have eight socket. These thing are real beasts.

And by the way, this type of pace was very similar to what they did with Power9, which is, “Hey, let’s bring four configurations out first and then let’s bring the beasts out second.” And eight socket, four socket systems take a lot more testing, so this would completely make sense. One thing that I like too, they went right after x86, basically saying that it performs 3.6 better than x86 equivalent, and TCO, by the way, we didn’t do the TCO analysis or the benchmarking, but talks about TCO improvement of 50% over x86 equivalents.

Daniel Newman: Yeah. I got some early look at this before, and as I kind of read through it, Pat, what I really like is that IBM, and you talked about this a little bit with the Arm instance, is seemingly really becoming more prolific at understanding its role, understanding its customer archetype, and understanding how to build products that satisfy. Not necessarily coming out at that entire general x86 market, but understanding that they have very specific workloads that they do better, that they meet, whether it’s price power, whether it’s meeting very specific needs of enterprise customers, and I think they keep finding these white spaces, and by the way, I think that’s a good strategy. It’s working. They’re seeing it over the last few quarters in the results of the company.

Of course, when they do hardware, and they do hardware cycles, they get these jolts of revenue, and then the hardware revenue cycles fade off. We see it a lot with the Z products, Pat. I think you hit it pretty square on there and that was kind of my sentiment here, is they’re just kind of hitting the right zone in the price performance space, and they kind of have their customer well locked in. They’re going after it. You did mention kind of in the comparable, and I do wonder sometimes, is IBM going to go bigger? Are they going to go for more market share? Are they going to get more aggressive? Are they going to expand? And by the way, you’ve worked closely with Power a lot longer than I have, but I just get the feeling that they’re like, “We know who our buyer is. We know who our customer is and we’re going to keep building for that particular customer and we’re going to do it really well. And we’re going to execute and we’re going to just be over here and be happy with this piece of the market that we have.”

I don’t know, have you sensed anything otherwise? I’m not trying to deflect, but just this kind of was my take as I was reading this. It’s not-

Patrick Moorhead: Oh, listen. They’re not going after the volume x86 markets. Now, they ran that play a couple years ago. In fact, they had Google signed up. Google had moved their entire stack to… not moved it, but ported their entire stack to I think it was Power8. Maybe it was Power9. And really going after trying to get the top of the Intel stack. And then they pulled back, but what I get the sense is that they’re very focused on their current customers, and keeping them happy with everything, not giving them a reason to move off the platform, and I don’t think IBM would be doing it if it weren’t a very profitable business.

And it’s not just pushing boxes, right? You have services. You have software. You have applications. You have everything that goes with it. And I don’t feel like this is a customer lock in. I think when I hear customer lock in, I hear you’re not delivering that somebody values long term, right? But IBM is delivering things that their Power customers appreciate long term. You don’t have to reboot this system for like five years. It’s completely ridiculous. Ridiculous in a fun way. They’re executing on their strategy.

Daniel Newman: Yeah. You’ve been tracking a long time. I’ve been looking at this a little bit more closely over the last year, and so it just kind of was my immediate observation is know their lane, execute within their lane. And by the way, this has been a really successful strategy over the last couple of years for the company. What they’ve done in cloud, hyper cloud. You mentioned about they’re not doing the traditional go to market, we’re going to try to compete with all the hyperscalers. They’re kind of partnering in a lot of cases. In this case, they’re kind of like, “We’ve got these workloads and these particular enterprise needs that we need, and we make these customers really happy, and we’re going to stay there, and we’re going to grow that, but we’re not going to lose sight of our business strategy and lose business trying to go after things that we aren’t necessarily either best at, or aren’t necessarily wanting to compete in these particulars.”

