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Get the news you need in just 15 minutes.
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Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.
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And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business and foreign
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relations, plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise,
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thoughtful take on the stories that matter.
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Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere.
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You listen to
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Bloomberg Audio Studios podcasts, radio news. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
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And I'm Tracy Alloway.
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Tracy, do you know what iPhone you have and what iOS you're currently on?
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C
No, I have no idea. I will say I think it might be like an iPhone 11. It is definitely on its last legs because in the past two days, I can only charge it when it's standing up and plugged in like that.
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A
You know you can.
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C
And so I've been creating elaborate, like, Jerry rig systems at my desk to actually get this thing to charge. So I got to get a new one.
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B
So you know what? You don't have to get a new one. If you go to, like, any one of these, like, little random, like, sort of Apple fix it shops, they can like, take care of that in 10 minutes and wait.
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C
I have the right to repair my iPhone? Is that true?
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B
They take. Put a little vacuum cleaner in there. That's what the issue is.
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C
I don't think that's it. Cause I tried it already. I think the battery's, like, legitimately dying. I've had it for, like, eight years.
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B
Well, I've had my. Okay, so I think I have no idea what iPhone I'm on. I think I've had it for about four years. I have no, like, I don't know anything. But there was a point in my life in which I could have answered, right?
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C
You said you don't know anything.
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B
I don't know anything about my phone. But there was a point where I could have answered, right? Like, if you're like, yeah, sure, if at some point in the early 2010s for sure, if someone would say, like, what app, what iPhone do you have? You're like, oh, I got the iPhone 4. I got the iPhone 5, whatever it is. And that was just part of, like, I would say pop culture, like, knowing, like, what generation is. And it's been so long, you know, those Apple presentations, everybody would, like, tune in. Like, it's a World cup game or something like that. Like it's been so long since like these were like top of mind things
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C
for people, you know, So I have never been an Apple watcher, as evidenced by the state of my phone. But I think part of the issue is also like the, the products got pretty good, right? To the point where you don't need to replace them literally every two years for the latest upgrade. Or maybe it's just Apple can't think of the, the enticing upgrades that people need to see in order to buy
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B
something that I had forgotten about until someone, I think pointed out recently there was a period in which it was very common to see people with very cracked iPhone screens. Right?
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C
Yes.
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That was just like, oh, and they would just really look, but they were still usable. When was the last time you saw like a badly cracked iPhone screen? Yeah, they never. And like you could drop them now and they're very likely to survive.
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C
Do you remember I dropped this phone for. From the stands at the Jackson Hole Rodeo. Oh yeah, you were there.
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B
Did it fall underneath me?
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C
It fell all the way down. It was fine. And it was fine. It was probably like 15ft or something.
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They work really well. Anyway, I think setting aside the fact that, okay, Apple is still a huge successful company, but we should talk about Apple because it is actually one of these things that it's at the intersection of so much that we're interested in right now. It's at the intersection of the future of manufacturing. It's at the intersection of memory costs and the degree to which that's bleeding into consumer prices. It's the primary way so many people interact with computers and the Internet and yet it's not a major player in like building AI models. So like, how will AI change our relationship to just like either like computing or it sits like at the center of so many like, important topics right now. So I sort of want to know like, what's going on with Apple.
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C
The thing I'm really interested in are the recent price increases.
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B
Yes.
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Because you think like the story in consumer tech for decades now has been deflation. Right. Things get cheaper to buy and at the same time, you know, it becomes more expensive to live because food prices go up and healthcare and childcare or whatever. But the scalp in tech is that prices have been going down and suddenly we have this sea change announced by Apple, I guess a few weeks ago or a couple weeks ago now, saying that actually they're going to raise prices pretty much for the first time ever.
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B
Yeah.
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C
On a bunch of their products.
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B
It's really wild. Like, we think that there should just be some, like, mechanical law, that if it's like a gadget, it goes down in price. And for years and years, I mean, it was just a thing. And so it's extraordinary to see, like, this actually reversing. So I don't know. I want to know what's up with Apple.
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C
It's a good time to talk about Apple.
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Well, I'm very excited to say we do literally have the perfect guest. Someone outside of probably Tim Cook. There's probably no person in the world, including employees at Apple. There is probably no person outside of Tim Cook that knows the company better. The ultimate Apple watcher. Not Apple Watch. It's an Apple Watch. The ultimate Apple observer knower. For years and years, literally, the man who watches Apple, and he is a colleague of ours at Bloomberg. I don't think we've ever had him on the podcast before, which is a shame. But we are now going to be speaking with Mark Gurman. He is the managing editor of consumer tech at Bloomberg. He's the author of the Power on newsletter, which everyone should subscribe to. So, Mark, thank you so much for coming on odd lots.
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A
Yeah, thank you both for having me. Really appreciate it. Good to be here.
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B
Wait, I noticed you have the orange iPhone.
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Yeah, it's a tank.
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B
It's what?
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It's a tank.
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It's a tank. But can you explain, like, what is it about the orange iPhones specifically? Because, you know, is this a thing? Yeah, it is. It is a thing. Because I noticed that, like, you know, in the old days, you get lots of colors, but all the cool people and all the people who, like, actually, like, have, like, regularly refreshed their phones, they all have that orange iPhone. There is something special about it beyond just being one of the Apple colors that they've always had.
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So here's the backstory, right? For years, the iPhones, they came in black or white. And then back in 2013, they added gold for the iPhone5s. Why did they do that? They were trying to break into China. Everyone knows gold is a hot color in China. They were trying to break into China.
