Low-end, Game consoles, Secondary Markets, Displays and AI

The Asahi Shimbun Interview Part 3

Horace Dediu / Takeshi Narabe & Dylan Weir / Asahi Shimbun Interview, April 2026

Takeshi Narabe • 16:20
[Y]ou also mentioned about the Japanese companies, overshooting, performance oversupply was also one of the reason that Japanese electronics giants were outmaneuvered by Apple: the insistence on in-house component manufacturing and a critical absence of software and service-led business as you mentioned now.

Horace Dediu • 17:02
It's a tough one. I think I know what you're getting at, but I think the puzzle there is that you try to make things better and you think by making things better you're going to be more successful and that was another observation by Christensen that sometimes you if you listen to your customers they'll ask you to do things better because that's all [the customer] can imagine.

I think the canonical example for me would be the game consoles. [...]Every new generation was more powerful and the way [the platforms] would decide how to improve it would be by talking to their customers and who are the best customers?

They are those who spend the most on games and the most on consoles. and they would survey those [customers] and [the customers] would always say "we need more performance in terms of refresh rate or, I don't know, how many dimensions of performance there are in games--i'm not particularly a user.

So the problem is that it's not just Sony but Nintendo, Xbox, everyone in the gaming industry was listening to the gamers and the most prolific and demanding gamers were those who spent the most money.

But if you compare mobile gaming to console gaming, it was always worse on all those dimensions. But if you [instead] measure how much time people spend on on mobile games, initially it was quite small, but over time it grew and grew and the number of people using phones for gaming is in the billions. In contrast, the number of people using consoles saturated at most at 30 percent of households in the United States. I don't know what it is in every country and there are many still. That's an okay business but it's not measured in the billions of users and arguably those users are not the ones you want to listen to.

The only exception was Nintendo with the Wii, which actually tried to expand to non-consumers, tried to expand to elderly people (so that they can do some movement) with the product or to young children. And that was a brief moment of success in the incumbents. But I think fundamentally, even that too gets passed to the phone.

So this is a classic example. How Apple plays in this game is a very tricky one because...

...they don't want to be doing "low end." So what they do is they improve the product and they let the previous generations of products to be passed to people who haven't got the money. There's a huge resale market for iPhones. And this is something that requires much more research, but we're observing that the longevity of the product allows the second or third owner of an iPhone to afford owning one.

And that improves the user base. It is, in fact, one of those interesting phenomena, that the iPhone is designed to last much longer than the Android phone, typically. And it's supported longer with software updates. And as a result, more people use the product. And that's a very different priority. So in that sense, they are protecting a little bit against low-end disruption.

But it is a challenge for Apple is to be careful because somebody might introduce something good enough at the low-end. I think in the AI time we live in, it's about something that doesn't even have a screen. And we've seen these challengers appear, which suggest that, it's only an audio interface or it's only something you wear that has perhaps a camera and is perhaps listening and gives you some information, but without a screen.

That is a very dangerous interface for Apple because they have no incentives to make screenless devices. The AirPods are an exception, but they are connected to the phone. So the challenge for AI is that if companionship through a voice interface is all that people care about, then there is a struggle for Apple because they don't add so much value.

But I do believe that the visual interface is still primarily what people want. I think the visual interface [through] the optic nerve is much more bandwidth than the hearing nerve. The ear doesn't process as much information as the eyes do. So people will always be interested in seeing.

And when you look at the social media or you see how automatically people migrate towards short video and less towards text. Because text requires understanding, [encoding]. Reading is hard. And it's also, by the way, language dependent. Video can be independent of language. So you have a lot of interesting experiments there. So I'm still bullish on Apple controlling the screen and becoming dominant or staying dominant in anything with a screen. But there is a challenge in the low end there. And that's why knowing disruption theory is very helpful to predicting some of these potential changes in the market.

Next in series: Part 4: How not to over serve; The machinery of vanity

Previous in series: Part 2: The Story of Japanese Innovation

Interview as published: 聞 Asahi Shimbun on Apple & Innovation