Which, by the way, it takes a company a little bit of humility to see the market that way, and I think it’s working pretty well for them. Credit to them. Pat, let’s go onto the next topic here. We talked a little bit about the CHIPS Act at the top of this, but what we haven’t talked about is what are some of the things that are going on where companies are putting shovels in the ground and meaningfully expanding production outside of Asia? And this week, STMicroelectronics and GlobalFoundries basically announced that they’re going to expand their footprint in Europe with a partnership that’s going to add about 620,000 more 300-millimeter chip wafers to their production lines by 2026. So, interestingly enough, this is going to be a split project. I think it’s something like 40-60, 42-58 it’s going to go between STMicro and GlobalFoundries. As a lot of people know, GlobalFoundries, as we talk a lot, Tom Caulfield, their CEO, joins us every year at our summit. We do have a pretty good ongoing dialog with that company. They’re really known for filling all the gaps in the market, Pat.

We love to spend all of our effort talking about three, five, and seven nanometer technology, but in the end a lot of the technology, especially a lot of the technology that caused the chip shortages in things like vehicles, were the lagging edge, or were the older processes, because it’s not always lagging. The things that make your car, the seat heaters, and some of the electronics for your radio, those are not three to five nanometer technologies. Those are 14, sometimes 30-plus millimeter technology, and we need more production long and short. And so, there’s companies that are talking about the CHIPS Act and wanting to see expansion, and then there’s companies that are doing something. In this case, Pat, I thought it was a really big piece of news. Of course, this is over in Europe, which is another area that lacks resiliency in the supply chain. Also, like the U.S., has moved the vast majority of their production overseas.

I guess my gut feeling on it is that this is the type of action that we need. We need A, more resiliency. We need B, not just U.S. resiliency. And I think there’s some misconceptions that we’re trying to do this, is it like U.S. and Asia? Well, if we’re going to do this on a global basis, and we need to be resilient for national security, but also resilient for everything from planes, trains, and automobiles, being able to ship stuff and get it from place to place, we need to make stuff in different markets where there’s demand. And so, this is a starting point and GlobalFoundries has been pretty robust about doing them here in the States, doing them in Europe, doing it in the Middle East, and of course doing it in Asia. So, good move, Pat, overall. It’s good sentiment right now and it’s good to see someone take action, make a claim, and get going on building both the low power type of silicon we need and also building on the continued need for those higher, older, and lagging processes that are really critical in so many of the things that we use.

Patrick Moorhead: Yeah. So, not a whole lot left to fill. I think it should be an embarrassment to the U.S. that we have people over in France, Tom Caulfield, shaking hands with Macron, and we should be completely embarrassed over here. Here’s the worst part. We’re talking EU is not a country. EU is basically a trading zone, an agreement of folks to abide by. I understand we’re the 50 states, but we’re one country versus multiple countries over there in the EU, and somehow the EU can get their shit together and get agreements going, and we can’t even pass this CHIPS Act.
I think this is a great announcement. Too bad the U.S. didn’t get this plant. But hats off to GlobalFoundries and ST to make this happen.

Daniel Newman: Yeah. Sorry, I didn’t mean to steal all the action. I think the philosophical of it was probably more important than the specific wafer, so glad you hit it and glad you called it out for what it is. It’s embarrassing. All right, we’re coming to the end here. We’re going to talk a little bit about Apple and then we’re going to talk some more about Apple. Pat, you’ve really covered the… You’ve been covering the M, the M1, and now the M2. What are you seeing here? Is the M2 the big winner that most of the press and media claimed at its launch? Or are you seeing something different?

Patrick Moorhead: We talked a little bit about the chip before they increased the die area 25%, yet they only got an 18% uplift in multithreaded performance, and pretty much flat on single core performance. I don’t think that that’s a spectacular, swing you around the room, particularly when you looked at M1, you were looking at orders of magnitude. We talked about that I think on the previous pod, or maybe one, but what I wanted to focus on were the reviews of the M2 MacBook Air. So, when initial reviews came out on the M1-based MacBook Air and the MacBook Pro, pretty much every review was positive. I was a little bit more cautious on that because quite frankly there were a ton of incompatibilities with the MacBook Air that I surprisingly found that others didn’t or didn’t want to report, didn’t run, and still to this day the MacBook Air M1, M2, every variant of the M1 really can’t play many AAA games.

