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Mint
5 days ago
- Business
- Mint
Nintendo Can't Afford a Slip Up With Switch 2
(Bloomberg) -- Never miss an episode. Follow The Big Take daily podcast today. The Nintendo Switch has generated some $100 billion in sales for the Japanese gaming giant since its launch in 2017, propelling the company's shares to record highs. Now the game-maker is under pressure to do even better with the new Switch 2, out this week. On today's Big Take Asia Podcast, Bloomberg Opinion's Gearoid Reidy joins host K. Oanh Ha to talk about why the Switch 2 is so important to Nintendo's business and whether it can live up to the hype. Listen and follow The Big Take on Apple Podcasts , Spotify or wherever you get your podcasts. Terminal clients: click here to subscribe. Here is a lightly edited transcript of the conversation: K. Oanh Ha: Gamers, start your engines. Mario: Let's-a-go! Yahoo! Ha: If that sound brings back memories, you're likely one of the hundreds of millions of people who's owned or currently owns a Nintendo gaming device. And this week the company is hoping to add to that number, when it releases the next generation of its most popular console, the Switch 2. Nintendo Ad: Nintendo Switch, two JoyCon, two controllers that attach in a snap… Gearoid Reidy: The Switch has been a massive hit for Nintendo. Ha: Gearoid Reidy is a Bloomberg Opinion columnist based in Tokyo. Reidy: Nintendo have made about a hundred billion dollars in revenue over the lifetime of the Switch. It's sold over 150 million units worldwide. And it has absolutely juiced Nintendo's stock price. Ha: The Switch launched back in 2017 and it's on track to become Nintendo's most successful device ever. Eight years later, the company is hoping to recreate some of that magic by dropping a new, premium product. Ha : Gearoid, what's new about the Switch 2? Reidy: It is everything that you loved about the Switch One powered up. It has a much better and larger screen than the original Switch. I've seen it myself. It looks fantastic. It's gonna have a whole host of new games starting with Mario Kart World. It's only gonna be available on the Switch 2. Ha: To outsiders, it may seem like Nintendo is riding high. But Gearoid says this is actually a risky period for the company. That's because Nintendo's business is almost entirely reliant on this one device, unlike its closest competitors, Sony, who makes the PlayStation and Microsoft, with the Xbox Reidy: Nintendo right now would seem to be at the top of the world. Their stock is just off an all time high. This is also the riskiest time for Nintendo. They really need to make a success out of this, right? If they don't, they don't have something else to fall back on, like Sony or Microsoft. Ha: This is the Big Take Asia from Bloomberg News. I'm Oanh Ha. Every week, we take you inside some of the world's biggest and most powerful economies, and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show — Nintendo's big bet on the Switch 2 and why it can't afford any missteps this time around. Ha: Gearoid, did you grow up playing video games? Do you remember your first video console? Reidy: Absolutely. I've been playing video games almost for as long as I can remember. The first Nintendo console that I remember having was the the NES, Nintendo's first console and the first game that I remember playing on that was the original Super Mario Brothers. Ha: We were actually the first kids on the block who also had the original NES. This was the one that came with the robot. Maybe it was the second edition for the American market. Reidy: Oh, wow you had the robot, R.O.B. the robot. Yeah Ha: It was so cool. All the kids came to our house and I remember we were all dazzled by the robot. Ha: When I first heard about Nintendo in the early '80s, its products were cool and cutting edge. Nintendo ad: Will you be the one to witness the birth of the incredible Nintendo Entertainment System? The one to play with R.O.B, the extraordinary video robot. Batteries not included... Ha: We are talking about Nintendo's launch of the Switch 2 today, and I wonder, as we're talking, how much of its success is really about nostalgia? Reidy: I'm not sure if nostalgia is really the right word so much as connection to those characters. Nintendo, I think, has been uniquely good at being able to create characters and maintain them over the course of so many years. It's almost like a timeless quality to these characters. Just as, you know, Disney has been able to do with Mickey Mouse, Nintendo has been able to do with Mario, Zelda and so on across these franchises. Ha: In the fiscal year of 2024, Nintendo sold more than 8 million units of Mario Kart 8 Deluxe, a game first released more than a decade ago. And all together, the company has sold more than 75 million units — without giving any discounts. On top of that, the majority of the games sold on the Switch are created by Nintendo and played exclusively on the device. Reidy: Nintendo's secret sauce is the intellectual property that they've built. That's a cold way to describe what is a very warm collection of different franchises and different characters that so many people across different generations love. These are characters that, in this case, something like Mario or Zelda, several generations have now grown up with. And that, I think, is really the thing that separates Nintendo from its competitors, is that they're almost stewards now, of