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C
That's what my one is. It's gold.
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A
Right, Right. And then over time, they start coming out with new variations of the iPhones. The cheaper phones, you had the 5C, you had the 10R. Now the base phones, like the 14, 15, 16, those had a lot of fun colors, bright colors, you had yellow, you had green, you had blue, purple, pink, whatever. But the people who bought the Top end phones, the pro phones, these are the thousand $1,500 phones. They were like, I'm kind of getting tired of just black every year or white every year, gold every year, or silver, these muted colors. And so people had started complaining to Apple, we want more colors. And Apple said, what can we do unique for the iPhone pros? And it just so happens that for the pro phones, right, the 17 Pro and Pro Max series, they needed to move to a new material.
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B
Okay.
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So the big deal with the iPhone 15 back in 2023 was they moved to titanium.
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B
Okay.
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And they started this ad campaign around titanium that your phone is using the same materials that they use on outer space. Yeah, they always come up with some interesting marketing material, but the problem with titanium, and they only seem to realize this was such a big deal after the phone shipped, was that titanium doesn't dissipate heat. Well, it dissipates heat about a tenth as well as aluminum. And Apple obviously was famous for aluminum products for many years. And so for the 17 series, they ditched titanium, went back to aluminum. Aluminum not only dissipates heat much better, but you're able to get color to stick to it much better than you can on titanium. And so they wanted to do a bunch of fun colors for this first generation aluminum pro phone. And so they've got orange, they have classic silver, which I think actually looks really hot. And then you have a dark blue.
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B
Got it.
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But orange, it's the hot color. It's in all their marketing materials. Everyone wants to show, hey, I have the new one. The easiest way to know you have the new one is to get this bold orange phone. They call it cosmic orange. And then in China, the orange in particular has been a hot seller. The word on the street is that's because the orange is kind of like Hermes orange. To my eyes, I'm a little colorblind. I don't think this orange looks anything like Hermes orange, but it's close enough.
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C
It's close enough, it's close enough.
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And then this year, they're moving to a red. From orange to red, or like a dark wine color. And why is red important in China? The dragon. Right. Obviously very popular there. So in other words, I think they know what they're doing when it comes to color.
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B
Wow. The Hermes orange iPhone sparks Apple comeback in China, according to a random post on Reddit.
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C
Well, okay, since we're talking about China and pop culture to some extent, the other big piece of Apple news recently is that Tim Cook got a World Cup Labubu from the Pop Mart CEO. Have I seen that?
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I saw that. I saw that this morning. Tim Cook's not gonna have too many more of those opportunities to have people come visit him at Apple park and take pictures with him. It's all about John Ternus, his successor, very soon. We're just a few weeks away from the new CEO taking over. And this is something, obviously I'm watching very closely. If you had me on your podcast two and a half years ago, I could have told you this was the guy. No one else other than me saw it coming, but did a big.
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C
He did write some profile pieces that, like, definitely hinted at it.
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Yeah, well, tried to do more than hint, but wrote a few about him the last couple years because I knew he was the guy. And I think it's going to be an interesting time at Apple over the next three years.
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B
Well, this is another way that things have changed, which is that Steve Jobs was a pop culture figure. Tim Cook became a pop culture figure after taking on the mantle of CEO. And I suspect that if he went around and asked 100 people, who was the person that they named as the replacement? They wouldn't.
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I am curious if you went onto the streets of Manhattan and you asked 100 people, who's the next CEO of Apple? How many would know? One.
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B
That seems high to me.
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One seems high. Maybe you ran into me.
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If I ran into you. Okay, well, let's. Maybe this is a good. Because obviously Frame is like, what is the Apple that he is inheriting? But before we get to that, what is it about him that either you recognize two and a half years ago, and then the board and the company decided, like, this is the man to take Apple into its next era.
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Oh, it's actually quite simple, believe it or not. Two factors. Okay. Factor one is the products. When you doing your. Not monologue, but your speech at the beginning of the show, Tracy, you remarked that you don't know which phone you have. You know, you stop counting which number you're at. But I think the big difference is, is that there's nothing remarkable about the new numbers anymore. The iPhone looked identical for six years up until this big change with the orange phones and what have you. Right? So I think the board recognized, certainly consumers recognized, people in the company recognized that the product is just lacking in, I would say, sexiness. Right. For lack of a better term, lack of.
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Victim of its own success.
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Victim of its own success. But remember in the Steve Jobs days, right? In the early Tim Cook days, every other year, you were getting this breakthrough new phone. Like when was the last time you went and picked up a new Apple product and you were like holy crap, this thing is totally different, totally amazing. It's been a while. And so I think Apple needed to resuscitate its product design its hardware, its product genes coming out with innovative new things. And John Ternus, he was the senior vice president of hardware engineering. He was the guy actually in charge of product development. And so for a company looking to shake itself out of a product lull putting your new, he's quite new in his senior VP role, your new product person in charge of things, that makes a lot of sense. You don't want another operational person, you don't want a marketing person, you don't want another finance person. We've went down that road now with Tim Cook for 15 years. Hugely successful. Time for a new era. The simpler answer is that John Ternus is 50, 51 years old. Every other person on the Apple executive team who could have theoretically replaced Tim Cook with their experience, 60 plus, okay, some of them, 65 plus and Apple, the way they're run is their run for the long term. They wanted to avoid Bob Iger to Bob Chapek situation where you're putting someone in who you know is going to fail or you know is going to retire in three to five years. The Verizon hiring Dan Shulman at 67 years old to be their new CEO, that's a one to three year thing. Apple does not operate in the short term, they operate in the long term. So who's the person we can appoint that's going to be CEO for the next 15, 20 years? John Ternus, the only option. I'm not saying that he's the perfect choice in the world, but he's the perfect choice for Apple because he really was the only choice. And maybe they fell backwards into him being the only choice, maybe they didn't. Maybe this was all calculated years ago. I don't think it was. But long story short, I think this is the man for the job at the right time.
