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Article Summary

This article introduces the important content of Apple's Spring 2024 launch event, mainly focusing on the update of the iPad ecosystem, showcasing Apple's ambition and compromise.

• •    Apple clarified the positioning of each iPad model at the press conference, emphasizing the difference between high-end Pro and mid to low end Air, and demonstrating precise product strategies

• •    The new iPad Pro is equipped with an M4 chip, providing a Mac like experience and showcasing Apple's progress in the AI era

• •    Apple has demonstrated its layout and compromise in the field of AI through open source small models and hardware advantages, laying the foundation for future development

After enduring the siege of AI big models in 2023, the highly anticipated Apple Spring 2024 press conference made its debut at 10pm Beijing time on May 7th, amidst a lot of attention. This was also Apple's first official press conference of 2024.

After handing over its quarterly report and revealing its AI ambitions to the public, Apple finally released its first new product report since the beginning of the year at this special event with the slogan "Let Loose". Similar to previous revelations in the technology industry, this press conference mainly focuses on updating the iPad ecosystem. Apple did not "unleash itself" as imagined, but at least from the new products released, it reveals Apple's full ambition.

"Let Loose", as an appetizer and a series of updates around the iPad ecosystem, at least indicates that Apple is listening to opinions and making efforts to try, and there are also many helpless compromises behind it.

After this press conference, what kind of response will Apple in the AI era give and what kind of layout will it make? What is the direction of iPhone in major markets including China?

This may be the question that Cook needs to answer more.

After holding it for over a year, Apple finally figured out the iPad on its own

As expected before the launch event, "2024 will become the year of the iPad."

The iPad was regarded by Steve Jobs as a representative work of the "post PC era", and when it was released in 2010, it was Apple's most popular product at that time. The iPad sold 1 million units in less than a month, while the iPhone took twice as long. Nine months after its release, sales have reached 1500 units.

As another flagship product of Apple, the reason why the focus of the Apple Spring Launch is on the iPad series is actually very simple. Following the rhythm of Apple's annual updates to the iPad series, it has been a full 18 months since the announcement of the "no update" last year.

There are three main reasons behind Apple's proactive "disconnection" of the iPad:

Firstly, in terms of performance, the revenue performance of the iPad has always been unsatisfactory. In the first quarter of 2024, the iPad experienced a rare decline to below $6 billion in a single quarter, and looking at the timeline, the growth rate of iPad revenue also showed a downward trend.

Secondly, in the product line, the iPad has been "adding" in the past, and there is a clear problem of unclear positioning. The different product models and generations make the iPad family appear very chaotic, with a multitude of accessory types added, causing consumers to have many confusions when choosing an iPad.

Apple iPad Product Matrix Source: Apple Official

Thirdly, tablets represented by iPads are currently in an awkward stage. Especially in the era of AI, with the emergence of foldable smartphones with larger screens and AI PCs with more convenient interactive forms, how to differentiate oneself has become a long-term test question. According to the latest report released by market research firm Canalys, after four quarters of decline, global tablet shipments only slightly increased by 1% year-on-year in the first quarter of this year, reaching nearly 33.7 million units.

Image source: Canalys

Looking at the iPad update with the above questions may give a better understanding of Apple's ambition.

Cook and Apple mainly did two things on the iPad during this press conference:

1. Clarify the positioning of each model, especially reducing confusion between Pro and Air, making high-end Pro more high-end and productive; The Air, which is aimed at the mid to low end and has a lower threshold, is more cost-effective.

On the iPad Air, Cook's precise knife technique is still displayed, and there are not many updates. The new iPad Air will be available in two sizes for the first time, 11 and 13 inches, and will be equipped with an M2 chip, with a total of four colors. The two sizes are essentially designed to provide users with more choices, such as 13 inches, which is very suitable for the needs of large screen entertainment enthusiasts.

The starting price for the 11 inch version is still $599, while the starting price for the 13 inch model is $799, with a screen size similar to that of a laptop.

On the iPad Pro, Apple directly allows it to experience "Macization". During the press conference, Apple repeatedly mentioned that the new iPad Pro can provide users with a Mac like functional experience.

The new iPad Pro is thinner and offers two options: 11 and 13 inches. The 13 inch iPad Pro has a thickness of 5.1 millimeters, which Apple claims is the thinnest Apple product in its history. In addition, the new iPad Pro is equipped with OLED technology for the first time, which Apple refers to as the "Ultra Retina XDR" screen.

Meanwhile, Apple directly installed the M4 chip for the new generation iPad Pro. The M4 chip is built using the second-generation 3nm technology, with a CPU speed increase of up to 50% compared to the M2 CPU and a four fold increase in GPU. At the same time, the neural network engine has been upgraded to handle AI tasks.

Apple Releases iPad Pro with M4 Chip Image Source: Screenshot of Launch Event

2. Upgrade and widen the iPad ecosystem moat with accessories.

The new Miao Kong keyboard is lighter and thinner, with a functional keyboard and a larger touchpad. Apple once again stated, "The experience is like a Macbook.".

On the Apple Pencil, if we ignore the Type-C version of the Apple Pencil that was considered a castrated version last year, the new generation of Apple Pencil Pro brought by this conference can be considered a major update. Apple has added a sensor to the Apple Pencil Pro, which supports new interactive methods such as gentle pinching and lateral rotation, achieving more precise control and easy positioning. When lost, it supports the "search" function. The Apple Pencil Pro supports both iPad Air and iPad Pro.