these characters, of these franchises that are so beloved across the world. Ha: Besides the games, Nintendo is also famous for its unique hardware designed to create new experiences – rather than just upgrading existing hardware with flashier graphics – something its competitors like Sony has done with the popular PlayStation. Reidy: With the PlayStation, you know, we went from the PlayStation 1, PlayStation 2, PlayStation 3. Each generation is broadly similar to the previous one. Of course, the hardware inside is very different and much improved from one generation to the next. But the main focus of the style of playing doesn't really change that much. The name doesn't really change that much. Nintendo withdrew from that kind of way of doing things quite a long time ago and decided to focus more on play experiences. They have generally gone into each new generation of product trying to do something new. From the Super Nintendo to the Nintendo 64, it has a different way of playing. They go from the Nintendo 64 to the Game Cube. They went from the Game Cube then to the Wii. And yet, with each one of these, you're seeing, the name changes, the philosophy changes, what they want to do with it changes. And oftentimes, they have a hardware innovation that keeps users coming back for a new experience. Ha: That's why Nintendo takes its time with research and development – meaning fans often have to wait years for new products. Reidy: The late president Satoru Iwata talked about the need to surprise gamers and to give them something new. Much to the chagrin of shareholders over the years, they're not focused on extracting as much profit from their business as they possibly can. They're very much focused on the player. Ha: And for the most part, Nintendo's player-focused strategy has paid off. One of its most successful breakthroughs was the Wii console in 2006. It was an instant success and Nintendo's bestselling game system for 15 years. Reidy: It was on every late night talk show. South Park had a whole, had a whole episode around the kids trying to get it. Liane Cartman: There you are Eric, what are you doing here? Eric Cartman: I'm waiting for the new Nintendo Wii to come out. Reidy : The controller did not look like anything that a traditional controller looked at the time. A lot of the games involved, you know, using motion sensing technology, and the idea was that they could bring in people who were intimidated by traditional sort of like game controller, which has lots of buttons and knobs and dials and stuff like that can be quite intimidating to people who don't know what's going on. Ha: I remember having dance parties with the kids using, using the Wii after it launched. It was fun. Reidy: Absolutely. It really broke the mold and it pushed Nintendo back into the mainstream, and for a while it was one of the most desirable products in the world. Ha: The Wii was a hit. But when Nintendo attempted to follow up with the Wii U six years later, it stumbled – big time. Reidy: People didn't actually know it was a new console. People thought that it was maybe just an add-on for the Wii. Nintendo had three straight years of operating losses. Their stock was absolutely tanked basically by this. Ha: After its failure with the Wii U, Nintendo spent five years making the Switch. That combined two different lines of hardware, the home console – the controller that you play while sitting in front of the TV – and the handheld – like the Game Boy – into one device. Reidy: The Switch could do everything, right? If you wanna have it as a home console, if you just wanna have it under your TV, you can do that. If you wanna take it out, play it in the park, bring it on a plane, you can do that as well. You're not really compromising on either one of those things. It's the same games, it's the same data, it's exactly the same device. And no one had really, to the best of my knowledge, thought of trying that. There's no device in the world basically that functions like a Switch does. Ha: The Switch generated some $100 billion in sales and propelled Nintendo's shares to record highs. It's one of the highest selling consoles of all time, coming in a close second to the PlayStation 2. With the runaway success of the Switch, Nintendo has been feeling the pressure to come up with an even better console with the Switch 2. And this time, Gearoid says the company's trying to learn from its past mistakes: It's deviating from its traditional approach of delivering something completely new. Reidy: This is the first time they've just basically taken the same concept and souped it up, put a '2' at the end of it and said, it's everything that you love about the original device, but more. Ha: After the break: The Switch 2 comes to market – will the change in strategy work? Ha: Nintendo's Switch 2 officially hits stores on June 5. But preorders for the console have already sold out, despite the jaw-dropping price tag. At $450, the Switch 2 lands on the expensive end of what most analysts expected. But the real jolt is the price of the games: It'll cost $70 to get Donkey Kong Bananza and $80 for Mario Kart World – That's a hike of as much as 30%. And gamers are up in arms. Gamer: Nooo!Gamer: Price dropped 450. That is not good. No, not Charging $80 for a video game isn't just ridiculous, it's That's too expensive 400 and 49 dollars is more… Ha: Adding to the challenge on pricing is President Trump's tariffs. Hours after Nintendo revealed