For years, everyone has wondered what Apple is doing in cars. We have no knowledge of their actual plans, but we think it is worth thinking through the project to understand how the supply chain may be affected. And by taking this approach it turns out there may be some interesting things taking place throughout that chain, which may, or may not, be related.
Let’s start with what would an Apple car actually look like on the inside (the outside will not be known to anyone until they announce it). First, we think it is safe to assume that the car will be electric – this fits with Apple’s expertise and with its branding. Second, it will be a luxury car, or at least it will be pricey for its category – that’s just the Apple model. Third, it will have some advanced software features. Bur fourth it probably will not be autonomous. Autonomous vehicles are still fairly far away, at least high level autonomy true self-driving.
All of this implies a large amount of semis inside. The car will need a fairly advanced processor to handle all the software features of the car, as well as the infotainment system, and it will likely need some sort of advanced sensor/signaling hub. We would guess that Apple will design this processor itself, which means there are some lucky souls inside Apple Silicon toiling away on the design right now. The car will need a lot of memory and an ocean of microcontrollers, actuators and sensors. The latter are not glamorous or particularly strategic parts, so Apple will likely source them from some third party with the ability to meet price targets to tight specs.
And who will put all these parts together, who will manufacture it? A few years ago, Apple clearly made the rounds talking to many leading car makers. Comments from executives at Hyundai, Kia and VW alluded to something going on, but those efforts seem to have stalled out, falling out of view. Our sense (i.e. a guess) is that Apple did not like what it heard in these meetings, and especially did not like the public comment leaking out. Or maybe they just wanted to learn as much as they could and see if they could find the automotive equivalent of the Motorola ROKR.
Apple does not appear to be planning to build a car manufacturing plant, and we doubt they want to do that part of the work themselves. So Apple needs a partner with the ability to handle scale, quality manufacturing, with a good understanding of electronics and not least the ability to keep their mouths shut about it.
On a completely unrelated note… Has anyone else noticed that Foxconn seems to be investing heavily in automotive, especially automotive electronics? In the past two years, they have made so many investments in and around autos that it is hard to keep track of them all. The industry is actually fairly confused about all this. We frequently have conversations about which entity is the best one to approach. There is so much going on that we imagine many people inside Foxconn/Hon Hai are themselves a bit confused about it all.
The key thing is that Foxconn does not appear to be investing only in assembly and manufacture, but also investing in chip design. Foxconn has long struggled to move up the value chain and winning an anchor customer would be a smart move for any semis ambitions it may have.
Obviously, there is a lot more to building a car than electronics, someone will have to literally bend metal to build the car frame, someone will have to build the electric motor, and all the rest. So it is certainly possible that some auto OEM is still in the mix somewhere, but a surprising amount of the car’s content can come from Apple’s existing supply chain. This is doubly significant in that it has the potential to re-invent the automotive manufacturing model, breaking away from its tradition of vertical integration.
As we say in the title, this is just speculation. That being said, we need to keep a closer watch on what Foxconn is constructing. Maybe they just hope to diversify into autos broadly, but it certainly looks like they may have lined up a big customer for their ambitions.
Photo Credits: The Simpsons