Benign brother has got your back: China launches coronavirus app

China’s government bodies and businesses have jointly launched a mobile app to help detect if people have been in close contact with those suspected of carrying the novel coronavirus.

The app has access to multiple official holders of private data. By registering with his or her name and Chinese ID number, a smartphone user can use the app, called “Close Contact Detector” to check if he or she has been in proximity of those who are later either confirmed or suspected to have the virus. Such close contacts include travelling in the same train carriage or sitting within three rows on the same flight with those carrying the virus.

One registered user can check the status of up to three users by inputting their ID numbers and names. One ID number is limited to one check per day. The app will then return an assessment of which category the individual in question falls into: Confirmed case, Suspected case, Close contact, Normal. Xinhua, one of the major official propaganda outlets, reported that over 105 million checks have been made by users three days after the app was launched.

The app development was led by the government organisations responsible for health which was joined by China Electronics Technology Group, one of the country’s largest state-owned enterprises, as well as the leading smartphone makers Huawei, Xiaomi, OPPO, and Vivo. The backend data comes out of the National Health Commission, the Ministry of Transport, China State Railway Group Company, the state owned enterprise that operates all the rail transport in China, and the Civil Aviation Administration, the aviation regulator.

The fact that private travel data is made readily available to business entities without explicit consent from the individuals involved may raise plenty of eyebrows in places like Europe, but the attitude in China is different. “From a Chinese perspective this is a really useful service for people… It’s a really powerful tool that really shows the power of data being used for good,” Carolyn Bigg, a Hong Kong-based lawyer, told the BBC.

“Close Contact Detector” has been pushed out by the smartphone brands as a priority app to their users in China. It is unclear how or if promoting to users of other smartphone brands, iOS users, or non-smartphone users, will be conducted. Nor is it clear if there are plans to extend the coverage to residents without a Chinese ID number, such as foreign nationals staying in China.

Telecoms.com has learned that over the last few weeks there have been other online tools to help concerned users check if they had unknowingly come into contact with confirmed victims of the new coronavirus. The key difference from the new contact detector is that, in the earlier attempts, backend data was crowdsourced from publicly available information including the flight and train numbers of the confirmed cases published in the media.

Neither is contact detector the only use case where user data is playing a role. A recent video clip making rounds on social media shows a drone flying a blown-up QR code that drivers can scan to register before they enter Shenzhen after the long Chinese New Year break. The method is deployed presumably to prevent cars and drivers registered to the major disease hit regions from going through, as well as reduce human-to-human interaction. Xinhua reported that the Shenzhen Police, which is responsible for managing the local traffic and owns the automobile and driver data, is behind this measure.

Wearables and services are paying off for Apple

The iPhone is still the biggest contributor to the monstrous profits Apple claws in each quarter, but efforts in wearables and services are balancing out the company.

While Apple is not a company which is going to go bust at any point in the foreseeable future, the dependence on the performance of the iPhone was leaning onto the unhealthy side. With more consumers leaning towards second-hand, refurbished devices, or extending the life of products due to the eye-watering price of new iPhones, there was a threat to profitability.

For the most recent quarter, there are no worries about the profitability of Apple, however. Total revenues for the three-month period, including Christmas sales, stood at $91.8 billion, a 9% increase from the same period in 2019. Net income set a new record of $22.2 billion, while international sales accounted for 61%.

That said, efforts over the last few years to supercharge alternative revenue streams and diversify the profit channels have certainly been paying off. The iPhone is still king at Apple, but it is evolving into a different company.

Quarter Product Revenue Software and Services Revenue Ratio
Q1 2020 79,104 12,715 86.2/13.8
Q1 2019 73,435 10,875 88.2/12.8
Q1 2018 79,768 8,471 90.4/9.6

For the purpose of continuity, we have only selected Q1 for the above comparison. This is a quarter which contains the Christmas period and therefore revenues are almost incomparable to the rest of the year.

As you can see, there is a clear trend of Apple become less reliant on hardware for revenues and profits, with the Software and Services becoming more than a bolt-on bonus for investors. $12.715 billion is an amount most companies would be happy to call group revenues for the year.