the price for the new Switch, Trump announced sweeping tariffs on countries around the world – including China and Vietnam, where Nintendo produces most of their devices . Ha: Gearoid, the US is the biggest market for Nintendo. How's that going to impact Switch 2 sales? Reidy: It is impossible to tell right now what that actual impact is going to be. China and Vietnam obviously both of those countries are potentially in the line for tariffs or potentially not. However, I think it's very hard to believe that they would be able to sell the Switch 2 for much more than it's going to retail for, at $450, in the US. It's hard to see how they would, you know, be able to have a device. As much as I am looking forward to the Switch 2, I don't think it's a $600 device, which some estimates say that it would cost if, if the tariffs go in the worst case scenario Ha: What's for sure is that Nintendo needs to sell its latest console…and LOTS of it – because.. it has no plan B. Reidy: In a typical year, anything from 93 to 95% of their revenue is coming directly from their video game business. They've had other successes over the past couple of years. They had the the Mario movie They have Nintendo stores in an increasing number of cities. They have theme parks these days in collaboration with Universal Studios. They really need this to be a success and that primes them for success going forward. Ha: That's a big reason why Nintendo is shifting its strategy this time around – building on what's worked so well with the Switch and avoiding a repeat of what happened with the follow up to the Wii. Reidy: I think they definitely learned the lesson of the marketing of the Wii U. The Wii U was a very confusing proposition. So I think that's why they've gone this time with quite a conservative, by their approach, take on the Switch 2. It started with the name, you know, there was a lot of speculation over, you know, what were they gonna call it? What was it going to look like? They've decided to keep the same, basic form factor of the Switch. It has the monitor, it has the two controllers. Now this time, instead of clipping on, they go on via magnets, but you can look at it and you just immediately know that is a Switch. And I think they are banking on that to avoid the confusion that they had with the Wii U Ha: Gearoid, it seems like there really isn't another hybrid machine on the market that can really compete with the Switch. Is that going to change anytime soon? Reidy: There are rumors that both Microsoft and Sony are looking at doing some sort of portable device. I wouldn't be surprised to see one or either of those companies come out with a device that was a portable. However, what I would say there is that Nintendo has a moat that is very hard for any competitor to copy. It's not the unique design of the Switch, which, you know, at this stage is nearly a decade since it was first announced. It is their incredible range of intellectual property. And I think any competitor who tried to go against Nintendo, even with something similar, does not have that range of games and experience to fall back on. Ha: And that's what investors and diehard Nintendo fans are banking on… Linus Tech Tip: Nintendo spends a shocking amount of time and energy antagonizing the gaming community. And yet I bought a Wii. I bought a Wii U, I bought a Switch. I bought an OLED Switch, and I'm gonna buy a Switch 2. Why? Because nobody does what Nintendo. More stories like this are available on
Yahoo
29-05-2025
- Business
- Yahoo
US to Revoke Chinese Student Visas in Escalating Crackdown
(Bloomberg) -- The US plans to start 'aggressively' revoking visas for Chinese students, Secretary of State Marco Rubio said, escalating the Trump administration's push for greater scrutiny of foreigners attending American universities. NYC Congestion Toll Brings In $216 Million in First Four Months NY Wins Order Against US Funding Freeze in Congestion Fight NY Congestion Pricing Is Likely to Stay Until Year End During Court Case Now With Colorful Blocks, Tirana's Pyramid Represents a Changing Albania Rubio said in a statement that students affected would include 'those with connections to the Chinese Communist Party or studying in critical fields.' The US will also enhance scrutiny 'of all future visa applications from the People's Republic of China and Hong Kong,' he added. China had the second most students in the US of any country in 2024, behind India. Chinese Foreign Ministry spokeswoman Mao Ning accused the US of taking its decision 'under the pretext of ideology and national security' at a regular briefing in Beijing on Thursday, adding that it would harm people-to-people relations. 'Such a politicized and discriminatory move lays bare the US lie behind the so-called freedom and openness that the US touts,' she added. 'It will only further undermine its image in the world and national reputation.' The decision comes just weeks after the US and China negotiated a truce in their tariff war. The issue of revoking visas could now emerge as another flashpoint between the world's two biggest economies, potentially upending progress made on trade. It will also add to heightened tensions over sales to China of sophisticated chips and Beijing's determination to limit US access to rare earths, which have been simmering even after the breakthrough agreement in Geneva to sharply lower tariffs for 90 days as officials try to strike a broader deal. 