As the tech world cheered yet another Apple product launch event last week, it was hard not to reflect on the strange place where the $3.4 trillion behemoth has arrived.
An Apple product reveal — always slick and highly produced — used to be the most important day on the tech calendar. Yet these days they are a little more perfunctory: a procession of incremental improvements on a suite of products that has not changed in nearly a decade.
The last mass-market device launched by Apple were the AirPods earphones in 2016. Its virtual reality goggles — the Apple Vision Pro, announced in 2023 — have flopped.
Big companies getting complacent is nothing new, especially big companies with a citadel-like business that produce a $105 billion (£78 billion) profit, as Apple has this past year. In pure financial terms, the California giant is doing better than ever.
And yet the world is in the grip of an artificial intelligence boom that promises to change how we live, work and do business. It is the biggest new thing since the dawn of the internet — and Apple is nowhere to be found.
Siri, Apple’s voice assistant, is good for setting a timer — and little else — 14 years on from its introduction. Meanwhile, nearly three years since OpenAI fired the starting gun on the AI revolution with the launch of ChatGPT, Apple’s efforts appear to be centred on a desktop AI “robot” that will resemble an iPad on a movable arm and is not slated for release until 2027.
Cook joined visitors at the event while they tried out his latest iPhones, but the company has become an innovation wilderness
MANUEL ORBEGOZO/REUTERS
JUSTIN SULLIVAN/GETTY IMAES
Other previously announced features, including a souped-up Siri, have been delayed until next spring. Amid the malaise, several top researchers have left in recent weeks.
• Meta lures Apple AI expert with $200m pay offer
How has a company that was once the quintessence of innovation drifted so far? One need only follow the money: $704 billion, to be exact. That is how much the iPhone giant has spent in the past ten years — not on engineers, nor big ideas, nor new products, but on its own shares. Corporate buybacks can boost a share price by taking shares out of circulation, making them more scarce. Apple’s is the largest such scheme in corporate history.
To put it into context, the money spent by Apple since 2015 is more than the value of Britain’s three biggest companies — AstraZeneca, BP and Shell — combined. It smacks of a business that has run out of ideas — and in tech land, this is very dangerous, especially at a time of violent disruption.
What else, you might ask, could Apple have spent its money on?
Wind the clock back, for example, to 2018. Apple chief executive Tim Cook was struggling with what might have been his crowning achievement: Project Titan, the quest to build a self-driving car that was, for years, the worst-kept secret in Silicon Valley. Yet progress was halting.
The Apple Vision Pro flopped, and Elon Musk, below, was rebuffed “during the darkest days of the Model 3” when he asked Apple if it was interested in acquiring Tesla
YUI MOK/PA
That was when Elon Musk, himself mired in “production hell” for Tesla’s new Model 3 saloon, got in touch. “During the darkest days of the Model 3 programme, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla,” Musk later tweeted. “He refused to take the meeting.” Tesla was worth just $50 billion; that year, Apple spent $63 billion scooping up its own stock.
We know the end of that story. Tesla became one of the largest companies on the planet; its market value now tops $1 trillion. Cook killed Project Titan last year after a fruitless decade. The world never caught a glimpse of an Apple car.
• Musk offered Tesla on a plate to Apple
What Cook has been very good at is squeezing every last cent out of the Apple brand and the 2.3 billion Macs, iPads and other devices it has in the wild. Of this total, well over a billion are iPhones.
Apple’s “services” arm — which includes its cut of up to 30 per cent on sales from any app in the App Store, plus AppleCare, iCloud, Apple Pay and other services — is on track to bring in more than $100 billion this year. That’s roughly triple the income that same division brought in a decade ago.
The company has, in effect, turned each one of its devices into a cash machine, and then used much of that cash to financially engineer its stock price.
Cook also made another pivotal decision: to take Google’s money rather than fight it out for search supremacy. Unsealed court documents from cases against both Apple and Google over the past two years have revealed details of a wildly lucrative alliance between the tech titans. Google pays Apple at least $20 billion every year in exchange for being the default search engine on Apple’s two billion-plus devices.
Apple is very good at making very good phones, such as the new iPhone Air
JUSTIN SULLIVAN/GETTY IMAES
Imagine if Apple had made the (very difficult) decision to turn down Google’s billions and instead go to war over search. Even if it had lost, which is almost certain — no one has yet managed to knock Google off its perch — it would have gained something important. Ben Thompson, from the tech site Stratechery, wrote: “Apple completely forwent any sort of knowledge or capability accumulation in terms of gathering, reasoning across, and serving large amounts of data.
“When you put it that way, is it any surprise that the company suddenly finds itself on the back foot when it comes to AI?”
In other words, taking Google’s money came at the cost of surrendering significant expertise in data.
The question is: what does the future hold for Apple?
In the short term, the future is very bright indeed. The rapidly growing universe of AI therapists, chatbots (including ChatGPT) and productivity tools will all sell themselves via the App Store. Apple, as the gatekeeper, will get its cut of that income.
And the company is very good at making very good phones. The iPhone Air, a new, super-slim, lightweight model, stood out in last week’s show — which also included less exciting products such as a “cross-body strap” to hold the iPhone, and earphones that track your heartbeat.
The long-term question, however, runs deeper.
Sir Jony Ive, left, and OpenAI’s Sam Altman have forged a partnership that threatens to gallop ahead in AI
In a world where our technology can understand and respond to queries in natural language, is the smartphone going to remain the primary portal to the digital world? Or will it be something else entirely?
OpenAI’s Sam Altman this year spent $6.5 billion on scooping up io, the hardware design start-up of Sir Jony Ive, the famed British designer behind the iPhone, Mac and iPod. Ive’s team includes several of his closest lieutenants from Apple including Evans Hankey, who succeeded him as Apple’s top designer only to leave in 2022. Since Ive’s departure, Apple has eliminated the “chief design officer”, splitting the duties among a small set of executives.
The goal of Ive and his band of Apple émigrés is to build an entirely novel device for OpenAI that is centred on the unique capabilities of AI systems. In a video promoting their new partnership, Altman said: “Jony called one day and said, ‘This is the best work our team has ever done.’ Jony did the iPhone. Jony did the MacBook Pro. These are the defining ways people use technology.
“Jony recently gave me one of the prototypes of the device for the first time to take home, and I’ve been able to live with it. I think it is the coolest piece of technology that the world will have ever seen.”
Apple has built an empire not by being first, but by being the best. It bides its time, as it did with smartphones, until it is ready to roll out a product head and shoulders above its rivals’ devices. But a decade-plus of financial engineering has pushed the company into a dangerous place in the AI revolution: the outside looking in.