Apple plays softball on design but hardball on data.
Market data tells much of the story behind the iPad Air 2’s design. It’s getting tough in tablets. This is Cupertino’s response.Unit shipments for 2014 are expected to reach around 230 million. But research agency Gartner now forecasts growth of only 11 per cent over last year, following 55 per cent year-on-year growth in 2013. IDC goes for an even lower 7 per cent against 52 per cent in 2013.
Moreover, Apple’s own numbers are slipping. The third quarter does represent Apple’s doldrums. Consumers are waiting for the pre-Christmas product refresh. But the latest tracking data from IDC shows that Q3 iPad sales fell year-on-year to 12.3 million from 14.1 million. Apple’s tablet market share also dropped to 22.8 per cent from 29.2 per cent.
Tablet growth is increasingly at lower retail prices, especially in Asia. With the Pew Research Center noting that by the start of 2014, 42 per cent of US adults already owned tablets, saturation is an issue in both Europe and north America.
This high-level assessment of Air 2 design decisions from Andrew Rassweiler, senior director for cost benchmarking services at IHS, is therefore noteworthy. “The Air 2 delivers a series of refinements compared to the original Air but features nothing earthshaking,” he says. “With largely identical display specifications and minor improvements in most other areas, Apple continues to offer evolutionary upgrades to the iPad lineup.
“It’s interesting to note that by offering the consumer a 128GB model for the same price as last year’s 64GB iPad Air, Apple actually has taken down our estimated margins a bit on both the 64GB and 128GB models.”
Memory is one of Apple’s margin mainstays. A comparison of pricing against the bill of materials shows that Apple is still charging progressive $100 increments for each memory upgrade against a BoM increase of only $25-$30 per unit. The iFixit teardown gives the iPad Air 2 a repairability score of 2 out of 10: users tempted to self-upgrade are discouraged, as “gobs of adhesive hold everything in place, making all repairs more difficult”.
But Rassweiler is right to note the significance of charging the same for a 128GB Air 2 as a 64GB Air cost a year ago. The company has adopted the same strategy going back to successive iPods and iPhones, but generally prefers to hold memory pricing firm across at least two generations. This earlier-than-normal cut again illustrates the state of the tablet market.
Elsewhere, many iPad 2 Air decisions are about refinement, but also crossovers.
Major refinements include a thinner display and a smaller battery. Three layers of the Retina display have been fused into one for 2048x1536-pixel resolution on a 9.7in diagonal screen. The smaller 27.6Wh battery (v 32.9Wh) exploits more sophisticated hardware and software power management that allow the new iPad to retain the 10-hour operational life of its predecessor. These innovations have led to an 18 per cent shrink in thickness to 6.1mm.
The main crossovers are a variant of the A8 processor used in the iPhone 6, and the addition of the fingerprint sensor introduced on the iPhone 5S.
The A8X system-on-chip in the Air 2 has notable differences from the A8 with regard to its engine room and its placement.
The main processor is based on a tri-core 64-bit ARM version 8 implementation of Apple’s Cyclone architecture clocked at 1.5GHz, against the dual-core A8 which is clocked at 1.4GHz. There is also a more powerful A8X implementation of Imagination Technologies’ PowerVR Series 6XT GPU. RAM in the Air 2 is 2GB against 1GB in the original Air, further reflecting the higher graphics load.
Placement differs from the A8 in that the A8X does not use the packet-on-packet, RAM-on-SoC configuration in the iPhone 6. Apple has instead placed the A8X on a metal heat sink, allowing for the heavier workload of a tablet than a smartphone.
Independent benchmarking by Primate Labs points to the A8X performing 13 per cent better than the A8 on single-threaded applications and 55 per cent better on multi-threaded ones.
According to IHS, the bill of materials on the entry 16GB Wi-Fi only Air 2 is nevertheless flat at $270 against $269 for the original Air, with design and Moore’s Law component savings making up for the non-recurring engineering on the A8X and the extra cost of a fingerprint sensor. For design, Apple has opted for steady progress with a warier eye on margins and competition. But we have not yet addressed the move to ‘soft SIM’ technology on models with cellular data.
Soft SIM is an arguably negligible design issue. Apple simply pre-installs a card in the SIM tray that provides software-defined options to choose from multiple ‘approved’ carriers rather than just one. On the Air 2, a user can also replace the Apple-supplied SIM with their own.
In commercial terms however, the soft SIM is the beginning of something potentially huge. It could strengthen Apple’s hand as gatekeeper in determining which carriers its customers use, particularly if the company later seals in the SIM as it does memory. Apple is unquestionably looking to recover some of the margin it has to surrender in hardware at the expense of the mobile networks.
But not yet. In the UK soft SIM configuration of the Air 2, it’s Hobson’s choice. Only one carrier, EE, has signed up. Even in the US, where three carriers are on board, the company most closely associated with Apple products, AT&T, has set conditions where once the soft SIM joins its network, the subscriber cannot swap to another. It neither wants to be disintermediated nor encourage consumer promiscuity.
Nevertheless Apple has set down an important marker. The Air 2 design may be conservative, but the product has teeth. It just hasn’t bared them fully.