00:00Brian, first of all, give us your reaction to Apple's results because it seemed to be a little bit of
00:04a mixed picture,
00:05especially when it comes to that weakness in China and services.
00:10Yeah, I mean, obviously they posted some really good results.
00:14You look at the strength across the product lines, whether it's iPhone, Mac, you know, the wearables, all the other
00:20businesses, they're all doing pretty well.
00:22I think really the market's reaction right now is because of that outlook, right?
00:26There's concerns around, as you mentioned, component supply on whether they can get.
00:31It's not just memory, by the way.
00:33You know, all this talk right now, we're talking about all these memory shortages.
00:36But the other thing that Tim Cook pointed out in the earnings call was around getting SOCs.
00:41Basically, they had under-forecasted how much demand they were getting.
00:44So it's kind of a good problem to have, right?
00:47We're actually seeing one of the interesting things we're seeing is there's this little phenomenon where people are buying Mac
00:53minis and Mac studios
00:55to run these agentic AI harnesses on these devices because Macs are one of the few sorts of devices that
01:01have what's known as unified memory,
01:03where you don't have to reload the model into multiple times across the various components.
01:08And this, I think, has caught Apple off guard.
01:11And this is something where they're getting all this extra Mac demand.
01:14In addition to, of course, you know, what we otherwise see as mainstream consumers, we look at MacBook Neo.
01:19Yes, that's getting a lot of headlines, but basically there's all this Mac demand, there's extra iPhone demand.
01:24And the problem with Apple is they're like, oh, man, we've got all this extra demand, but we need the
01:28parts to be able to go in there.
01:30So that's, yeah, it's a good problem to have, right?
01:34Exactly. As you say, it's a good problem to have.
01:36But at the same time, when it's eating into your margins, that's really not what you want to see as
01:40a CEO.
01:41So when are we expecting those bottlenecks to ease?
01:46Yeah, it's going to be a challenge, at least for the next quarter.
01:50I think there was some implication on the call that this next quarter, they're going to try to, you know,
01:54work through that and try to have things catch up.
01:56But they obviously weren't guiding beyond that.
01:58I think from a memory perspective, one thing that we see is that there is going to be tightness through
02:0327 into 28.
02:04The situation, despite potential additional capacity coming on board, isn't going to change things.
02:09So as we already saw, Apple has lifted its prices on things like Macs and iPads as a result of
02:14those memory prices going up.
02:15We'll probably see something along those lines when the new iPhones launch.
02:19So we'll see how that, you know, at least that will help to protect some of the margins.
02:25The issue, I think, you know, back to this point about the SOCs, that's the part where I think it's
02:31really just an issue of them just getting enough supply.
02:34So the good thing is, I think, to the point on margins, they did point out about the tariff refunds
02:40helping at least a little bit.
02:41So there's some of that. There's a few puts and takes that are helping to offset that.
02:44But, yeah, the broader challenge is, yes, particularly with memory, we see these prices skyrocketing.
02:51That puts pressure on them and hence why they had to raise prices for Macs and iPads recently.
02:57When it comes to these supplies, we've been talking for a while about how the Chinese alternatives could potentially come
03:02in.
03:03Are we getting a little bit ahead of ourselves when it comes to immediate business for Apple at this point?
03:09And when could that become actually a viable choice?
03:14Yeah. So when you look at some of the Chinese memory suppliers, you know, there is that capacity there.
03:22Obviously, there's some geopolitical stuff that Apple needs to deftly wade through to make sure that there's no snags that
03:30they encounter in the process of doing so.
03:33But there was some implication on the call as well, too, that they, you know, he didn't name CXMT, but
03:38basically that was implied that they were looking at all sorts of suppliers to try to address this.
03:46I think if they are able to get the U.S. government's approval or blessing on this, then most likely
03:52where a lot of those will go first was probably for the domestic Chinese market.
03:56But again, let's see. I mean, I think we're still, you know, several steps away from that.
04:01Hmm. So we have the incoming CEO John Ternus now taking office within September.
04:07What are we expecting his priorities to be at a time when there's so much hardware demand, but at the
04:11same time, these bottlenecks that we're talking about?
04:16Yeah, it's it's interesting. I think there's. And by the way, when I when I look at Tim Cook versus
04:21John Ternus, the way to think of it is Tim Cook is obviously very an operational person.
04:25Ternus is a product person. And I think that Tim's not going to be going away in this transition in
04:30the sense that right now, a lot of these component challenges that we've been talking about are operational.
04:35A lot of his expertise, a lot of his smooth talking and relationships are are still going to be key
04:40to this.
04:40So he's not going away. But to your question, Ternus, right, he's a product guy.
04:44He's a technical guy. One of the other big things to watch out for for Apple in the upcoming quarter
04:49is how does Siri AI land as we go ahead?
04:52Is it really as good as they're making it out to be?
04:56There's obviously been some disappointment from investors and users in the past year on how Siri was supposed to turn
05:02out in the past year.
05:03So it's really, really key that they stick the landing on this and Ternus being a product and technical minded
05:10person.
05:11I think it's the right guy to be able to be able to make sure that, OK, this is the
05:14right user experience.
05:15This is what we want to make sure we can we can build out here.
05:18So that's the thing that I think that is really key to watch for.
05:21So far, I think the early reviews, some of the early beta testers around Siri AI have been, you know,
05:26it's OK.
05:26People are saying, yeah, it does a job.
05:28And hopefully, I think the main thing is, as long as it's good enough, that it keeps Apple users within
05:35the ecosystem, potentially get some new users over.
05:38That's key, because then you've got, you know, once you're within that Apple ecosystem, there's very little friction to just
05:44start using things like Siri AI in your day to day life.
05:48I've got to be honest, I've been tempted to look at other handsets because of the AI skill set there.
05:54How do they compare?
05:56Yeah.
05:58Yeah, so that's a challenge, right, because arguably Apple is a bit of a bit of a latecomer to this.
06:04You as you pointed out, you've got competition, not just in the form of Google and everything they're doing with
06:10Gemini on Android.
06:11And for that matter, Samsung, right, one of their key partners who's been talking about Galaxy AI.
06:15Arguably, they've been much they've been they've been further ahead.
06:18And Apple's kind of catching up to that. Right.
06:20And by the way, don't forget China.
06:22China is its own AI ecosystem.
06:23And there's a lot of talk in China right now about a so-called agentic AI phone and, you know,
06:30having things being done for you on your behalf via your assistant on your phone.
06:34Anyway, the point is, is that, you know, a lot of this is being developed.
06:39There's there's a lot of value that is being delivered from not just the Android camp and in China, but
06:47also what we're seeing with Siri AI.
06:49I think we will get to that point.
06:51I think the early like I mentioned earlier, the early reviews, at least, of Siri AI suggests that there is
06:57some potential.
06:59But, yeah, I think that's the key. Right.
07:01Can they really keep up with the competition?
07:04And to your point is a consumer thinking, oh, you know, hey, that Gemini, that Android product, I can do
07:09more on that.
07:09That's not the thing that, you know, that the situation that Apple wants to get into.
07:14Yeah, especially if you have the AI model makers like OpenAI or Anthropic actually wanting to make devices at some
07:21point.
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