Asymetric Podcast: Episode 138 — Watershed

Horace on WWDC 2026, John Ternus’s timing, what we can learn from the candy bar, and Judd’s indifference to origami. Also, World Cup predictions.

Audio Recording

https://asymco.com/wp-content/uploads/2026/06/asy-138.mp3

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Transcript

Asymetric 138, hosted by Horace Dediu and Judd Rubin.

Judd: The World Cup has only just begun, but somehow Horace has amassed 11 yellow cards. This is asymmetric. Horace, why are you being so rough on the refs and your fellow competitors?

Horace: I don't know what to say because I'm not even watching the World Cup. Never mind playing in it. But so, what can I say? First of all, the World Cup is, for me, something kind of very beloved. I used to watch it quite religiously when I was younger, and my family and my father in particular was always a big fan of what Americans call soccer, but the world calls football. And because I grew up in Europe, and I live in Europe now, it was always a big deal. We would kind of predict those first round games, like what the outcome would be, and have a competition with that. And I even went to see, in 94 when it played, I think it was 94, yeah, when the games were in the US again. And I actually went to see a couple of games. Miami and New England or Boston. But the last few years I just haven't been as excited about it. It feels like it's lost a lot of its charm. It's become very expensive. And I don't know if the right word is corporate. I don't think it is corporate, but it has felt more commercial in a way. Which isn't always bad, but I'm just thinking that football is a people's sport, or it's the beautiful game, the game that everyone plays even if they don't have any money. You just need a ball. And many people just don't, barely even use a real ball.

Judd: It's like they make their own. And feet.

Horace: Yeah, you need feet. But when I was hearing that ticket prices were like thousands of dollars and it was so exclusive, it just didn't feel like it used to. And also, the game has become much more defensive because it turns out you can game the game, so to speak. And the games are kind of a little bit less vibrant. But anyway, I'm not an expert. I just kind of don't have the passion anymore for it.

Judd: Okay. Good to know. When we were talking earlier you had said that it's been a watershed couple of weeks for Apple. Tell me more. Why do you think that is? What has been the major life, world, company changing events or series of events that makes you feel that way?