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C
Well, so I don't know anything about John Ternus other than what you just said and some of your pieces that I've read before, but do we have any evidence that in terms of product design, like he can be quite creative and he can come up with the sexy new features that might get people interested in iPhones again? Because if he's been doing it for a while then I would say maybe not.
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A
He's not particularly known as an innovator or hasn't been particularly known as an innovator inside Apple. Some people call him a treadmill runner, doing the same thing over and over again. But he also has the awareness to know that Apple needs to do things differently. And he has the credibility and charisma to let Apple do things differently and quietly. The last three to four to maybe five years, Apple has been working on its most impressive and, you know, packed product lineup, product overhaul in its history. The next three years are going to be the biggest three product years in Apple's history. There is so much stuff coming, I'm having a hard time wrapping my head around it and I've already removed my credit card from my wallet and put it in my drawer, locked it and threw the key out the window. Not really I'm going to get all of it. But point being, there's a lot of coming. If you're an Apple fanboy like myself, I'll admit it, if you are a tech enthusiast like myself, this is so freaking exciting.
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The Bloomberg this Weekend Podcast News, politics and the lighter side of Bloomberg the Great. That wealth transfer includes $570 billion in classic cars.
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A
I'm not in a position to be inheriting any classic cars. You no.
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C
But my brother did inherit my non
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A
classic car when I moved to New
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B
York, so he still has not paid me for it. Coming for you, Joey.
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C
The Bloomberg this Weekend Podcast.
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B
Subscribe today on Apple, Spotify or wherever you listen. All right, so we obviously have to talk about the next three years, what these products are. But just one quick question before we get into that convers. You know, there was a time when I think everyone, everyone agreed that from a smartphone perspective the iPhone was unambiguously the best product in the world. That there were other phones that like maybe on a price, you know, adjusted standpoint, maybe were better deals or whatever, et cetera. There are really good phones now being made by other companies, including Chinese manufacturers who like I saw the foldable phones and things like that. They're actually really cool and they're good and so and I think in some cases maybe the camera quality is better for some of these Others though, I'm not sure if you take buy the most expensive iPhone that you can buy right now, is it unambiguously the best smartphone in the world and what is the gap between that and the next
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A
biggest best in the western world? The iPhone is unambiguously the best smartphone when you factor it in totality. But they're not the most creative phone. They don't have the Best form factors, they don't have the best screen technology. I would probably give that to Samsung by a small margin. Don't forget, Samsung designs envelops, you know, all those components. Right. From a camera perspective in the western world, you're talking about Google. Google identified a decade ago that the magic to making a better camera isn't necessarily the sensors and the hardware, it's the AI. And Apple, as we've undoubtedly know, has not been exactly a leader in the AI space. Yeah, but when you're talking about the combination of design, hardware, accessibility. Right, Like a product that people understand how to use, ecosystem, customer service, the whole nine yards, Apple is certainly in the lead. You go to China, it's a whole different world. I don't think people understand that China is just literally a different planet when it comes to technology. They have foldables, they have trifolds, they have this, they have that, they have glasses, they have bigger tablets, they have these tabletop robotic devices on people's desks. The cameras on the phones in China, you're talking about Vivo, you're talking about Xiaomi, Huawei. They will destroy Apple head to head. It's a big, big difference. And so Apple needs to step it up in China when it comes to hardware. I think the iPhone Air and the iPhone 17 Pro Max were good steps in that direction. But if you want to talk about the product roadmap, I can dive into that. I think the foldable phone, I'm calling it the iPhone Ultra. Apple's coming out with it in September. October timeframe is going to be really hot, really successful in China. It's going to be a status symbol. People are driven to status symbols in China. It's going to be $2,500 roughly. And so I think it's going to be a big seller there. Given how popular foldables are there, I'm certainly going to be first in line because I have been waiting for a foldable iPhone for a number of years. Samsung, absolutely the pioneer in the category. They've been working on them for a long time now. They finally got really suitable for daily use a year or two ago. Apple will be there from day one. I would just not want a non iOS phone, if I'm being honest with you.
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B
Yeah, right. That's still a huge thing.
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C
I'm going to save the rest of the product launches for the end of the podcast. So we entice people to listen all the way through. But you mentioned Apple and AI, so I think we should talk about this. But like, why does it seem that Apple has in large part, I guess, missed the boat vote on AI?
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Tim Cook. His worst decision in his history at Apple was who he hired to manage artificial intelligence at Apple. Bless his soul. Perfectly nice guy, bless his heart, as
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C
he say in the South.
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B
Yes, he's that bad.
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A
John denied by all accounts a thought leader in artificial intelligence, but also a skeptic of AI. And so John G JG as he goes as inside of Apple. He was the senior VP of AI at Apple. He was hired in 2018. This was the guy who was supposed to make sure that Apple became dominant in AI, in generative AI. Totally missed the boat. Apparently didn't see it coming or if he saw it coming, did not put the right staff and resources on it. So clearly that was a big miss and Apple should still be embarrassed about it.
