iPhone is the most commonly referenced beneficiary of the coming 5G network. Consumers are impatient, and upgrading their iPhone on the promise of data speeds 10-100x faster than 4G will generate a modest uptick in iPhone growth. We expect the first 5G iPhone to be released in the fall of 2020, more than a year later than Samsung’s lineup. Samsung’s head start will be muted; we estimate that by mid-2020 less than 20% of the US population will have 5G coverage — and that number will be even lower globally. We believe that very little iPhone 5G lift is currently priced into shares of AAPL.
The fierce debate around the future of AR is understandable given the technology has limited applications today, but its long-term potential is easy to imagine. AR has been described as painting the world with data. Massive data throughput is needed to unlock its potential. Ubiquitous, low-latency connectivity will enable what we think of as true AR, shifting from the small window of your smartphone to a wearable capable of spatial computing. Based on acquisitions and patents, it’s clear that Apple is developing AR glasses. Our best guess is that they will be released in 2022. We believe this could result in a gold rush for developers creating AR experiences and for Apple, who would take a cut of the revenue generated from these applications in the App Store. We believe that none of the AR 5G lift is priced into shares of AAPL.
While healthcare can materially benefit from 5G, Apple’s approach to the industry is largely unknown. No-latency wearables will create new ways for consumers to track and manage wellness, but that would only have a small impact on Apple’s business. Wearables will likely only account for ~8% of revenue in five years, compared to ~5% today. In a recent interview, Tim Cook commented that their impact on health will be “Apple’s greatest contribution to mankind.” While “greatest contribution” doesn’t necessarily mean “biggest business,” it may mean Apple would pursue a path toward improving personal healthcare by leveraging wearables, AI, and their user-centric hardware/software to tie together payers, providers, and consumers. We believe that none of the healthcare 5G lift is priced into shares of AAPL.
Autonomy needs 5G. A vehicle can drive itself without the 5G network, but for things like V2V communication, teleoperations, and other enablers of mass adoption, full coverage and instantaneous data are required. Like healthcare, Apple’s go-to-market in autonomy is unknown. Our current thinking is that Apple will work with a manufacturing partner, likely an existing auto OEM, and help design a vehicle (car or bus). We don’t know if this will take the form of an Apple-branded vehicle, but we do know that Apple has a well-documented and turbulent history of working on autonomy. We believe that none of the autonomous vehicle 5G lift is priced into shares of AAPL.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.
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