Horace: Well, we finally had, in WWDC, we finally had the kind of, I don't know if catharsis was the right word, but it's some revelation of what people had been hoping for for a long time. Which is, firstly, well, maybe, I hate to say it, but I think it's kind of like two years ago we had anticipated sort of Apple intelligence being something that was going to change everything, or at least bring AI into the world of Apple, and it didn't seem to do so. And now it seems like it actually has delivered on that promise of two years ago. Now, what it did is actually delivered beyond that, but people haven't yet absorbed just what changes will be coming, I think. Because I think, unlike a two-year-old promise, what we're seeing now is an integration that's far deeper, where the operating system is going to change dramatically the way it works for the user in terms of interpretation of their intentions. So I call it intention computing. And it's going to allow developers to participate with AI inside of their apps, and it'll make apps modular for an intent driven experience for the user. So they're reorchestrating the entire operating system and the entire app ecosystem to accommodate intent computing. That's my read of it. And that intent computing has very much been the promise of AI as a new way of doing computing versus touch computing, which has been the consistent interface for almost 20 years now. And touch was going to propagate into voice computing or spatial computing, and now it's intent computing. Now, actually, voice didn't really go very far. Spatial, the jury's still out, and I do think Apple's pushing hard on spatial, continuing to develop that, but it's far more, let's say spatial is far more, I would say, along the lines of what Mac is, whereas intent is much more along the lines of where phone is. What the dream of those who wanted to replace touch was, those who, for example, if you go back to Alexa, if you go back to, what's the Google version of that? You know, just smart speakers. If you go to Siri, even the original Siri, if you go to Humane, which had the notion of a microphone-only interface, maybe with like a mini projector. And even if you go to what OpenAI suggests that they are building, an AI-first device. The assumption behind all of these is that, first, you don't have touch; second, you don't have apps; and that your entire compute is a conversation with some intelligent agent, or the equivalent of a chatbot. And you ask it what you want to have done and it'll do it. By this I mean intent, because it's kind of like you just ask. It seems a bit utopian, because I think that it's not driven by analyzing what people actually do, but rather hoping to replace what they do now with this new way of doing things. Let's not forget that touch also didn't replace the way we were computing before touch. We had applications on our computers, but they weren't apps as we call them today, and they weren't, you know, involving swiping and gesturing. They involved mostly, you know, clicking and typing. So the idea of intent is just, tell me what you want and I'll get it done. And I think, as I said, it's a little bit utopian. It's, you know, remember Star Trek, you know, asking the computer. And yet when you look at what people actually do, they're not in an inquiry mode. They're not inquiring. They're not requesting. They're chilling. Entertainment, communications, they're doing things with their phones which are far more passive, you know, and far more like television than they are interrogatory or trying to be productive with a machine. That's, I think the reason behind intent's utopian vision is that it's created by computer people who think that computers are utility first, and, well, first, second and third. So I find it a little bit, the visions until now have been more or less, you know, not consumer friendly and not consumer accepted. But what Apple's building, in terms of intent, is a layer within the operating system. You can do those things, but at the same time you maintain all the other things that you're already doing. So you'll have the app economy, you'll have the app ecosystem, but apps will also be stitched together into workflows and experiences that would allow you to get things done. So, for example, instead of turning to three different apps to deal with your travel. You'll have an app for booking your flight, an app for booking your hotel, an app for booking your ride to the airport, maybe something more to do with setting your vacation settings in your calendar, maybe dealing with some shopping that you need to do before you leave. Instead, you might get all those things done with a few voice commands, which then will put together, it has to be iterative, so it'll give you back options and you'll go through them, and it'll connect to these apps that you're normally using. And my thesis is that Apple decided not to completely obsolete the app economy because it is somehow easier to replace all that. It isn't. They decided to keep trust and connections with developers and connections with data sets and connections with the trusted entities that are like banking, shopping, all those places you go. Those relationships will be preserved rather than you giving rights to all those things to a new entity that is this new agent. And so for that reason, I think the future that Apple is envisioning is where AI is layered on top of what we already have. That they call the system orchestrator, which routes your queries to multiple AI models but also to the apps that can work with those models and put the solution together.

Judd: That does sound very nice. It also sounds like a lot of, you know, maybe the methodology is slightly different than what's been talked about before, but as you were saying earlier, this is sort of where they seem to be where they were hoping slash promising to be a couple of years ago. But when I think watershed, I think something new. This feels like they're doing some really interesting things, but they're just sort of catching up to where they thought they would have been a couple years ago.

Horace: Well, Siri's gotten better and Siri has caught up to where it was promising to be. I mean, it's not even the way it should have been two years ago. It's where models are maybe as of six months ago. So things have gotten better from that point of view. So Siri has caught up and then surpassed where it was supposed to be. But my observation about intent is that it isn't only, it isn't just we have a new Siri, or we have new image playground, or we have new text creation tools and all of those things that work better that were introduced two years ago. Rather, we have, at the operating system, the orchestrator. And the ability for developers to work with these new Apple foundation models. By the way, there's five Apple Foundation models. Two are on device, three are in the cloud. One of them is hosted with Google. There is training that was supplied, or rather, you know, there was training data that was supplied by Google, and so Google's data was used to, you know, create these models to some degree. Possibly those will continue, that relationship will continue, and there'll be improvements over time also because of Apple and Google kind of partnering there. But one thing to note is that this isn't Gemini, this isn't any of the Google apps, any of the Google interfaces, and the data never leaves Apple's own servers, or what's called private compute. And so none of that was promised two years ago. The idea of the foundation models being updated. The on device foundation models, which by the way require quite a higher level of device performance that two years ago wasn't available. So they've done a lot to enrich this whole thing. And like I said, connections to developer, connections to Google, connections within the operating system, all of this is new. So let's just summarize it as, it's smarter, but it's also far more integrated.