'This action intends to build a wall between two countries,' said Wu Xinbo, director at Fudan University's Center for American Studies in Shanghai. 'I don't think it will help facilitate the forthcoming trade talks between two sides.' Follow The Big Take daily podcast wherever you listen. The move followed Rubio's order a day earlier instructing US embassies worldwide to stop scheduling interviews for student visas as the administration weighs stricter vetting of applicants' social-media profiles. It marks yet another effort by President Donald Trump's push to restrict foreign students' entry to American schools over claims that they might threaten US national security. The White House has waged a high-stakes battle with universities that initially focused on elite universities such as Harvard and Columbia over antisemitism. That has turned into a bigger attack over the role of US higher education and the foreign students whose tuition is a crucial source of income for schools around the country. 'For the ones that really can make a contribution, want to make a difference, we want to make it possible for them to come here and bring their great ideas, bring their great intellect and help us build a great America,' Nvidia Corp. Chief Executive Officer Jensen Huang said in an interview with Bloomberg Television. 'I think the administration is all in on that and I don't think anything they have said changes that.' The scrutiny of Chinese students and researchers in the US in recent years dates back to Trump's first term, as part of a broader attack on China's ties in the US. The Trump administration announced in 2020 that the Confucius Institute US Center, a program funded by the Chinese government that's dedicated to teaching Chinese language and culture in the US, had to register as a 'foreign mission,' making it subject to administrative requirements similar to those for embassies and consulates. Later the same year, the US revoked the visas of more than 1,000 Chinese students and researchers for national security reasons. In 2018, the Justice Department created a project to investigate and prosecute Chinese and Chinese-American researchers it said were stealing American secrets while hiding their links to the government in Beijing and to the People's Liberation Army. Known as the 'China Initiative,' the program was shut down four years later after coming under intense criticism for fanning discrimination against Asian-Americans. The visa restrictions announced on Wednesday extend a broader crackdown underway since Trump reclaimed the White House this year. Hours earlier, the US president said Harvard should cap foreign student enrollment at 15%, escalating his campaign to force policy changes at the elite institution. Rubio told senators last week that the number of revoked student visas is 'probably in the thousands at this point,' adding that 'a visa's not a right — it's a privilege.' International students accounted for 5.9% of the total US higher education population of almost 19 million. In the 2023-2024 school year, more than 1.1 million foreign students came to the US, with India and China accounting for about half, according to the Institute of International Education. Last year, America sold a net $32 billion in services to China — including education, travel and entertainment — more than double the amount in 2022 and accounting for 11% of the nearly $300 billion global total. Almost a third of US services exports to China were related to education, coming from tuition and living expenses for the Chinese students studying in the US. The number of Chinese students has declined in the US — it fell 4% to about 277,000 students in 2024 — amid increased tension between the two adversaries. The FBI has warned that China has sought to exploit 'America's deeply held and vital culture of collaboration and openness on university campuses.' The State Department is also clamping down more on foreigners seeking to come to the US more broadly as part of Trump's crackdown on immigration. Earlier Wednesday, Rubio announced visa restrictions on foreign officials and other individuals who 'censor Americans,' including those who target American technology companies. Taking action against people with links to the Chinese Communist Party is a sweeping measure, given the role it plays in the lives of Chinese people and institutions, including universities and enterprises. While just under 100 million people count as members of the party, its reach is so pervasive that the number of those who can be said to have ties with it runs into multiples of that figure. What happens next is less clear. During his visit to the US to meet with then President Joe Biden, Chinese leader Xi Jinping pledged to bring 50,000 young Americans to China to stabilize ties over a period of five years. That he's lent his name to such an effort could suggest China will be less inclined to engage in tit-for-tat by targeting American students in China. Even if it did, that number is minuscule, with the US State Department saying in April last year the figure was fewer than 900 students. In the past, the two sides vented their fury at one another by closing consulates. China shuttered the US consulate in the southwestern Chinese city of Chengdu. That came just days after the US government forced their Chinese counterparts out of their mission in Houston in 2020. But this time, China has other options. Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute's Center for China Analysis, said a possible response may be indirect, such as new export controls on critical minerals. 'Beijing is increasingly realizing the power of its export control regime to apply pressure on global supply chains and Western political leaders,' he said. 'Beijing will be angry and ask more questions about how successful the Geneva talks really were at laying the groundwork for a US-China deal.' --With assistance from James Mayger, Derek Wallbank, Yasufumi Saito and Philip Glamann. (Adds Chinese Foreign Ministry comment in fourth and fifth paragraphs.) Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Inside the First Stargate AI Data Center How Coach Handbags Became a Gen Z Status Symbol ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Mint
18-05-2025
- Business
- Mint
How Apple Fell Behind in the AI Race
(Bloomberg) -- Never miss an episode. Follow The Big Take daily podcast today. Over the past year, Apple has pulled out all the stops to tout shiny new AI tools: from big presentations at its Worldwide Developers Conference to ads featuring The Last of Us star Bella Ramsey. Now, the company is facing questions about what it's promised versus what it's delivered. On today's Big Take podcast, Bloomberg's Mark Gurman takes host Sarah Holder inside the company's efforts to keep up on AI and what it needs to do next to stay in the game. Listen and follow The Big Take on Apple Podcasts, Spotify or wherever you get your podcasts. Terminal clients: click here to subscribe. Here is a lightly edited transcript of the conversation: Sarah Holder: When Apple released the iPhone 16 last year, the company put out a series of TV ads promising shiny new AI tools. One of those ads featured Bella Ramsey, the star of HBO's The Last of Us, trying to remember someone's name at a party. Apple ad: Siri, what's the name of the guy I had a meeting with a couple of months ago at Cafe Grenel? Holder: Siri scans their calendar and answers... Apple ad: You met Zac Wingate at Cafe Grenel… Holder: And when Zac approaches Bella, they nail his name. Apple ad: Hey, Zac. Oh Bella, I didn't think you'd remember me. Yeah, of course. Holder: It was a promise of what was to come with Apple and its AI ambitions. But Mark Gurman, who edits Bloomberg's consumer tech coverage, and has been covering Apple for years, says… it hasn't quite gone according to plan. Gurman: They advertised that it was gonna do that in order to sell the new phones, but that feature never came out. A complete disconnect between Apple Engineering and Apple Marketing. Holder: How rare is that for Apple to do something like that, to promise something, to advertise it, and then not actually deliver it? Gurman: This is AI. This is Siri. This is at the very core of this major technological revolution. So to the scale this happened, with the importance of these features, nothing like that has happened in modern Apple history, and I consider modern Apple history to be the last 20 or so years. Holder: Apple ended up taking the Siri ad down. But that disconnect led customers to file class action lawsuits alleging false advertising in March. Apple declined to comment on the lawsuits. The company also declined to comment on Mark's story or on behalf of the executives mentioned. Mark spoke with several employees and people close to the company, some of whom requested anonymity to discuss sensitive matters. And he says, based on his reporting, those missing features on the iPhone 16 point to a much bigger issue for Apple: that when it comes to the AI race, the company known for delivering on revolutionary tech is way behind. This is the Big Take from Bloomberg News. I'm Sarah Holder. Today on the show: inside Apple's efforts to catch up on AI. The challenges the company faces to keep its status as a tech pioneer… and the pitfalls of getting in the game too late. Mark, I wanna start by getting a sense of your reporting process here. What made you wanna dig into Apple's artificial intelligence efforts? Gurman: You know, AI has always been an important topic, but until ChatGPT launched at the end of 2022, it really didn't come into the mainstream. It really wasn't the center of the technology world. And it's so interesting because over the years, Apple has dominated so many categories that it wasn't first to: The MP3 player with the iPod, the smartphone with the iPhone, the tablet with the iPad earbuds with the AirPods, smart watches with the Apple Watch. And what was different this time around is not only was Apple late to AI or generative AI, this modern technology that we know from ChatGPT and Gemini, Anthropic, you name it. But they also weren't the best. There was no Apple iPhone or Apple iPad moment for AI where they took something that people didn't really understand and made it mainstream into some beautiful, fully functional product, right? That just didn't happen. And so for me. That was fascinating. That was a sea change for Apple. And then over time, you start hearing from people working at Apple, people in the industry, that there's a problem there. Holder: What products does Apple have that do use AI today? Like when you go on your phone, is AI there? Gurman: Touch ID, Face ID, the way you unlock your phone with biometrics. That is a form of artificial intelligence. The ability for the phone to say 'you have a meeting in 45 minutes, there's 40 minutes of traffic, you should probably leave right about now in order to get there on time.' That's artificial