Interestingly enough, even in the ‘product’ segment, the team is becoming less reliant on the iPhone to drive revenues and profits.

Quarter iPhone Mac iPad Wearables and Home
Q1 2020 55,957 (60.9%) 7,160 (7.8%) 5,977 (6.5%) 10,010 (10.9%)
Q1 2019 51,982 (61.6%) 7,416 (8.8%) 6,729 (8%) 7,308 (8.7%)
Q1 2018 61,576 (70%) 6,895 (7.9%) 5,862 (6.6%) 5,489 (6.2%)

In short, diversification of revenues is an excellent way forward for the Apple business and demonstrative of the power of the Apple brand.

Apple is a brand which certain consumer identify with, and such is the innovation and creativity of the Apple marketing department, loyalty has been almost cult-like. Cross-selling alternative products when the consumer is so heavily invested in the brand and ecosystem is a much simpler task, this will be one of the reasons Apple’s services division is becoming so successful, but it also explains the growing wearables segment.

Wearables is a family of technologies which has struggled through the years. The first smart watch, in its current form, was released in 2011, though the segment has never really gained the traction to make it an attractive business. Apple has been persisting with its own portfolio of smart watches for years, but it does now appear to have turned a corner.

“Apple Watch had a great start to fiscal 2020, setting an all-time revenue record during the quarter,” CEO Cook said during the earnings call. “It continues to have a profound impact on our customers’ lives and it continues to further its reach as over 75% of the customers purchasing Apple Watch during the quarter were new to Apple Watch.”

Apple is no-longer simply satisfying product refreshment cycles but attracting new customers into the smart watch bonanza. The more smart watch customers there are, the more normalised the product becomes, which then compounds the success, especially with more digital natives entering their 20s and collecting bigger salaries.

Apple is a company which is defined by iPhone. This will not change, such is the success of the product and the importance of the smartphone in today’s society, but diversifying the business was always viewed as critical to expanding the profitability of the firm. Apple is doing a remarkable job of capturing new revenues.

Early 5G smartphone market all about Samsung and Huawei

Research firm Strategy Analytics has been looking at last year’s 5G smartphone shipments and found most of them were accounted for by just two vendors.

SA says there was more demand for 5G smartphones than it expected. It looks like operators jumped on the future-proofing bandwagon, even though any 5G devices they sold would probably only get a 5G connection in their own HQ, and even then only if you were actually sat on a base station. As a consequence SA says around 19 million 5G phones were shipped, with almost three quarters of those made by Samsung or Huawei.

“Global 5G smartphone shipments grew from zero in 2018 to 18.7 million units in 2019,” said Ken Hyers of SA. “Demand for 5G smartphones is higher than many expected. Fierce vendor competition in China and heavy carrier subsidies across South Korea have been the main drivers of 5G demand. Other regions, like the US and Europe, are lagging behind Asia, but we expect them to close the gap later this year.”

“Almost all Huawei’s 5G smartphones were shipped in China, where US sanctions have made relatively less impact,” said Ville-Petteri Ukonaho of SA. “Popular 5G models for Huawei include the Mate 20 X 5G and Mate 30 Pro 5G. Samsung is number two and shipped 6.7 million 5G smartphones worldwide during 2019, capturing a healthy 36 percent marketshare. Samsung’s 5G smartphone shipments are international and span a wide spread of countries, from South Korea to the UK to the United States. Popular 5G models for Samsung include the Note 10 5G and S10 5G.”

“Upcoming 5G models from Apple iPhone and other big brands mean 5G will be the hottest part of the worldwide smartphone market this year,” said Neil Mawston of SA. “However, the recent coronavirus scare is currently restricting trade in some parts of China and this may well cause a slowdown in 5G supply or demand across Asia or worldwide during the first half of 2020. Industry players should be prepared for bumpy 5G sales in some markets.”

A couple more of them piped up too, but we figure you got the message. The presumed launch of 5G iPhones will definitely take 5G hype into the mainstream and will also put pressure on operators to deliver a network and service that offers something more than 4G. These numbers largely follow the broader smartphone market, given Apple’s early absence thanks to its feeble efforts to strong-arm Qualcomm. It is interesting to see how much of a jump Huawei seems to have got in the Chinese market, however.

