(Bloomberg) — By abandoning plans for self-driving cars, Apple Inc. is giving up billions of dollars in potential revenue and the dream of selling what one executive calls “the ultimate mobile device.” Become. The hope is that other big bets, such as generative AI and mixed reality headsets, will make up the difference.
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Apple reached this crossroads on Tuesday, telling employees it was ending its car project and redeploying some staff to its AI efforts. The decision comes after months of heated meetings between top management and the board of directors over how to proceed. Chief Operating Officer Jeff Williams and Project Director Kevin Lynch broke the news to the roughly 2,000-member team during a meeting that lasted less than 15 minutes.
Bottom line: Apple's future doesn't depend on selling $100,000 cars with self-driving features. Instead, it will focus on catching up with rivals in the generative AI industry, where OpenAI and Google's chatbots have captured the imagination of consumers and investors. This change will allow Apple to focus on turning its fledgling Vision Pro headset into a mainstream hit.
Investors and analysts praised the move, which allowed Apple to avoid the electric vehicle market, which has become increasingly risky in recent months. Bloomberg Intelligence analysts Anurag Rana and Andrew Girard said, “Shifting resources to generative AI is the right decision given the long-term profitability of AI revenue streams compared to automotive. ” he said.
But the decision also leaves Apple without a future source of revenue as it struggles to maintain growth. The company managed to break free of last quarter's sales slump, but warned that it will be sluggish again this quarter. Vision Pro was launched just this month and is not expected to contribute significantly to growth for many years, if ever.
With cars, the profit margins would have been slim, but the profit potential was huge. The idea has long been touted as one of Apple's famous “next big things,” and could have locked consumers even more firmly into the company's ecosystem. Tesla Inc., which led the U.S. EV revolution, generated nearly $100 billion in revenue last year. Moreover, tech giants like Alphabet and their Chinese rivals remain focused on cars.
Apple's decade-long automotive effort, known as Project Titan, was also an AI challenge in its own right. Apple set out to build an artificial intelligence system powerful and energy-efficient enough to make cars fully autonomous.
By leaving this off the table, Apple will focus on applying AI to its current products like the iPhone and iPad, leaving it further behind peers such as Alphabet Inc.'s Google, Amazon.com and Microsoft. You can avoid taking it.
Apple plans to announce new AI features at its developer conference in June, including more automated tools for software development and the ability to summarize news articles. The first new features are planned for iOS 18, which will be released around September with the next iPhone, Bloomberg News reported.
Read more: Apple prepares AI tool to rival Microsoft's GitHub Copilot
These efforts now have new talent, thanks to the closure of an automotive effort known as the Special Projects Group (SPG). The company plans to redeploy about a third of its vehicle team to other divisions.
Meanwhile, hundreds of people working in self-driving hardware, car interiors and exteriors, and vehicle electronics will need to find new jobs within the company. If you can't find a role, you'll be fired. Additionally, some employees have already been notified to head for the exits.
Three main groups within SPG – the Ottawa-based software team under executive Dan Dodge; Cloud engineering and software group under Ribo Meyers. Vera Kerr's software project management team will move to Craig Federighi's software division and will work on Apple's core operating systems.
Apple's automotive artificial intelligence team, which previously reported to Stuart Bowers, will move to work on generative AI in John Gianandrea's machine learning division. Some automotive talent can apply their skills to the Vision Pro. The product has many features that rely on artificial intelligence, including the ability to create a virtual representation of the wearer.
The big question is how quickly AI will bring significant benefits to Apple. The company is unlikely to have a full lineup of AI applications and features for several years. Additionally, Apple's tendency to value user privacy may make it difficult for it to compete aggressively in the market.
For now, Apple will continue to make most of its revenue from hardware. The iPhone alone accounts for about half of the company's sales. So AI's biggest short-term potential will be the ability to sell iPhones, iPads, and other devices.
As for Vision Pro, which combines virtual and augmented reality, it too will take years to make big bucks. Although this immersive technology has excited some early adopters, the first version of the device remains unwieldy and too expensive. Even if millions of units are sold annually, the $3,500 headsets represent only a fraction of Apple's roughly $400 billion in annual sales.
The company is also considering other big ideas, including lightweight AR glasses, new smart home devices, and AirPods with cameras. But it will be years before we know whether a variety of smaller products will replace Apple's biggest product: cars.
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