intelligence. They've been really good at heavily integrated AI. Where they missed was this new topic of generative AI. And so there is a big disconnect between the AI that Apple has long offered and the AI that both Wall Street and consumers are clamoring for. And Apple knew that. That's why they spun together Apple Intelligence. They called it 'AI for the rest of us,' just like they called the original Mac, the computer for the rest of us. Expectations were sky high. The presentation looked pretty good. In reality, it fell extraordinarily flat. I used the first beta version of Apple Intelligence back at the end of July, early August of last year. And I wrote a column about this saying 'this is kind of unbelievable. They've hyped it and hyped it and hyped it, and it has basically nothing. People are gonna start using this thing and be like, that's it?' Right? And people were shocked at the time. Holder: This is where you get a couple texts from your friends and then they give you basically an AI summary of what was said. Gurman: That is one of the features. So you have the summaries and it can summarize, you know, a slew of text messages. It was able to summarize news headlines, right? But they had to pull the news headlines feature because the BBC complained that they sent a headline out about Luigi Mangione and the headline actually spit out after going through the Apple system that he had shot himself. And so that was a sign, the system was quite broken. So they pulled that months ago, and that's still not back actually. There's the Genmojis feature where you can create your own emoji. Gurman: That is a cool feature. There's writing tools, which allows you to summarize, text, uh, synthesize text into bullet points, but the generative AI to create something that actually uses Open AI, ChatGPT, which is also integrated into iOS 18. So there's a slew of these little features throughout. But many of them have also been delayed. Many of them don't work as intended. Many of them don't work as it's been marketed. And what we have today is really a far cry from the vision Apple presented. And it's an even farther cry from what you're seeing from competitors. Holder: Well, benefit of the doubt for a second, being a little late to the game isn't exactly new for Apple. They've historically, you know, sat back while their competitors developed riskier new products. They've entered the ring when the bumps and the kinks are, are kind of smoothed out. Is Apple lagging behind now as a strategy to, to work more on the tech? Or is it really struggling to keep up? Gurman: Well, I think it's all of those things, right? One, they're struggling to keep up. They have fewer AI engineers than other companies like, like Amazon at this point. The other issue is that they don't have the vision for exactly how they can be different and how they can implement these things. But also, AI is something that the company is not necessarily built to produce. AI is messy. There's a frequent problem called hallucinations, right? Hallucinations could be you ask ChatGPT or Claude or Perplexity a question, and it's so confident that it knows the answer, the AI, and it'll give you an answer, but it's complete nonsense based on nothing and it's completely wrong. And so Apple, as a company with 2.35 billion devices out there, they wanna avoid those types of issues. So, there is a bit of approach to go slow. There are the technical challenges that they've had trouble overcoming, but then there's also the true reality that this stuff takes a lot of time in the oven in order to be at a great place for consumers and they put it in the oven quite late. Holder: Well, let's talk about when they put it in the oven because part of that beginning of the baking process of AI, if you will, started with poaching John Giannandrea from Google back in 2018. They wanted him to kind of kickstart the AI program at Apple. How was he supposed to change the game? Gurman: So that was a big coup for Apple. That was one of the most dramatic hires at the time. JG, as he's known, was probably the second most important person at Google. He ran all of Google search and all of Google AI. And don't forget, back in 2018, Google is really at the forefront of AI, putting it into Gmail, Translate, Photos. They were really a pioneer. And JG was supposed to come in and take everything AI-related, Siri-related, put it under his own umbrella. Before, you had Siri and different AI teams scattered throughout the corporation. Apple executives at the time felt like the scattered nature of the AI work made it more difficult for them to get things working properly. They brought it in under one roof. He removed the head of Siri at the time. He did a lot of analysis of what features people were using and not using in Siri, and proposed killing a lot of those features. He brought in his own people from Google and elsewhere, some of the top scholars and AI researchers in the world, but then everything sort of fell flat. Since he came to Apple, there wasn't a lot of change that we've seen in Siri or Apple's machine learning or artificial intelligence work. A lot of the AI work in the years before Apple Intelligence went to development of a self-driving car, they spent billions, billions on that. They never launched the car. That AI didn't go entirely to waste 'cause they were able to use some of that technology towards the generative models that they're putting on the iPhone, iPad, and