 

Global 5G Smartphone Shipments by Vendor (Millions of Units) 2018 2019
Huawei 0.0 6.9
Samsung 0.0 6.7
Vivo 0.0 2.0
Xiaomi 0.0 1.2
LG 0.0 0.9
Others 0.0 1.0
Total 0.0 18.7
     
Global 5G Smartphone Marketshare by Vendor (% of Total) 2018 2019
Huawei 0.0% 36.9%
Samsung 0.0% 35.8%
Vivo 0.0% 10.7%
Xiaomi 0.0% 6.4%
LG 0.0% 4.8%
Others 0.0% 5.3%
Total 0.0% 100.0%
     
Source: Strategy Analytics

Apple forecast to dominate the 5G smartphone market next year

A report from analyst firm Strategy Analytics reckons that then Apple launches its 5G iPhones next year it will immediately become the biggest 5G player.

Right now SA says Samsung has around 40% of the market and Huawei has another 30%. Apple hasn’t launched a 5G phone yet, thanks in part to it trying to get tough with 5G modem leader Qualcomm, before eventually capitulating. That’s all set to change when the next lot of iPhones gets launched, Which SA says will all be 5G enabled.

“It may seem counterintuitive that Apple, which currently has no 5G phones in its portfolio will be able to pass current 5G market leaders Samsung and Huawei,” said SA’s Ken Hyers. “But with three new 5G models coming next year, Apple merely needs to match its current upgrade rates for newly introduced iPhone models to take the lead next year.”

“Currently Samsung is the undisputed market leader in 5G smartphones,” said Ville-Petteri Ukonaho, of SA. “But with the two largest 5G markets in 2020, China and the USA, dominated by Huawei and Apple respectively, these two vendors are set to lead in 5G next year.”

Eventually, however, the balance will inevitably be restored at 5G modems find their way further down the Android product stack. “Despite the strong showing that is expected for Apple in 5G in 2020, in the longer term Samsung will regain the 5G crown,” said Hyers. As more markets cut over to 5G, Samsung will capture the majority of that share by virtue of its dominance of the overall smartphone market and a broader portfolio of 5G devices across more price-bands.”

“Huawei’s potential in 5G smartphone sales is currently limited by the US technology trade ban,” said Ukonaho. “Huawei is dominant in China and will likely remain so. But until the ban is lifted, prospects for Huawei in 5G smartphone sales elsewhere are limited. Regardless of its long-term prospects in terms of 5G smartphone marketshare. 2020 will be Apple’s time to grab bragging rights in 5G.”

Here’s the SA forecast chart, showing Apple quickly grabbing a 40% share of the 5G market and topping 50% by the end of the year. As Hyers indicated the forecasting is simply based on the historical uptake of new iPhones, which seems fair enough. If Apple decides some of its new iPhones are undeserving of a 5G modem then the things could look pretty different.

Apple continues its transition from products to services

Quarterly revenues for gadget giant Apple were up year-on-year but down for the full year, as the company increasingly relies on services.

The headline of Apple’s latest quarterly announcement read: ‘Services Revenue Reaches All-Time High of $12.5 Billion’. This achievement masked the fact iPhone revenues continue to decline, which in turn dragged full year revenues into the red. On the whole, however, these were solid results for Apple and it seems to be managing its strategic transition well.

“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

The services side of things was the focus of the tech press in its analysis. Apparently Apple pay transaction volume overtook that of PayPal in the most recent quarter. A significant initiative that illustrates the symbiosis of the services and hardware side is Apple’s decision to offer interest-free financing of new iPhones through its own credit card. This will also be a significant blow for the postpaid phone contract sector as subscribers will no longer be dependent on operators for handset financing.

The fact that iPhone shipments are declining is not disastrous, so long as Apple maintains the massive iOS installed -base. As the Apple Pay numbers show, Apple’s services are bound to do well so long as there are lots of iPhones in use. The financing initiative implies Apple is worried about that installed-base declining, however, and may not be the last time we see Apple further incentivising people to buy iPhones.