So, I was really surprised to see some of the reviews for the M1 MacBook Air were a little bit different, at least some of the quotes, and let me read you from CNET. At $1,199, the $200 increase over the traditional $999 MacBook Air starting price is a disappointment. Essentially, there was a $200 price increase, and in one of my tweets I said, “Hey, I don’t know if this is supply chain issues that they’re having. Are they testing price elasticity or is TSMC charging them so much on the M2 that Apple has to charge more?” Here’s something that came out of The Verge and here’s what Techmeme said. Thinner, with much improved screen, and a webcam that gets warm and throttles aggressively under intense workloads. Base model has a slower SSD.

This was kind of taboo when you looked at the M1 reviews. Something is going on at Apple. I can’t tell you exactly what’s going on. And by the way, for a backdrop, I don’t know if y’all remember, pretty much said Apple’s going to come in and clean house on market share with the new M-based. Well, Apple still has single-digit market share out there in the marketplace and I think what a lot of us are realizing is that it’s still a Mac, and everything that people like about the Mac, and things that people just don’t like about the Mac, like can’t play AAA games, is still super expensive, but I just find it interesting that there were… Listen, I don’t want to take anything away from the engineers at Apple. The M1 and the variants of the M1 were pretty awesome even with some of the incompatibilities, but M2, I think we can all agree is a disappointment so far.

Daniel Newman: I think the big question is going to be can they do an M2-M1 sort of overlay and do the same thing they did with M1, which is basically bring something out that was kind of less than optimal and then over time make it better, because I remember your earliest reviews on M1 and you wrote some of the best and also most controversial reviews about M1, and I think at the time you wrote them they were absolutely spot on, but Apple did put in the cycles to make it better. And by later generations of M1, they became better machines and more usable.

Apple’s real, as I see it, story is going to be the sort of ubiquity that’s going to exist between its device ecosystem, and as Arm becomes more compatible with more apps, and apps become more cloud native, and more things are running on a browser, I do think that you’re going to have a story that says, “Hey, if I can move from device to device to device seamlessly.” And Pat, you and I are kind of… We’ve called out loud because the x86 ecosystem just doesn’t have that because right now the x86 providers don’t do mobile the same way that Apple does, and so as mobile has become sort of our first device what we’re screaming for is how do we create more emulations, simulation between the phone, whether that’s an Android or an iOS, and your Windows x86 laptop or whatever desktop machine.

That’s the big thing I’m sort of looking for is how does x86 respond to this. I think it’s something that’s being crafted and considered but it’s been hard. You and I, we go to enough events together and we’ve got out different phones. We’ve got our different laptops out. And we’re kind of trying to get our picture, we’re taking a picture in the front of the room. We just want the picture to show up on our laptop seamlessly so we can post it on Twitter without necessarily having to connect the device, or email it to ourself, and that’s the kind of stuff when you talk about the actual power, the apps, the ecosystem, there’s a lot going on and it’s not a quick review. We can’t get through this in the next 30 seconds. But I think the real question is going to be about usability and I think that’s where Apple is on the right track, but I think everyone’s going to follow.

I don’t think this is over and I think you’re going to see competition there. And I think in the enterprise, you still got x86 still does dominate the enterprise commercial users, and so you’ve really got kind of a three-headed race. You’ve got the incumbent being x86. You’ve got Apple. Does Apple come in and make a meaningful dent in that particular space, which we’ve said for a long time they will, but they never really have. And then you’ve got the Arm-based variants of Windows that are starting to come out from all the OEMs that are going to, just like we saw in the data center, they continue to be better, they’re continuing to improve, and continuing to make a better case.