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B
I think it's worth noting by the way here, Apple is trading at an all time high and actually some of the other Mac like so the, the companies that are among the really big tech companies that have invested more in AI and are doing quite better are not necessarily.
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A
Yeah, but you know Apple, I would be happy for them if this was a strategy. No, no, no, they fell asleep to it.
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B
I'm totally, I totally get it. But what I'm saying is that the market has not really penalized them for the fact that they're not really a player in AI. Whereas you have these companies that are very serious players in AI and I'm thinking like Google and Microsoft and they're like the market has not rewarded them for having technology that is near the AI frontier. Now when we talk about AI at Apple, I think there's sort of like two different things that we could be talking about. So one of them is what we'd say like edge based AI. Is there AI that's like on the chip that can make a photo render much better than say like a traditional camera architecture. That's like one kind of way we talk about AI. It does a better job of capturing what the user wants to capture using artificial intelligence. And then there is this other question of like well, is the company building something that we call a large language model, which is a very separate conversation. It's a different way of like understanding what we're talking about with AI right here, right now, 2026. So it's like okay, inside Apple, we want to correct our past 10 years of like missing out on AI. What do they want to achieve with AI?
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A
Wow, there's a lot here. And I think I'll take It back to why Apple's at an all time high.
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B
Okay.
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A
I think investors are smart and they actually have a good understanding of what kind of company Apple is. Yeah. And Apple is not an AI company. It's not a hardware company, it's not a software company, it's a product company. The magic of Apple, and this was Steve's big thing, is bringing it all together in one package. Apple may not have the best phone in terms of the technology or the camera, but the complete package, unambiguously the best. I think consumers realize that AI is going to shift into products and products that combine hardware, software, services and AI. And you're going to see some great stuff from them coming in the future. We'll get back to it in the roadmap section in the podcast. But I think that's their goal, to create products that merge all these things together, where the AI disappears into the background. Now, I want to go back 12 years ago.
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B
Okay.
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A
12 years ago, Apple started this big project. The idea was to compete with Tesla and build an autonomous car.
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B
I remember that.
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A
And that project was canceled in February of 2020, 24. So two and a half years ago. So they spent well over 10 billion on it, hired thousands of people, reorganized the company around it. And closing a project of this magnitude is not something that has a comparison in Apple history. This was unprecedented. It was a complete disaster, a huge failure. But there was one piece of the pie there that is actually really interesting. It's called the Apple Neural engine. And so in order to do self driving cars, you need to process a ton of data at very high speeds in real time, see the world around you, process it, and so the car knows where it's going. And the magic sauce that Apple was trying to create for the Apple car was the smartest onboard computer or chip in order to do level five autonomous driving. That chip they started working on around 2014 eventually got shrunk down into what they call the neural engine or the A and E, and they put it in the iPhone X in 2017. And that's what allowed features like Face ID and Animoji and augmented reality to work. So the only reason that Apple has some of the more sophisticated AI hardware on device processing in their phones and computers and what have you is because of the apple car project 12 years ago. And so that's a little secret background. If it wasn't for the Apple car, Apple would be even in a more terrible place when it came to artificial intelligence.
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C
Okay, but it seems like that was kind of accidental, right?
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A
Well, it's all accidental.
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B
Yeah. Right.
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C
Okay.
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A
It feels like the common theme with Apple is that, yeah, they're lucking out a lot.
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C
Yeah. Okay, but would we expect that they
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A
would say that strategy, but I don't think so.
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C
But do we have a sense of what they actually want to achieve in AI? Like, or are they just going to experiment with some stuff and maybe it'll stick, maybe it won't. Maybe it'll be useful 10 years later,
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A
you know, monetizing AI. You know, the jury is still out on how exactly you do that. I mean, you see the amount of money that OpenAI is making versus how much they're losing. It's not entirely clear yet, but I think Apple has a proven business model. It is hardware with very high margins. Right. And we can talk about that with the price hikes later. But Apple wants to roll out AI hardware products. AirPods with cameras, pendant with cameras, smart camera. AirPods with cameras, AirPods, a pendant, smart glasses.
- [25:07]
B
Is that like a thing you'd put like kind of a necklace.
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C
A necklace.
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A
Or you put on your. On your pocket here? Eyes and ears for your phone, AI cloud processing in order to feed context into your phone and your icloud account to do AI tasks. Those are going to sell and those are going to make money. And so Apple has a proven business model there. The other thing is they have this new Siri AI and what they've done is they took their artificial intelligence models, those are called AFM or Apple foundation models. That whole team just basically got blown up over the last year. A bunch of them went to Meta for $50 million pay packages, but to them went to Google, Anthropic, Microsoft, you name it. So Apple open up the hood of their models. They're paying billions of dollars to Google to have redeveloped the underpinnings of their models. And so now Siri. Now Siri is competent.
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B
Wait, wait, so this is. I mean, this is one of the ironies is that Apple was truly one of the pioneers in talking to computers and plain language.
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A
Well, they launched Siri.
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B
Yeah, they launched Siri.
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A
They launched Siri in 2011. And I was on another show here the other day, and the. The host was telling me that he asked Siri, he's got the old Siri still, When is the next Fed meeting? I know you guys like talking about that, and Siri's response was, there are no Fed meetings in your calendar.
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B
Okay?
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A
I have the new Siri AI. And so I said, when's the next Fed meeting? The next Fed meeting. Gave me the date.
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B
Wait, so sorry. What powers Siri AI's intelligence today?
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A
It's Apple foundation models that have been rebuilt with Google underpinnings. It's Gemini.
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B
Okay. Okay, got it. Okay, so. And going forward, is the idea that Siri will just be a Gemini skin, as they would say. Like, is that sort of just from the language, sort of the way we all talk about AI today is like a model, Whatever this thing you talk,
- [26:58]
A
it's like a reskinned Gemini, okay. That has access to your personal data, so you can ask it about your text messages, your photos, your emails. It's actually pretty nifty. You know, one thing I've been doing, people send me calendar appointments on, like, my work computer.
- [27:11]
B
Yeah.
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A
I take a picture of my work screen with the phone and then it just adds it to my calendar through Siri.
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C
Oh, that's useful.
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A
So, you know, how many people have that use case? I don't know. But it does work. It's extremely competent, I would say. You guys know video editing software? Okay. You know Imovie? Okay, so there's like, iMovie versus Final Cut Pro.
- [27:31]
B
Yeah, yeah.
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A
All right, so before Siri AI, Apple had nothing. Now they've got iMovie, ChatGPT's Final Cut Pro.
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B
Got it.
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A
They've got a competent product that 95% of the world can use, but they don't got that step up, which allows you to do hardcore research.
- [27:48]
B
Yeah.
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A
Documents drafting, editing, etc. Travel planning. Everything you want to use ChatGPT for. Can't do all of it.
- [28:11]
C
Well, let's talk about the price hikes, because this was a pretty big sea change both for Apple, the company, and I guess, in a macroeconomic sense. Right. So we're told that the increases are because of memory shortages and component shortages and competing with the hyperscalers for all these things. How much of that is true?
- [28:30]
A
95% of it.
- [28:31]
C
Okay.
- [28:32]
A
I think that the other component of this, speaking of components, is that inflation. Real thing. Over the last five, seven years, Apple product prices really have not increased over that time as other components got expensive and as inflation has gone up. And so I'm not one of those people who think this is a conspiracy theory to finally raise prices and blame memory. Memory is a real thing. If you look at the price adjustments that they've made, it is entirely in line with how much more they're paying for memory on a product by product basis. For instance, the Vision Pro went up by $200. Right. 6%. Nobody's buying the Vision Pro, they're not going to do anything to lose 1% of their margin. And so they probably set a date on the calendar several months ago, and they said, we're going to use our cash balance or whatever, we're going to use our margins to eat the additional cost of memory up until this date. The date hit, they flipped the switch, they did the price hikes, and you'll see them do more price hikes in September for these new phones.
- [29:29]
B
It just occurs to me it's on the AI component. It's like, you see these huge budgets that the Alphabets and the Amazons and the Microsofts of the world are spending. If there's one company that knows about, why don't we let someone else do the big capital expenditures? It's Apple.
- [29:47]
A
That's what they're doing.
- [29:49]
B
But their core history from partnering with Foxconn is essentially, you know, there's this really expensive aspect of the process where it's very physical. Let's just get another company to do the really high capital expenditure.
- [30:03]
A
You're spot on. It's straight out of that playbook. But AI is pretty darn fundamental. And I think eventually they're going to have to rebuild that AI research team and spend the money to rebuild AI. Now I'm saying you can do it without those hyperscaler expenses. Apple never wanted this. Apple's vision for AI, and they talked about this two years ago, was on device model processing. It was about using Apple Mac chips in the cloud, not this whole hyperscaler situation with Nvidia that you're seeing from OpenAI, Anthropic, Google, you name it. And so the irony here is that this is not a world that Apple was trying to push. They want it all on the phone. And I think eventually these LLMs are going to be able to shrink to the point where you can put them on the phone. But for right now, cloud is the game in town to make better artificial intelligence.
- [30:47]
C
Do they have other options for getting chips and components? I know they've been trying to source out of China, for instance.
- [30:53]
A
So they are testing memory from CXMT and ymtc. Those are two Chinese memory providers. There's actually. You can count on your fingers. That's the number of memory suppliers there are in the world. There's about five. Right? You've got Micron, sk, Hynix, Samsung, and the two Chinese companies I named. They already used the other three, the Korean one and the American ones. They're going to do this. Like, I'm convinced that they're going to start using Chinese memory inside of Chinese iPhone SKUS. Apple already has a unique SKU for China. So being able to, you know, add the Chinese memory into that and carve that out, I think is not that big of a lift from an operational standpoint. The bigger issue for them will be the PR campaigns for Micron and Korea, you know, trying to make Apple look bad for using Chinese memory. If you're using Chinese memory and Chinese phones, I think people in China know the deal there. I'm not really sure why it's the
- [31:43]
B
problem of any other country if Siri is reskinned. Gemini.
- [31:48]
A
It's a little bit more than that.
- [31:49]
B
Yeah. Okay. Okay. Does that create issues for China in terms of like using Siri in China and do they like, do they, are they going to have to like use like Deep Seek or something like that for the Chinese skews? How are they handling that?
- [32:02]
A
Okay, and this is actually a timely question because earlier this week, after a two year delay, Apple finally got Chinese government approval to launch Siri in China. Now we're talking about the old school Siri, not the new Siri, but here's what they've done. So there's basically two components to Siri that you can break down. You've got the Apple models and then you have integration with Google and you have integration with OpenAI. That's the situation in the United States. And so in China you've got Apple models and then the outside partner is Baidu, they're the big Google equivalent for search. And so that makes sense to have them instead of OpenAI in China, which both don't work in the region. But there's also one other player, it's a company you may have heard of called Alibaba. And so what Apple's doing with Alibaba is they've got Alibaba models in the system and it serves as what I call a censorship engine. And this censorship engine is constantly calling back between Apple and the Chinese government, getting Chinese government approval on updates to the models on the phone.
- [33:05]
C
Yeah, because the censorship announcements like get updated really, really quickly.
- [33:09]
B
Right.
- [33:09]
C
Like keywords are now problematic that weren't five minutes ago.
- [33:14]
B
But that model from Alibaba is essentially way of keeping the Baidu model in check.
- [33:22]
A
And the Apple model.
- [33:23]
B
Okay.
- [33:24]
A
And the Apple model. But yes, that is what Alibaba's there to do is to. Is a censorship engine. Isn't that crazy?
- [33:30]
B
Yeah, it's models on top of models.
- [33:32]
C
Yeah, models all the way.
- [33:33]
A
Well, that's the ultimate vision for Apple Intelligence and for Siri is to make the model interchangeable. Now, we haven't even talked about this big war between Apple and OpenAI.
- [33:42]
B
Oh, yeah, I know.
- [33:43]
A
But the phone, as you know, it has ChatGPT baked in as a Siri extension. Basically, if you ask Siri something that Siri doesn't know the answer to, it'll fall back to ChatGPT and grab the answer from there. With the new Siri AI, it's gonna know the answer to basically everything you ask. You're not. You don't really need ChatGPT. These current iOS27 betas have ChatGPT still as part of that system, but the ultimate goal, and I think this is gonna happen more quickly because of the lawsuit. Apple's going to pull the ChatGPT exclusivity, in my opinion, and they're going to allow you to install any third party LLM onto your phone to use through Siri.
- [34:24]
B
Interesting.
- [34:26]
C
Wait, okay, talk to us about the lawsuit because this seems dramatic.
- [34:32]
A
Two years ago, three years ago, dude named Ting Tan vice president of iPhone product design, Apple watch, product design, AirPods, acoustics, accessories, all sorts of stuff. One of the most senior executives at Apple, and by all accounts the number two under John Ternus and the hardware engineering organization comes to turn us, comes to Apple and he says, I'm out of here. I'm going to a startup. This is early December of 23. They're like, okay, well, you have your tentacles tied up in so many different areas, you can't leave immediately. So they're like, okay, stick around till February. So he sticks around until February, but in behind the scenes, he's already cooking up a new AI devices company. With Jony, I've the former Apple design chief and Sam Altman, who runs OpenAI obviously at the time, still does. And their whole goal is to create a new range of devices that will destroy the iPhone. Combining the engineering and design prowess of some of the best people who used to work at Apple with what at the time was widely considered the best AI. Lethal combo. And Tang Tan has been hiring over the last year, two years, an exceptional number of people from Apple, They've pillaged Apple's hardware engineering ranks. They have 400 former Apple employees in their hardware division at OpenAI right now. My guess is that's between 5 and 8% of the total OpenAI employee pool is a former Apple employee. Kind of nuts, okay. Apple has been beside itself for two years about this. The hiring, the poaching, the fact that they're trying to compete with them using their best former people, nothing you could really do about it. Reverse the beginning of this year, Apple finally had what they think is a smoking gun, an engineer named Chang Lu. He allegedly breaks into Apple servers and steals engineering presentations and such and gives them to OpenAI. And so Apple begins building a big case against Chang Lew and Tang Tan, who they allege was bringing Apple employees into open A offices with prospective job offers and asking them to bring in Apple prototypes and other internal Apple equipment to give them a look at what's coming down the road.
- [36:36]
C
What's OpenAI's defense here? Because when you read the complaint, right,
- [36:39]
B
it's like, this looks bad.
- [36:41]
A
Here's my take. Overall, the complaint is very thin.
- [36:45]
B
Really?
- [36:46]
A
Very thin, huh? The stuff about Tang Tan, very thin. A lot of that is common practice in Silicon Valley for recruiting and meetings with employees that they've drummed up into a Netflix special. That's my take. The Chang Lu stuff, if true, is extremely serious. And he's in trouble, and that's a big problem. Okay, so that is the delineation there in my head in terms of the recruiting and pillaging Apple's hardware engineering ranks. I don't know how kosher that is. I'm sure there were some, you know, funky stuff going on that strikes me
- [37:16]
B
as just business in California.
- [37:18]
A
Business in California. But we'll see where this lands. But the one thing I'll say is, if you read the Apple complaint, they say so many times in that complaint, we need to do discovery to know what's going on.
- [37:27]
B
This is a good segue to, like, the new form factors that we might expect for gadgets. And there were the Google Glasses, like, 15 years ago, and people hated them,
- [37:39]
C
and people still hate them.
- [37:40]
B
The new glasses, my old colleague at Business Insider, he, like, got beaten up or, like, got. Yeah. Remember that story in California because someone tried.
- [37:49]
A
Wanted to steal them?
- [37:50]
B
No. He was wearing the Google glasses and people found it, you know, is just, like, very upset about.
- [37:55]
C
People really hate them.
- [37:56]
A
Because of the recording.
- [37:57]
B
Yeah, everything.
- [37:58]
A
Well, Apple has a high bar to cross there because their next big thing is glasses.
- [38:02]
B
So this is what I'm getting at. And there's a lot of interest in this. And we know that Meta, obviously, is, like, really pushing on this hard, et cetera, setting aside, like, market demand for some of these new form factors. It feels to me like we are very close to crossing a deeply uncomfortable cultural threshold with all of this stuff where it's like, people do not want, you know, if you had a little pendant on in your pocket.
- [38:30]
A
You mean my body cam?
- [38:31]
B
Yeah, your body cam. Like right now, recording this. And it was like, oh, yeah, I have the, like, people would be very uneasy. Yeah. To say the least.
- [38:40]
A
There's a high bar.
- [38:41]
B
So when we think about the range of like, quote AI gadgets, setting aside even pure market demand, are we going to be in this era where like, we are really going to have to, like, have some serious cultural fights about what's acceptable for people to have on their person at any given time?
- [38:59]
A
I walked into a family member's house a couple weeks ago. I got the new Meta glasses for review and they were very upset that I walked in with the Meta glasses thinking that I'm recording them. Right. And how are they supposed to know I could be recording them? I wasn't. I assured them of such.
- [39:18]
C
But people like jailbreak the light.
- [39:20]
A
Yes, it's. It's uncomfortable. You know, there are people who, yeah, use a black Sharpie to cut out the light. It is sort of the.
- [39:27]
B
And someone will sell a phone from China that doesn't have any light or any outward indicia. It's uncomfortable being looking like they will look. There is no doubt.
- [39:37]
A
It's the unknown.
- [39:37]
B
The short term, there will be glasses that are absolutely indistinguishable from normal glasses.
- [39:43]
A
And then Meta is talking about what they call the super sense glasses right now, which are recording at all times versus the current ones where they record as you snap or ask it to record. Yeah, I don't know.
- [39:54]
B
Coming for sure.
- [39:55]
A
From Apple?
- [39:56]
B
No, from all. There are going to be a lot of these products.
- [39:59]
A
You've got new ones coming.
- [40:01]
B
We will not know. We will have no idea who is recording what's going on.
- [40:04]
A
Well, you know, Amazon's got new ones coming, Apple's got new ones coming, or their first ones coming. Google is working on this. Samsung is about to launch theirs. Everyone's doing this. And so, you know, Meta has a lot of privacy baggage and they've sort of, you know, soiled the market for Apple and these other players ahead of time by making people uncomfortable with this stuff. And I think Meta gets a little bit too hard of a time. Right. I think people go a little bit harder on Meta than they should. But there are serious privacy questions that are being raised here, serious privacy questions that are being raised here. And it's going to be a very high bar for Apple to meet this moment and get people using these things despite those concerns.
- [40:43]
C
All right, well, other than the glasses that everyone seems to hate, talk to us about what we should actually be saving up our money for I guess in terms of new product launches.
- [40:51]
B
Yeah.
- [40:52]
A
Well this foldable phone, the Ultra is going to be really fantastic. Open it up. It's like an iPad mini. Pretty excited about it. You know it's not going to be as durable or priced as well as like a pro phone or the one of the low end phones, but I think it's going to be pretty exciting. I think the AirPods, the pendant, the smart glasses are going to be very exciting. Smart home so they're coming out with three different smart home products. One is an in home security camera system tied to a new Apple security system. I think they want to compete in some fashion with ADT or some of the home security companies.
- [41:22]
C
Interesting.
- [41:23]
A
There's a landmark smart home device which you know you can put on your desk, put on wall and you can walk up to it and it'll know who it is. It'll basically bring Siri AI to life, pull up your music, you can do video conferencing, you can do apps, smart home appliances, et cetera. It's like a smart home command center. And then there's another device, it's a robotic version. So the one I just Described has a 7 inch screen then there's a 9 inch screen version and it's going to be on a robotic arm so it can move around on your desk so you can look at it, you can point it to look at people on a video conference. It's kind of nifty. I don't know how well that's gonna do but you know what, they're trying things at least. And then tons of new Macs, new MacBook Neos, new iMacs. Augmented reality glasses is the biggie. Probably end of decade, early next decade. Taking the glasses but being able to give you information.
- [42:13]
B
Google Glass. Yeah, I was gonna say. So people were talking about AR 10 years ago, 15 years ago and hadn't taken off. What is gonna be different that it's like okay, now people actually like AR and find use for it.
- [42:27]
A
It's the visual fidelity.
- [42:28]
B
Okay.
- [42:29]
A
It's the quality. Have you used the Vision Pro?
- [42:31]
B
No.
- [42:32]
A
Okay, so if you use the Vision Pro I would encourage you to can borrow mine or you can go to an Apple store. The visual quality is amazing. It's the best movie watching experience once your eyes see that quality.
- [42:42]
B
Oh, these are the glass, the Apple goggles.
- [42:45]
A
Yeah, yeah.
- [42:46]
B
I saw someone say recently they watched Citizen Kane on their Vision Pro and this is amazing.
- [42:51]
A
Yeah, it's amazing.
- [42:52]
B
Anyways, it's a better experience than watching a big screen TV on your couch.
- [42:57]
A
If you don't have a family. If you have a family.
- [42:59]
C
I find something so dystopian about like two people sitting on a couch with their glasses on.
- [43:03]
A
They have marketing around that like and they're trying to make two people rang a Vision Pro have better interactivity. I think it's crazy.
- [43:09]
C
I guess you can hold hands, you know.
- [43:11]
A
But long story short, the glasses of 10 years ago and even today the AR glasses, the visual quality is garbage. Right. You can hardly see what's going on. Apple, their goal is to make a leapfrog AR product. They're not gonna get anywhere near the Vision Pro quality, but they're gonna get to a, you know, a high quality place.
- [43:30]
B
Okay, so the next three years. Anything else? So it's like foldable phones.
- [43:34]
A
Vision Pro, we'll start off with the foldable phone and the 18 Pro and Pro Max. This fall you're gonna get a new OLED iPad mini.
- [43:41]
C
I was gonna ask. No one even cares about the new iPad mini. It doesn't have mention until now. Yeah, so I that's what I'm excited about.
- [43:47]
A
As an Apple Luddite, I wrote a stream story about it today. So you're gonna get a new OLED display. So same visual clarity that you get on an iPhone. The current iPad mini stuck in an old lcd. Next year you're gonna get some of the wearables. So you're gonna get that foldable phone two actually in the fall. But you're also gonna get the AirPods with cameras and you're gonna get the smart glasses. And then the other big one next year is the 20th anniversary iPhone, the iPhone 20 or the iPhone xx, whatever you wanna call it. And that is going to be an all glass phone that meshes well with the liquid glass. The new software they rolled out last year and updated this year. The year after that you're going to get things like the tabletop robot. I talked about the smart home appliances and what have you. So it's a big next three years for Apple and augmented reality glasses behind that they've been playing with this big tablet, foldable tablet, foldable iPad with a 20 inch screen and then that main smart home device. I talked about the smart home hub that'll be in the next few months. So that's an exciting one.
- [44:47]
B
Mark Gurman, thank you so much for coming on odd lots. That was great. I learned quite a bit.
- [44:51]
A
Good, thanks for having me. This was awesome.
- [45:06]
B
So Tracy, I thought that was very Interesting. I needed that ketchup on this company that once like occupied a little bit of my mind share and now I hardly ever think at all. I do think it's interesting as a starting point for all of the like, they're not the best phones in the world, especially when you bring China into it. They've been stumbling on AI for over a decade. That it's like the one big tech stock that Right now today, July 16th is at an all time high.
- [45:32]
C
Well, I thought it's interesting. I mean, to some extent you can say, okay, they missed the boat on AI, but on the other hand, you know, they've sort of stuck true to their ethos as a product company that often, I don't want to say leeches off the technology of others, but like is very good about sourcing tech from other companies. Right, right.
- [45:51]
B
I would say, you know, Mark described it's a product company. Right. But the other thing is it's a supply chain integration story. Obviously that was like, that's what Tim Cook's expertise was, et cetera. You know, there's an interesting episode we did, I remember, with Sam d', Amico, the Impulse Labs.
- [46:12]
A
Yeah.
- [46:12]
C
He was talking about it and he
- [46:13]
B
said that term and I guess it's actually originally an Elon term, which is that the factory is the product. Right. Which is really interesting. And so he was like, why have they been this unified experience that combines really good hardware with really good software? The product is their ability to integrate and it's not like a. That's what they're good. That's their thing. They can integrate many different things better than anyone else. And then people really like the product.
- [46:39]
C
Yeah. But then on the other hand, I guess the question is if something like a camera, if the edge on a camera now comes from AI.
- [46:46]
B
Yeah.
- [46:46]
C
Versus like the actual hardware components, then are you going to get a big AI company, a hyperscaler that starts, you know, becoming a product company or you
- [46:56]
B
just have like one of these Chinese companies where AI is like one random thing they do and Even that is 10 times better than the. You know what I'm saying? And so I do think like pretty clearly from a pure product standpoint there is probably a limit to your point of like how far they'll they'll go if their core technology is just not frontier. And it's so crazy to me that like they were years ahead of everyone else in terms of conceiving of talking to your computer with your voice and then they just like completely drop the ball on that.
- [47:30]
C
Well, I do also think the other thing, you know, we talked about their ability to entice buyers for these new products and a lot of the stuff, it sounds cool, a robotic arm that sits on your desk and points at people, I guess. But on the other hand, how much of it do people actually need? How much is it going to cost? Given that, as we were discussing, memory and components are in short supply at the moment, I don't know.
- [47:55]
B
I also think, who knows, I guess part of it may be, you know, other companies are all going to build the similar gadgets, etc. Like again, the iPhone, bringing together this entire ecosystem. Like, what are the. I just, like, I don't know, I guess the, the flip side is like, we don't care at all anymore about what iOS we're on, etc. And it hasn't hurt the company.
- [48:17]
C
Well, I was going to say one question we should have asked Mark and I forgot, but how much of a moat is iOS now, actually? Because people will say like, oh, I don't want a non iOS phone. But on the other hand, you don't know what I.O.S. you're on.
- [48:29]
B
No. All I know is that if I didn't have one, all my friends would make fun of me for being green text in the group chats.
- [48:36]
C
That's the important part.
- [48:38]
B
Who's the Android person that's making the group text show up in green chat? Expose yourself. And so I don't want to be the that person.
- [48:44]
C
All right, shall we leave it there?
- [48:45]
B
Let's leave it there.
- [48:46]
C
This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
- [48:52]
B
And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand, dashiell Bennett at Dashbot, Kale Brooks Cale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to bloomberg.com oddlods we have a daily newsletter and all of our episodes and you can chat about all these topics 24. 7 in our Discord Discord, GG Oddlots
- [49:15]
C
and if you enjoy Odd Lots, if you like it when we provide you with Apple updates, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.
- [49:35]
B
Sam.