The columns in the table below are as follows: fiscal Q4 2019, Q4 2018, full fiscal year 2019, full year 2018.

Apple U-turns again to pull HK map app under pressure from Beijing

Apple has removed the crowd-sourced app HKmap.live, favoured by the protesters in Hong Kong, from its local App Store, after being blasted by China’s state media.

The submission of the mapping app, developed on top of the web version which could enable users to instantly track the police movements, among other things on the roads, was first rejected by Apple, on the ground that “the app allowed users to evade law enforcement.” This caused strong protest from both local users in Hong Kong and politicians in the US so Apple reversed its decision and made the app available. The US Senator Josh Hawley (R-MO) told his followers on Twitter that Apple admitted it “mistakenly” failed to go through full review process the first time:

Shortly after the change of mind by Apple, the People’s Daily, one of the Chinese Communist Party’s major propaganda outlets, accused Apple of “helping HK rioters engage in more violence”. Apple quickly undertook a second reversal in days to take down the app. The company said in a statement on the decision that the app “has been used in ways that endanger law enforcement and residents in Hong Kong.” The web version is still available.

This is only one of the latest actions Apple has taken after finding itself caught in a perfect political storm. One day earlier it also removed Quartz, the online news publication, from the China App Store, following complaints from the Chinese government. Apple told Quartz that the app “includes content that is illegal in China”, reported The Verge.

Quartz believed this might refer to its discussion on VPN technologies, the use of which is illegal in China, and its coverage of and links to coverage of the ongoing protest in Hong Kong. Quartz’s website is also blocked by China’s Great Firewall. A week earlier when Apple updated its operating system, iPhone users who set their locale to  Hong Kong and Macau found the Taiwan flag had disappeared from emojis.

This is just one of the highest profile cases of global companies contorting themselves to appease local political interests, with China the centre of attention not the least because of its reputation as one of the most censorious countries, Apple vs. China only epitomises the delicate balance almost all global companies are forced to strike, and not always successfully. Whenever they enter markets that operate very differently to their domestic one, these companies, especially those from North America and Western Europe, have to make a choice between the values of their origin and market pressure.

Increasingly we have seen companies surrender to market pressure, which has led to more either remedial or even pre-emptive self-censorship. Such conflict has a long history in the digital age. Back in 2010, Google pulled out of China when it decided to no longer comply with the latter’s demand for censoring search results. In the same year, India, Indonesia, UAE, Saudi Arabia, among others, demanded access to the encrypted communication carried out by the then king of instant messaging, BlackBerry Messenger, for national security and data localisation purposes. RIM, the then owner of BlackBerry, bowed to the Saudi pressure, and Nokia, who also operated messaging services, decided to set up a local data centre in India.

Recently we have seen Google’s repeated attempts to re-enter China, by offering willingly to censor content to please the Chinese authorities, despite backlashes in its own office. Meanwhile games developer Blizzard had faced a backlash for acting against a Hong Kong protester, as has the US NBA for similar activity.

Apple rejects crowdsourced map app used by Hong Kong protesters

HKmap.live is a crowdsourced web app that shows the location of Hong Kong protests and police activity. Apple has rejected the app version of it.

This is the feedback the developers got from Apple, which they shared in a tweet. “Your app contains content – or facilitates, enables, and encourages an activity – that is not legal … Specifically, the app allowed users to evade law enforcement.” The tweet goes on to object to the assumption that the app is used to break the law, but Apple seems to be saying that any app used to identify the location of coppers is intrinsically illegal.

Initial reports on the matter implied Apple had banned a pre-existing app, but the developers subsequently tweeted to clarify that the app had been rejected during the review process and to say that its main frustration was the glacial progress of that process. It also noted that anything can be used for illegal purposes in the wrong hands and that the app is designed only to provide information. It has received some support for its position.

This minor controversy puts Apple in a delicate position as it raises the question of whether its decision was influenced by pressure from China. The Hong Kong protests were prompted by apparent attempts by China to exert greater direct control over the semi-autonomous region and have become a significant embarrassment to the Chinese government. If it continues to the block the app, Apple will be under increasing pressure to demonstrate it’s not doing so for political reasons.

Apple finally gets the memo on sacrificing margin for market share

By making its entry-level new phone cheaper than last year’s one and only charging a fiver for its new video service, Apple is further compromising its premium image.

The roman numerals experiment is over, which means no more X in the iPhone nomenclature. Now we have the entry-level iPhone 11, the iPhone 11 Pro that has additional wide-angle and telephoto cameras on top of the regular one, and the iPhone 11 Pro Max, which is the same as the Pro but bigger. The most significant change, however, is the pricing of the 11, which is $50 less than the XR was last year at $699, which is also $100 less than the Google Pixel 3. The price of the other two phone remains the same.

On top of that the pricing of the new Apple TV+ SVOD service, which will launch on 1 November, has been announced at $5 per month, a lot cheaper than the standard Netflix package that costs $13 per month. The latter is a sensible acknowledgement that Apple TV+, which will only have original content, won’t have a fraction of the amount of stuff you can get from Netflix, while the phone pricing must surely be in response to increasing competitive pressure from the sub-premium market.

“With the tight integration between hardware, software and services, the advancements in iPhone 11 bring an unparalleled user experience at an affordable price to even more customers,” said Apple marketing boss Phil Schiller. “Apple TV+ is an unprecedented global video service with an all-original slate,” said Jamie Erlicht, Apple’s head of Worldwide Video. “We look forward to giving audiences everywhere the opportunity to enjoy these compelling stories within a rich, personalised experience on all the screens they love.”

The pricing angle has caught the attention of the commentariat. Bloomberg notes that not only is the iPhone 11 price cut significant, but the XR has had $150 knocked off it. “We view this as an admission that Apple stretched too far with the price points at last year’s launch,” Chris Caso, an Analyst at Raymond James & Associates, is quoted as saying in the Bloomberg piece.

On top of the aggressive price point for Apple TV+, anyone who buys a new iPhone, iPad, Apple TV, Mac or iPod gets a year’s subscription for free, which is not just a great way for Apple to seed TV+ into its existing customer base, but provide a strong incentive for new sales too, so this is a smart move. Having said that it’s further evidence of Apple’s sudden willingness to sacrifice margin at the altar of market share.

We spoke to Ed Barton of analyst firm Ovum to get his take on the TV+ move. “The price point and a free year of access for new Apple device buyers are aggressive moves which will help drive early growth and usage,” said Barton. “But it’s still, by volume of content, a very limited video service with no catalogue content wholly reliant on new, untested intellectual properties.

“The strength of the Apple hardware and services ecosystem means that it practically can’t fail and a lot depends on how effectively and frequently Apple drops new shows to maintain viewers’ interest levels. Apple’s $6 billion production investment and its ability to surface and promote Apple Video content to a global audience of hundreds of millions throughout its tightly integrated hardware and software ecosystem give the service huge potential.”

On top of the phone and telly stuff Apple also unveiled the latest versions of its Watch and iPad in a mega-launch that it would previously have scattered throughout the year. Just as with the phones the new devices are largely spec upgrades, but we were reminded what a relative bargain the iPad is at just $329 (Apple is still charging $130 for a modem, for some reason, and it’s hard to see why anyone would pay that when they can just tether).

One other announcement was Apple Arcade, a gaming subscription service that Apple has been banging on about for a while. Just like TV+ it costs a fiver a month (although there’s no free subscription offer) and offers a smallish selection of exclusive games. People are less impressed with the games service though.

“It’s difficult to get excited about the games subscription, it does include some exclusive, new titles which didn’t appear particularly noteworthy from a gaming perspective,” said Barton. “Most of the games included didn’t sell well on a standalone basis so it’s difficult to see who this will appeal to. Perhaps there is a casual gamer segment which appreciates the simplicity of a subscription for a heavily curated selection of mobile games, but I won’t hold my breath.”

Since smartphone innovation has been stagnant for the best part of a decade, Apple decided to seek revenue and margin growth from flogging services to its installed base. Apple TV+ is a major step further in that direction, but the decision to be more aggressive on pricing is also a sensible strategy when it comes to expanding that installed base and thus the addressable market for its services.