And so, again, you and I say this all the time on the show. I’m going to say it one more time. I love competition. Competition spurs innovation and innovation means better stuff for you and me to use. So, rock and roll. Let’s go.

Patrick Moorhead: Hey, my apologies for the brain fart there, but Apple slipped from fourth place to fifth place. The overall market went down 15%. Mac sales went down 23%.

Daniel Newman: Is this Canalys or IDC or whose numbers are this?

Patrick Moorhead: This is IDC.

Daniel Newman: Okay. All right. Well, there you go, so not gaining market share at the moment, so are we even needing to have this debate? I don’t know. I’m sure some Apple defender will come out and smack you straight up across the head for even acknowledging that they lost market share. You’re not supposed to say that, dude.

All right, so let’s hit on the last one, which is a little bit more Apple. A couple weeks back, you and I, there was a report that came out of Asia from a well-regarded analyst that basically said a survey that he’d recently done suggested that the Apple modem may have failed and that they were going to continue to need to use Qualcomm a little longer, and then you and I talked at length about the complexity of a 5G RF system and the probability that this relationship may continue for some time. And then a few weeks later now, I think it’s been a couple weeks, Pat, but Florian Muller, one of Apple’s most outspoken defenders, you can go back and sort of follow the FTC case. You can go follow the original Qualcomm-Apple case. Definitely a person that strongly aligns himself with Apple whether there’s evidence or not, seemingly, is what I’ve seen in the past.

And he kind of came out with nothing that I could see that was evidence based, just opinion based from what I can gather, that it’s the reason that Apple has failed has nothing to do with Apple’s technology and has everything to do with a couple of very specific patents that Qualcomm has not relinquished. Or what is the right word for it, Pat? There’s some sort of they basically need to enable Apple to utilize these patents and Apple’s lost every case in every court to Qualcomm about the ability to use these patents, so they can’t seem to build it without help, quote unquote, from Qualcomm. And so, now we’re in a situation where it looks like Apple is either A, trying to not acknowledge that they maybe have failed and they’re looking for sort of a loophole, and the loophole being let’s blame Qualcomm and let’s call them patent trolls, more or less, or B, they really are building something and Qualcomm, which by the way spends billions of dollars on R&D, wants to be paid fairly for their development.

And you can say that we’re Qualcomm defenders in this case, but I would say when you look at whether it’s the CHIPS Act, or this thing, when you look at technology leadership, the companies that spend big money in advance to have the technology that builds the products of our next generation, they should get paid for it because there’s a lot of risk that goes into that. Apple’s an implementer. They want to often take credit as an innovator. They’re an implementer of technology that creates innovative outcomes, yes. Let’s say that’s what it is. But many of these standards and non-standards that they use to build the products are created by others and their history says they often don’t want to pay or don’t want to pay very much for the access to that innovation, and if we keep doing that we’re going to create more risk of future innovation.

Big story here, Pat, but I guess the question I throw over to you is, so, we’re getting a flip flop here. Two weeks ago, you and I felt very comfortable saying it was probably a technical issue. Now you’ve got Muller coming out saying, “Nope, it’s just a legal issue.” Is it? Or do you think Apple’s embarrassed and they’re kind of throwing some weapons at the market to say, “Hey, don’t let us get embarrassed here. Let’s create some doubt in the fact that it’s technical and let’s make sure everybody thinks it’s someone else’s fault.”

Patrick Moorhead: Listen, historically people love to blame Qualcomm for their modem issues. There’s a lot of evidence that came out of the trial between Qualcomm and Apple where Intel was on the record kind of blaming Qualcomm for their woes, and then in emails you had Apple basically saying that Qualcomm is the best at this, which is why we need to go with them and why we need to essentially create a campaign to destroy the company to get what we need. I kind of put it under the if we can’t figure it out on our own, let’s blame the market leader and then sue them. That’s kind of the way that I see this right now.