Judd: That sounds great. You also were not shocked at how the market responded.

Horace: Yes. So the market, the stock fell immediately when, let me just put it as precisely as I can. During the keynote event, there were several segments. There was one on child safety, or, you know, safety in general. There was a previous segment to that that was on changes to the core operating systems, broadly speaking, not very detailed and not operating system by operating system the way we used to do it. And then finally Siri came in about two-thirds in, or Siri AI. And to introduce it came Mike Rockwell, who is the new head of Siri AI. He used to be the head of spatial computing, or vision pro actually, and he delivered vision pro and then moved to this role. As soon as he began speaking, and I mean within seconds, you know, they introduced him, he said hi, I'm here to introduce Siri AI, probably between the second and third syllable of Siri AI, the market fell. I was watching it. I was watching it and it had been up, up, up throughout the anticipation. It had been up for a long time before even the event occurred. But during the event, you can see it keep rising. And then, as soon, I think $317 right before Mike began speaking. And I of course blame Mike Rockwell for this. I mean, his outfit was terrible. His outfit as soon as he comes, not cool. I don't know, it was his haircut at the time, but clearly as soon as he began speaking, it felt like straight down and then it kept going and going and going to the end. Over the next couple of days it fell over twenty-five dollars. I mean, it's, but if the drop started as soon as he said Siri AI, is it just that—

Judd: people are freaked out at the name. If it was a different name, do you think it would have happened? What was the signal? Or did it just hit a number where it was far beyond what you've always described as a point. Many people said, you know, the market's got nothing to do with the event, the market's nothing to do with Siri.

Horace: I saw these feedback, as I had posted this on the social media, and I said no, I was watching, it was very precise. But notice that it wasn't based on what he said because he hadn't even begun explaining. He hadn't even done a demo. It just started falling as soon as, okay, now the presentation begins. It's time to sell, which is indicative of the phenomenon that's known as buy the rumor and sell the news. And the thing is that usually you don't know, but some people, you don't know the timing, so they'll say, well, as soon as the keynote begins, or as soon as the day begins of WWDC, people start to sell. Why not? But here they start to sell only when this Siri announcement was finally made. And it was spectacular. I've never seen a better representation of just sell the rumor, sorry, sell the news, because, you know, Siri, it doesn't matter what it is, they're announcing AI, they're doing all the things that everybody anticipated. It's time to sell, and it just kept going and going and going. And then days later people are trying to explain the quote unquote market's reaction, or Wall Street reaction, or investor reaction, or analyst reaction to WWDC, because it had kept, you know, it had fallen so much.

Judd: Will he be allowed to present again?

Horace: Yeah, exactly. I don't know. But of course, when Steve was on stage back in the day, we had calamitous, catastrophic falls similar to this. One of the worst was when he announced the MacBook Air. I have no idea, but I think the stock fell 20% in the next few days. The very first air, the launch of that brand. It's not explainable because it is entirely driven by some kind of momentum and market, you know, markets are not pricing at that point. What they're doing is, there's an anticipation that other people will sell, so you sell. So it's an avalanche of anticipations. And the same thing before, this is an anticipation of buying, so you buy. So it's all based on what other people might be doing, and what other people might be doing based on what other people might be doing. So it's kind of recursive, and it's a news cycle that leads to this kind of, you know, amplification, on the upside and on the downside.

Judd: So, but again, I thought this was... other than that, how was the play, Mrs. Lincoln?