Mac at this point. But not a lot happened. Holder: Until November 2022 – when OpenAI released ChatGPT to the public. According to people familiar with the events who spoke with Mark… that set off a flurry of activity at the company… Gurman: And Craig Federighi, who runs software engineering for Apple, he and JG and other people at Apple, they started meeting with OpenAI, met with Anthropic, met with other smaller AI players and determined they need to figure out these AI models and they need to make the 2024 release of iOS, very much an AI-driven release with AI features throughout. The edict: get as many AI features into the operating system as possible. Holder: So three years and several delayed AI products later, the question is: when will Apple catch up? Can it? That's after the break. Holder: Mark, your reporting shows that internally Apple is really worried that falling behind on AI could be a critical error. But why couldn't Apple just be content to be a good hardware and software company without being a leader in AI? Gurman: That's a good question. So really there's this predicament inside Apple right now. How much of this stuff should we be building versus how much of this stuff should we be licensing? And already you have Open AI, ChatGPT integration, into Siri and writing tools for those generative use cases like writing an essay and whatnot. They're going to add Google Gemini as an alternative to ChatGPT inside of Siri and writing tools as well. They're also working to redo the search engine in their browser Safari to integrate AI engines. That's still to come. So you have this question: internal versus external partnerships. Like you said, why do we need to be an AI expert? Why can't we just license? That's what Samsung does, right? Samsung uses Google Gemini to power all their AI. Holder: Right. And all these other companies are putting so many resources and energy— Holder: Into developing this AI. They're ahead. Gurman: Correct. Sitting here today, AI is the most core fundamental technology that you can get. It's equivalent to the processors that go into their devices. Throughout Apple's history, it has been core technologies that have enabled their new types of products. The iPhone only was created because they owned a core technology known as multitouch. We take it for granted today, but that touchscreen interface, the original iPhone and iPad, is enabled by very intense, expensive to develop multitouch technology . All the Macs, the one you're using now, the iPad, those products, AirPods, were enabled by these very advanced processors. But Apple needs to think about the next wave of technology. They already killed the self-driving car, but let's just put that in there. So the next wave of hardware in the technology industry: autonomous cars, advanced augmented reality glasses, glasses that can scan your surrounding environment, robots, whether that's humanoids, whether that's roaming robots, whether that's tabletop robots. The only way to enable those products is by owning the core technology of AI. And we've already seen Apple's AI was not up to snuff enough to produce the autonomous car, but they're gonna be doomed on the next phase of hardware if they don't get the AI working. And you cannot rely on third parties for technology as core as artificial intelligence. So that's why they need to keep digging in and building their own AI to enable the next wave of hardware. 'Cause don't forget, at the end of the day, they're a hardware company. Holder: Are these things that customers are actually like really, really asking for? Gurman: I mean, it's hard to say. I think there is demand for augmented reality glasses. I think the Meta Ray-Bans have been somewhat popular, and so I think glasses are going to become a real category. I think there is going to be a time when pointing your watch at something or pointing your earbuds at something to get more data based on AI is going to be commonplace. I think there is going to be a market for different robotics devices and certainly, the ship has sailed. Autonomy and self-driving cars is a real thing. So I think, yes. Now, is it ever gonna be as popular as the iPhone has been over the last 20 years? Probably not, but it is certainly the future. Holder: What does Apple actually need to change about its culture, its processes, its core business model in order to actually compete in the AI space, and is it doing it? Gurman: Apple needs to get a lot faster. They need to get a little messier. They need to make bolder bets. They need to be less afraid to launch things. They need to go back to that ethos of move fast and break things. There's going to be a new entrant that potentially could knock Apple off, you know, the top of the technology mountain, right? And in order for Apple to avoid that, they're gonna have to beat out those new entrants time and time again. And AI is the big thing right now, and they have so far very much failed to do so. Because of their large user base, because of their design, because of their marketing and the love that people have for Apple products, I mean, we're all using them, right? They have a very big chance of turning things around, but they're only going to have so many chances and only so much time to break through these new, faster, cheaper competitors. Holder: Well thank you so much, Mark. Gurman: Thanks for having me. More stories like this are available on
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