But listen, 3G was harder than 2G. 4G was harder than four and five was harder than four. And what happened in five is it really turned into a system, right? Which was it wasn’t just the digital part that was important. You had to have really tight integration with the RF side. And that’s given the complexity of the different levels of spectrum and some of the special features that 5G has. And you know, I have to ask myself, how do you go from buying a working modem from Intel three years ago, now they did have some millimeter wave challenges, but at a minimum you had sub-6. How do you go from that to not being able to ship anything?

I just chalk this up as more people blaming Qualcomm for their technical ineptitude. And you know, if I kind of dial back and I look at what’s going on at Apple, listen, they hit an absolute home run with the M1 even with its incompatibilities, because it did run Apple software really well. But why don’t we have an Apple Watch? When was the last Apple Watch SoC updated, Daniel? When did that happen? How do you get an 18% increase in performance on a 25% die size increase with the M2? I just don’t understand. I think that Apple may be hitting the point where I don’t know if it’s COVID that’s getting in the way of their developmental cycles. Maybe they bit off more than they can chew. Maybe 5G systems is just a more difficult thing than they had ever expected.

Daniel Newman: And can I just throw out one more thing? Sometimes innovation too fast and too much performance is not the goal. I’m just being candid. I know we kind of… We went off a little bit from the patent issue here, Pat, but you know, Apple has notoriously brought out mid-cycle upgrades that are very much the same as the last with a few updates, and they sell a whole cycle. This is good marketing, so sometimes I think we need to ask the real questions. Does the company want to innovate that fast? Do they want to get that much performance out of the next thing? Because they have people that will just keep coming and buying them. You heard me start this show off about TSMC saying record profits on demand for the iPhone, and what do most people get between their 12 and their 13? What changes for most users? What are they able to do on the 13 that they couldn’t do on the 12? It’s usually one little thing, like some sort of-

Patrick Moorhead: That 8K pro res, that probably two-square-millimeter die that they put on there. That’s one.

Daniel Newman: I get it. But what I’m saying is it’s like one feature and people will do a whole cycle of buying because the camera got better, or they’ll do a whole cycle of buying because there’s a new game that… Apple’s gaming is not really their thing, but you know, my point though is that the 5G stuff is really hard, and that’s a whole different story. The question of how much they innovate because they can and how much they innovate because they want to be able to get three more cycles out of what they could get in one cycle, what does that mean for revenue? That’s all I’m saying is if they could push the M2 to really where you think they could, how many sales do they lose between people that’ll buy an M1, M2, M3 and M4? So, they’ll just make an M2, and an M3, and then at M4 they’ll actually do what they could have done at M2.
I’m not saying that’s what they do. I’m just saying there’s a case to be made that innovating too fast creates less revenue.

Patrick Moorhead: Listen, the way that the whole processor, the highest end processor makers stay in business, is to have to convince people that they have to buy the latest and greatest, otherwise they’re dead. Analog companies, just they operate at kind of a slower pace, but that’s been their business model forever. But great question, Daniel.

Daniel Newman: Analog transformation, Pat.

Patrick Moorhead: How about that?

Daniel Newman: All right, man. Well, listen. We hit it. We hit it hard another week and no travel, no trip, nothing’s going to stop us from doing the show, so thanks everybody for tuning in. As always, we appreciate you very much. Hit that subscribe button. Send your positive feedback my way and everything else to Pat. We love our community. Check out the regular shows that are now dropping on our Six Five channel that are from our Six Five Summit. Talk about a great summit, over 70 sessions. We’re going to be dropping those each and every week for you, one a day, Monday to Thursday, until they’ve all been played. So, if you missed our summit, you don’t have to miss it anymore.

For this week and this show, for Patrick and myself, it’s time to go. Time to say goodbye. See you all later.

Patrick Moorhead: Bye, everybody. Love you. See you, bestie.

 

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio