The last Apple keynote that truly wowed everyone was the iconic launch of the iPad in January 2010 by an ailing Steve Jobs. A couple of months later Apple surpassed Exxon Mobil as the world’s richest company by market cap. It was on an innovation tear for little more than a decade — starting with the iMac in the late 90s, the iPod at the turn of the millennium, the MacBook Air, the seminal iPhone in 2007 and the iPad in 2010. And when one speaks about the iPhone today, you don’t get that kind of awe-inspiring feeling that one used to 9 years ago.
In fact, if anything in the last couple of years, some of the most interesting and hair raising keynotes have come from Microsoft and its master presenter-cum-chief product officer Panos Panay and some of his colleagues.
Be it the first demo of the Hololens in early 2015, or the launch of the Surface Book later that year, and more recently from a day before, the announcement of the dual-screen Surface Neo tablet and Surface Duo Android smartphone.
Microsoft in the last 4 years feels like the Apple of old as much as for some, Apple is like Microsoft of old. People keep talking about the innovator’s dilemma. Microsoft sure did go through with it having a moat around its Windows division — with everything in the company revolving or created to serve the Windows division. And its failure to catch up to Google and Apple in mobile is reflective of that so much so that today it’s making an Android smartphone.
But that argument doesn’t hold true for Apple even though many people like to point out for the longest time more than half of Apple’s revenue was dependent on the iPhone. And this fact only changed in the recent quarter as Apple’s pivot towards services bears fruit and its other products like the Apple Watch and AirPods grow in stature.
Apple isn’t going through the cycle of the innovator’s dilemma, but it has different problems to contend with. Microsoft at its heart is a software company and it could’ve done things to protect itself from Apple and Google if it hadn’t protected Windows so much by ditching skunkworks projects like the Courier dual-screen tablet in the late 2010s.
Its decision to charge a licensing fee for Windows Phone hobbled it further and the final death kneel was the fact that Windows Phone 7 was based on Windows CE which forced kernel change with Windows Phone 8 — the developer momentum was dead; Microsoft had committed harakiri in mobile.
Scaling hardware is different from software
Apple, on the other hand, is a hardware company first and its innovation comes in the form of customised and unique hardware. But you’re operating at the global scale of Apple — with a premium brand lineage to protect and also have the ability to launch products across the globe within weeks of a keynote; it can’t decide to execute wild ideas and deploy them across the world.
The problem for Apple is supply chain management. Apple is expected to ship somewhere between 60-70 million iPhone units in this quarter alone. That’s basically 60-70 million units spread across 5 models of the iPhone — including the three new ones. And iPhones, unlike Android smartphones, are predominantly made of custom parts that aren’t used in any other product on the planet — be it the SoC, the custom display, Face ID sensor, camera sensor to even the software. The A12X Bionic chip, to the custom liquid retina display on the iPad Pro. Similarly for the iPhone 11 Pro, the cameras are custom, as is the A13 chip and the Super Retina XDR screen.
On the flip side, if you look at what Microsoft is doing, then you’ll realise collectively in the last 3 years or maybe more Microsoft hasn’t moved as much hardware as Apple does in one quarter. Its hardware products are also launched in fewer and limited markets. Even in India, the Surface products came late and as of now, we don’t have a date for the launch of the new Surface devices in India, the ones that are coming in 2019. In fact, when these products do get launched, they come to markets like India very late – the launch of the Surface Laptop last year was another classic example. And let’s not even get into things like local manufacturing and after-sales support.
Microsoft can make big bets on hardware when it doesn’t need its manufacturing partners and suppliers to create so much inventory for custom parts.
The Surface Pro X comes with the Microsoft SQ1 chip which is based on a forked Snapdragon 8cX driven up to 7-watts for Xbox One level of graphics and a dedicated AI engine. Qualcomm hasn’t even shipped one product with the 8cX so this special customisation relationship wouldn’t have been possible for a product that was going to be sold in the tens of millions of units.
Similarly, on the Surface Neo, Microsoft has a new Intel Lake-field chip which isn’t there on any device on the planet. It’s expected to come next year and Microsoft is said to have collaborated with Intel for it which speaks of a customisation similar to the one Apple had back in 2008 for the first MacBook Air. Again, this is a product which will not hit the iPhone level of scale so they can afford to do this.
The custom AMD Ryzen 7 for the Surface Laptop is the first time an AMD chip is making its way into a Microsoft product. AMD isn’t the worlds biggest PC chipmaker, it is Intel, so this is a huge win for AMD. It is motivated to do this like Qualcomm because they want more Windows products to not run on Intel silicon. But more importantly, they don’t expect to ship 50 million units of the component in a quarter.
If you look at the custom dual screens on the Surface Duo and Neo, then you’ll realise three things — the bezels are huge, these are LCD panels, not OLED screens and they are ultra-thin. No doubt these are custom parts but the fact there is no OLED and the borders aren’t stretched up to the edges tells you the hardship Microsoft must be having with suppliers. Samsung is the one which makes the best OLED screens. It is likely for a small order it wouldn’t make Microsoft OLED panels for these Surface devices as it would compete with its own Galaxy Fold and foldable screen tech which it wants many Android phone makers to adopt over Microsoft’s dual-screen concept.
Microsoft has been forced like Apple was for the iPhone launch in 2007
And on the software, Microsoft has had to create an all-new version of Windows called Windows 10X. It has been forced to show its hand a year earlier so that it can convince developers to make software for this new form factor. For the Duo, it had to partner and yield to its arch-nemesis Google for Android and is, in fact, doing a lot of work to improve Android for dual screens with its own apps which will not only help its device but also every other Android manufacturer in the world.
Apple does all of this in-house, discreetly, and ticks along like a Swiss watch these days. Gone are the days of the original iPhone which was announced 6 months before launch and only a year later added the App Store. It also helps that its custom hardware has been brewing for years, so it has been quietly baking software capabilities year on year, like the way it made iOS, the biggest AR platform on the planet.
When you do hardware as a platform company that’s also entrenched in software — the scale is everything and supply chain management is king. That’s what made Apple’s CEO Tim Cook such a formidable operator who revamped Apple’s operations under Steve Jobs. There are legendary stories of how Jon Rubenstein who used to lead the work for the iPod saw the iconic Toshiba hard drive and then Apple bulk-ordered so much that it had the entire supply of that component to itself. It’s what allowed Apple to sell millions of iPods give all of us 1000 songs in our pocket.
And by that measure, Apple does supremely well to innovate and have the ability to distribute so many products across the globe at scale.
Microsoft is taking the slow and steady approach as the Surface business matures from a hobby to a real thing in front of Microsoft’s main cash cows which is its incredible cloud computing business, Office and Windows. The real moment of reckoning will come when Microsoft hits its 2010 Apple moment and starts to scale its hardware. Because right now is the easy part.