Horace: that the kind of, these play, these types of games are over for Apple. It used to be much more prevalent, used to be much more common, but it became, let's say, less of a game. But it's interesting how the market itself is so hyperactive right now. We've had these international issues, we've had inflation issues, we've had consolidation or concentration inside of the tech sector. And so it just seems jittery. So my point though is, I kind of felt, because it was back to this game, I found it strangely comforting, because, hey, look, Apple is selling on good news. And the more the news piled on, by the way, throughout the week, you know, WWDC was still running. There were more and more events, more stuff coming out, there was more interviews with the executives and the picture of Siri AI, with, you know, the whole picture of the integration I've been speaking of, the relationship with Google, all those got fleshed out and it sounded better and better and better. Most analysts or whoever got their hands on the software said, wow, it really is pretty good, even being, you know, great, some people would say. And there was a lot of applause from the people watching the performance here of the product. That we're gonna need a lot more powerful hardware from Apple to take advantage of all these things. Obviously that is a positive for the business. So maybe that is not what was expected, but now we have a precision about exactly how many current devices can take advantage of the full scale of this improvement, and it's not many, so a lot more hardware will be needed. So my reading is, as an observer, as an analyst, there was kind of, I would say there wasn't a huge excitement during the event, because it was not their greatest event, especially taking so much time on the safety side of things, which isn't, it's, safety is a hygiene thing. You don't advertise that your system is more hygienic than ever. Just like people can't sell cars because they're safer, that is a not a purchase decision driver. So from the defense, yeah, well it works for one, but not many car makers. So it's flat, it's kind of, for me the whole keynote was a little bit flat. Also, by the way, the Siri demos were slow because they weren't faking it, and therefore that is exactly how their action happens. So from a snappiness and entertainment point of view, it was a bit like, it felt like there were a couple of beats off, you know, in the quality of the video. For me as an observer, again, it was like, okay, this is decent, this isn't great. But then as time after the event passed I was getting more and more and more impressed. Okay. The market went the other way. They hyped it up way in advance. They sold it deeply afterwards, ignoring all the interesting stuff coming out of WWDC. Historically though, that's how WWDC has always been sold off because people would always anticipate more than what was happening. In this case, they delivered actually more than they expected. Most people expected, and yet it's still sold off. And now it's bottomed out and it's probably gonna start recovering. But you know, there's a lot of cynicism around, as usual. And that's, again, encouraging to me in a way, because it means Apple works as an underdog, you know, it works better when it's underestimated. And it's great to see the market throwing away good, you know, the baby with the bathwater.

Judd: What else jumped out at you? I mean, not only just the keynote, but there were other events throughout the week and all sorts of other announcements. Was there anything else in particular you wanna touch on, for Tim Cook's last WWDC as CEO?

Horace: Well, a couple of things have been in the background. The news coming out of the analysts following this, the market for phones and computers and PCs has been, and this isn't getting a lot of highlights, but the market, because of the memory crisis, the market for computers is going to be down this year and the market for phones is going to be probably the worst year anyone can remember. I mean, we're going to see 20% drop for a lot of the vendors out there. And some may actually be almost in a state of, you know, economic or financial distress. Like, who, it's that bad. These are the smaller so-called budget phones, the lower price points of Android, okay. They're just not able to get, you know, any memory, and they're not gonna be able to ship their market shares.

Judd: Would now be a good time for us to introduce an Asymco phone.

Horace: Yeah, sure. It'll just be an iPhone with an Asymco logo on the back and we'll just charge double. But the idea of the market being in serious trouble is contrasted with the fact that Apple is, the same analysts are projecting Apple to be growing. Apple grew in the first quarter, projected equal growth in the second quarter, which is ending June. That growth would roughly be in line with the first quarter, which was like in the twenty percent plus. Now this is at a time when most of the vendors are seeing declines, and then the analysts are suggesting that declines will accelerate into the end of the year. So this sounds to me like a catastrophe. So while the market for smartphones is collapsing, Apple is somehow still increasing its volume. Now we don't know if it's going to actually continue their rapid growth into the second half of the year. But because it has had such a great success with iPhone 17, and because there's new product coming out, probably of the, you know, high-end, maybe a new version of air, a new version of fold, a new version of the pro products. And then the anticipation that 18, base 18 is not coming out until early next year means that 17, base 17 is gonna run through the end of this year. All of this is probably going to increase Apple's revenues in the iPhone segment. The NEO is doing amazingly well.

Judd: But time out, timeout. So did you just say you don't think that the iPhone 18 is gonna come out in the fall?

Horace: Well, that's what the rumors are saying, and they've been saying this for a while. The iPhone lineup into two. Now they already have an iPhone, the S, sort of the low-end version of the iPhone, was a spring product, springtime. So that started with the iPhone, I think it was C back in the day, and then became the S. And now the idea, I think, is that they're actually going to take the standard base model, okay, which is now maybe the mainstream model, and move that to a spring launch and keep the, by the way, there's a reason why in the December quarter the mix of the high-end product is far overwhelming. There's a lot more of the premium stuff sold, and not many people are rushing out to get the latest of the mid or low range of the iPhone. And they know this, and they've known this for a while. So it also makes sense to move around China a little bit. China holiday is in first quarter. And so moving the 18, and possibly also for India, I don't know when the Indian holidays are. But if we can move something off into the spring, it might be an interesting split. Now I don't think it's gonna affect sales that much because, like I said, there's not only a bias towards the high end, but we're going to have more high end than ever before. If a fold is coming, then the high-end lineup will be the pro, the pro max, the air, and then probably ultra will be the branding for the, so we're looking at four high-end iPhones we'll be launching in the fall, with hints of what might be the 18 base model coming in later. And thus also maybe concentrating a lot of the buyers to saying, okay, since this is what the latest is, we're gonna go with one of those four options, driving the ASP higher, and so on and so on. So yes, it's a radical departure, but it's been rumored for at least, I'd say, a year, maybe two years.

Judd: Well, I guess a couple things. I mean, in American football, not soccer, but in American football, there's a saying that when it comes to your quarterback position, if you have two starting quarterbacks, you really have no starting quarterbacks. So if you have four premium phones, don't you have zero? I mean, like, they can't all be premium. They can't all be. They're just expensive.

Horace: Well, you have a good point. And historically, you know, Apple's been about a simple and clean and clear product portfolio. You know, famously when Steve came back he eliminated half a dozen, whatever, there were so many different versions of back. He eliminated a lot of them and then introduced the iMac and it became, as you say, the quarterback, the leading quarterback. But with the iPhone over the years it's kind of gotten a little bit broader. And you see this in what, the so-called, my stairway to heaven is my, the breadth of the products available. Of course that includes different memory configurations, so that there are far more now than there used to be. Used to be one iPhone or maybe two, and now we have like about 15 with all the memory configurations, and not to mention the color configurations. But as far as the so-called premium, now there's this puzzle around fold, and I must say I'm a little bit confused by this product. I think we talked about this before, but I think when it opens, it kind of starts to look and feel a lot like an iPad. Like an iPad mini actually. And I'm not sure that people want to carry an iPad in their pocket. Of course, when closed it's a phone and it feels fine, but it is, the iPad is not necessarily, maybe it'll become, because if it is with you all the time, it'll become far more attractive for you to interact with the iPad type of interface. But I will say that one of the rumors about why they're doing this is that there's a lot of interest in China. And it isn't for software reasons, but rather because it is such a, it's such an event, it's such a theater, it's so theatrical, right? When you have a machine, a moving object, it's a different thing than something static, and so there might be a preference for something that shows action, that shows clever mechanicals. And that could be one of the reasons that market is appreciating it. I'm reminded, by the way, of the debate back when I was at Nokia, that there were flip phones that were very popular in the US. And Nokia resisted going to a flip phone. They had something called a monoblock, or the candy bar. The candy bar phone was the way Americans called it, but inside Nokia we called it the monoblock, and it was better by every possible thing you could measure. It had more durability, it had longer battery life, it was more durable, it was easier to use. You didn't have to do something to get something done. And it just was cheaper too. Obviously you could make it fancy and expensive, but it was cheaper to make and cheaper to manufacture and so on. So everyone, all the engineers were scratching their heads. Why Americans preferred flip phones. And Motorola launched the Razr, which was a super thin flip phone, and that went on to become the number one world bestseller in the phone space. So much so that, you know, they make dozens of versions, and eventually they relied so much on it that when it began to decline the whole Motorola failed. I mean, the whole company essentially collapsed. Strange story, but you know, you have a hit product and a couple of years later you're out of business. That was the story of Motorola. But it wasn't just because it was a fold, it was because they, I don't know, they made a lot of mistakes as well. But flips were very popular. And so when we try to find out why people wanted a flip phone, it was that this mechanical action felt like, I don't know if people felt like, well, that's one idea, but people felt like it's much more satisfying. It's satisfying to open it and answer and close it, to hang up, and especially if you don't like whatever the conversation was, it's satisfying to just hang up on something with violence. So it was, you know, as some people even in Japan, it was common to have tiny little flip phones with little antennas. So you had to flip for the phone and then extend the little antenna to make it work. And that's outrageous, you know. You have simplicity on one side, you have complexity on the other, and people are voting for complexity. Now, I don't suggest, and this is one of the reasons I think people reject, and Nokia, or sorry, Apple rejected a lot of these moving origami, you know, have your laptop flip inside out, have it be an iPad or a tablet with a pen. Do all these things as if it's kind of a convertible. But here we are. So maybe after, you'll know the answer to this question.

Judd: I won't. How popular are the current folding phones from, you know, Samsung or the other manufacturers? I mean, are they that popular?

Horace: Not that popular at all. They've been doing it for years.

Judd: Yeah.

Horace: Partly the reason they're not popular is that they are flimsy, and there's a visible crease, and they're gimmicky and cheap. The, but cheap feeling, but very expensive to buy, and this is the problem. And it isn't a killer function, what do you do when it's open? Well, you have a bigger phone screen, so maybe you watch videos or something. So it hasn't come with a killer app, if you will, for the bigger screen. So this is what's interesting about Apple, is whether they will, first of all the form factor is slightly different. It's shorter in height, and then when it opens it's much more like, like I said, like a mini iPad. And I think once it's in iPad mode it's going to be probably usable for entertainment and other things in a much more intuitive way. Maybe the keyboard and other things will be easier to use. I don't know what they're going to introduce in terms of software, besides just making it an iPad. So from Apple's point of view, they are also getting rid of the crease. It probably mechanically will be nearly magical. Probably they'll solve a lot of the durability issues as well. So there's a lot that they can fix about those products. And then there's something that needs to be done on the software side to make it more attractive and usable. So yes, there's room to improve, but it's not clear that people are craving this, except again, maybe culturally for various reasons. I do believe that $2,000 will make it very, very niche. You know, it'll cost more than a MacBook Pro.

Judd: This just feels like, I don't get it. I don't get it. This feels like it's like the cube. You know, like, sure, you can have a beautiful acrylic cube. But, okay.

Horace: But this is why I don't like to speak about rumored products, although there's a lot of evidence for this one. But no, I brought it up because I think the portfolios, the split between the two. I mean, we're talking about watershed, okay, and we're talking about how the market is contracting for phones. Into this, Apple is expanding its portfolio. It's going to launch a lot of new product in the fall. There's a lot of expectation that they might, if not volume wise, but at least in dollar wise, going to expand, they're gonna grow their business. And their market share probably will increase substantially. This is where it comes down to. Historically, Apple's had 18 to 20 percent of the phone market. A lot more in terms of the install base because the phones last longer. But with this crisis in memory, and with this market expansion in product, the lineup and the new spread of launch dates, it's possible that Apple is going to reach 22 to 25% market share in devices, or, I should say, in iPhone. Okay. In the phone market. And at the same time, in the PC market, we're looking at 10 million NEOs this year. I think the market share in the phone, it's much harder to make an impact in the PC market because Apple's share is relatively limited. You know, closer to ten to fifteen percent. And so, but they probably, we're going to see a couple of points increase there, and we're going to see a couple of points increase in the phone, and this is going to be going down in history, the twenty twenty-six, twenty twenty-seven time period we'll probably see a substantial increase in market share for Apple. We'll look back upon this year and ask what happened for that change to occur. And that's why I think now, this last few weeks we've had this WWDC with AI. And we've had the memory crisis, which also is caused by AI, you know, restructuring the phone market. Some analysts are suggesting we're not going to see a recovery to 2025 levels of phone sales for three to four years. That's three to four years for Apple to continually beat down their competitors. And Ternus is going to take over just at this moment when there's probably this market shift happening. I think we might, and I've been sort of pulling punches on this, but we might be looking at Apple doubling down on a market share strategy that will see them shoot up significantly. Something that we've been thinking for 20 years they might do, but they haven't done yet. They've always been kind of happy with their limited market share, but obviously extremely high revenue share and extremely high profit share, to the point, by the way, where their profit share might end up being nearly a hundred percent, if not actually one hundred percent, going into the end of this year. So this is why I think the watershed is maybe AI, but we don't yet see the impact of AI on the bottom line. But we're seeing evidence that the market share game is changing. Because they made this decision probably two years ago to split into a fall lineup and then a spring lineup. Yeah. I think the only thing is that it's compounded by the memory crisis. That's affecting, by the way, it's, let me clarify, it's less of an effect on Apple because they manage their supply chain very well. They're also not squandering a lot of this memory on cheap product with no margin. But it's also not affecting Samsung as much because Samsung also has more of a mix of premium product. They sell lots of cheap, but they can always retreat back into the premium, and they then drop a lot of low-end product and they can still be in the business of selling phones. But Samsung is doing very well selling memory. They're far more profitable selling components than they are selling phones. So for Samsung to actually exit the phone business would probably be a blessing, because they'll be like, well, thank God we don't have to deal with that low margin, typically negative actually on many of their phones. That's interesting. But it's all the other guys, the Vivo, the Oppo, which are, by the way, numbers three and four in volumes. Nobody's heard of them because they're China mainly, and they sell in Africa and they sell in Middle East and they sell in parts of Asia. But globally those are the four, the two big brands. There's some other one, oh, in India I forgot to mention, and there's a lot going into these markets that is at two hundred dollars price points. And those $200 price points are no longer sustainable with the cost of memory that's out there. So what we'll see is contraction, Apple's share goes up. Premium, what they call premiumization, premiumization, I don't even know how to pronounce this, but the idea of portfolios going to the high end even if you're not an iPhone, that's been happening for a while. So maybe we'll look back upon this year again as something of a, I would, you know, market discontinuity, cracks, it's something cataclysmic, it's something substantial.

Judd: Well, it could be. It could be. I mean, it's interesting to me in that, I think what I can't get away from, and I'm curious if they care about this at all, but just because something is expensive doesn't mean it's special. And I don't know what, what do you think they think is special about the iPhone at this point? I mean, obviously it's the best phone.

Horace: But this is a syndrome that occurs every year. But people are always remarking about the very, very high end of the market. So the premium iPhone, when it reached one terabyte and it reached a thousand dollars, people freaked out and said, oh my god, the iPhone is so expensive, why is the iPhone, they're just gouging, da-da-da. Well, again, that's the top of that staircase. It is the highest of many products, but if you look down into the middle of that distribution, of that range, that's where the most popular phones still sell. They're selling at, you know, six to eight hundred dollar price points. This is the bread and butter iPhone, whatever is the right analogy. That is a mainstream product that's not going away. There's also, by the way, low-end versions, and there's last year's versions that are still for sale. Those end up being the cheapest. And so all of those things are gonna carry on. What they're separating is that the launch window that used to be fall for Christmas purchase, which, by the way, Christmas is gifting. So when you gift people, you want to always show maybe a little bit more of your generosity. So the gifting process typically also attracts the premium. And then the students and everybody else who needs to buy medium grade phones, they're still, but the 17 is going to be still for sale. It's done very well this year. It's gonna continue next year as the low-end product. The 18's coming out a couple of months later. No big deal. It's just that from a marketing point of view, from a ramp, the production point of view, they probably were seeing this already, that the mainstream phone and the low end phones were doing better later in the year, and that is later in the next year versus the end of the year. So I don't think this is a giant change in how Apple thinks about premium. I think it's just a cadence question that some people said, which I find incorrect. They said, well, the seventeen is doing so well they're gonna keep it going a couple of months more. No, no, no. This was decided years ago, but they're going to start to launch in a kind of a two-phase process. And, by the way, I think it keeps the excitement of the iPhone moving into spring. Because the problem they've had is that people would see new iPhones in the fall and then there'd be nothing new and the competitors would take advantage. Point of fact, Samsung always launched six months out of phase with Apple. So if Apple had a big event in the fall, Samsung would launch six months later, literally, so that they would come in when Apple was, you know, being long in the tooth. So now Apple suddenly has fresh product coming also at the same, you know, not quite six months, but into that Samsung cycle, and it's going to drive excitement. And as I said, China, their holidays are different than ours. So I think there's some value to this staggered approach. You know, if I were to design it, in fact, from the very beginning I would have probably said, yeah, why don't you launch around the whole year so that people are always looking forward to something. Again, Steve was the one who said, no, we do once, simple, yada yada. But it was because of clarity, it was because of the simplicity, and it wasn't optimal in the case of the five, yeah.

Judd: Well, but it's also an event. It's also an event.

Horace: It's also an event.

Judd: And what they had been doing over the years is releasing new colors in the spring, but maybe that just wasn't enough. Anything else before we sign off?

Horace: Well, again, the AI thing is one of those things that we've been waiting for two years. But we're gonna probably have another ten years before it propagates to most of the people who are using Apple phones. So let me, you know, a lot of commentators that I think are smart about this have been saying, hey, it looks like AI will be first experienced by the majority of people through an iPhone. And that's very profound. It's not just that, yeah, using a chatbot is not in and of itself an experience. People, I mean, some people are addicted to it, some people are using it productively, some people are becoming mentally ill, whatever. Yes, but the majority of people, your mother, my grandmother, or, well, I don't have one, but, you know, these types of laggard users or mainstream users are probably going to experience AI through their iPhone.

Judd: Yeah.

Horace: And that's, you now, we're now seeing just what that experience might end up being. It's gonna be a Siri and it's gonna be apps. And as a final line, the economic model, everyone's been thinking that you pay for AI, you pay ChatGPT monthly, you pay Anthropic, or you pay whomever. What Apple's probably going to do is not charge, unless, maybe you have a new tier of iCloud accounts, that, you know, if you're a frequent user you might hit a limit and then you'll be invited to pay more. But also the developers are going to be probably charging extra for these types of AI functions, and so what that goes into is services, almost without any drama, without any change in business model. Suddenly Apple will be seeing an acceleration in services, which has been the growth story for forever now. And I'm pretty excited that, it's almost, it's almost, what's the word? It's almost anticlimactic. The financial model of AI is anticlimactic. It's there, there'll be lots of revenue, but it's not even mentioned by Apple. They never talked about it in WWDC. Fascinating.

Judd: Horace, this has been great. Thank you for taking the time today. Thanks to everybody listening. We will be back with you very soon on Asymmetric.

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