It is worth mentioning that the new product release also did not forget other products on sale. Apple had previously planned to cut off the production line of the ninth generation iPad, and this launch event will advertise the tenth generation iPad.

In summary, there are two definitive signals about the iPad revealed from this press conference: first, Apple continues to simplify its iPad product line; second, the high-end iPad Pro positioned will feel more like a computer, which means that Apple will continue to combine AI capabilities to achieve a more intuitive and practical multitasking experience in the future.

The compromise of "AI" in "Let Loose"

Behind the iPad major update, Apple's "Let Loose" has also released many AI signals.

Not long ago, Cook made a high-profile statement at a performance meeting: "All of our devices, or the vast majority of them, will have generative artificial intelligence."

The reason why the technology industry is paying so much attention to this press conference is also due to people's expectations that the new iPad Pro is likely to become Apple's first AI hardware in the era of generative AI, with the help of the M4 chip.

Apple also said at the press conference, "Without the M4, there would be no new iPad Pro.".

Objectively speaking, this press conference undoubtedly marked a good start for the AI based iPad.

On the one hand, focusing on professional creation and emphasizing productivity is the advantage of the iPad. At this press conference, Apple showcased its AI interaction capabilities in fields such as film manufacturing through the iPad ecosystem. For Apple, an "AI iPad" undoubtedly expanded its audience.

On the other hand, Apple's current progress in AI smartphones and AIPCs is slightly behind other manufacturers. From this perspective, with the influence of the iPad, it can still gain a piece of the pie in the early development of AI hardware.

Of course, the launch of the AI iPad also reveals Apple's compromise and helplessness in AI.

A consensus in the industry is that under the halo of technology giants such as OpenAI, Microsoft, and Google, Apple's wave of generative artificial intelligence represented by big models has shown a slight lag.

In the past period of time, Apple has also been striving to make up for its time disadvantage, attempting to change the illusion of being "backward" from the outside world.

Internally, according to publicly available information, Apple has a layout in the computing power layer, model layer, framework, and application layer.

Firstly, in terms of computing power, according to a report by The Wall Street Journal, insiders have revealed that Apple's self-developed data center AI chip project, codenamed "ACDC", has been brewing for several years.

Some insiders also indicate that for Apple's server chips, this component may be applied to the inference side of large models. However, it is currently uncertain when this new chip will be unveiled.

However, regarding the rumor of "self-developed server chips," Bloomberg reporter Mark Gurman refuted the rumor: "This project has been cancelled, and Apple will not manufacture its own AI server chips due to cost reasons and lack of differentiation."

Mark Gurman believes that this news is unreliable. Source: X @ Mark Gurman

Speaking of the topic of self-developed server chips, whether or not Apple has entered the market, computing power is indeed an attractive business.

The computing power demand scenarios for large models mainly include pre training, inference, and tuning. As the number of model parameters increases, the inference cost also increases. NVIDIA founder Huang Renxun stated in an interview last year that "the demand for inference will skyrocket." According to his perspective, "in a large language model, the entire model has over 175 billion parameters. In the inference of a large language model, the response time of each token is really important.".

Secondly, at the model level, Apple attempts to find the best landing posture for the model through an "open source+small model" approach.

According to the Silicon Based Research Laboratory, Apple has been releasing its open-source AI research results since October last year, while also focusing on small models (including multimodal and language models) and end-to-end deployment.

Apple Part Model Image Source: Hugging Face

Based on recently released model cases, Apple has released a series of small open source language models - OpenELM, which includes four models: 270 million, 450 million, 1.1 billion, and 3 billion. In terms of parameters alone, it is much smaller than other recently released open source small models. Apple has also opened up CoreNet for training OpenELM models.

In April, Apple also released Ferret UI, which uses a multimodal large language model to understand user interfaces. Apple AI/ML research scientist Zhe Gan explained the purpose of the model: "Imagine a multimodal LLM that can understand your iPhone screen? Ferret UI can accurately locate and infer your Apple screen, achieving free input and output." At the same time, Apple has also upgraded Ferret to Ferret v2, enhancing its understanding of natural images and space.

Ferret-v2 technical paper source: report screenshot

Finally, at the framework and application layer, there is currently no clear information indicating that Apple is not developing conversational tools similar to GPT. According to previous foreign media reports, since the beginning of last year, Apple has been secretly developing its own artificial intelligence tools, internally known as "Apple GPT", and the development framework behind it is called Ajax.

Externally, Apple actively seeks allies and accelerates investment through vertical and horizontal alliances.

Since the beginning of this year, Apple has been exposed to having contact with technology giants such as OpenAI, Google, and Baidu. At the end of April, Apple also revealed a restart of cooperation with OpenAI. According to insiders, the two companies have started discussing possible agreement terms and how to integrate OpenAI features into Apple's iOS 18, but Apple has not responded to these discussions.

At the same time, Apple also made a low-key move to acquire the AI startup DarwinAI, and also recruited talent along the way. DarwinAI is a visual quality inspection company known for creating smaller and faster AI systems. Alexander Wong, the company's chief scientist, has joined Apple as the director of the AI team.

Previously, we summarized Apple's AI strategy as a combination of software and hardware and vertical integration, making AI ubiquitous. Recently, a series of actions taken by Apple at the model level have confirmed our judgment.

Firstly, Apple is known for its closed ecosystem, but it is beginning to show an open source trend, to some extent, to showcase its differentiated advantages (such as algorithm design, model architecture, high-quality datasets, etc.), in order to better attract developers and strengthen its own ecosystem.

Secondly, Apple's hardware advantage determines that it does not prefer larger cloud models with larger parameter sizes, but rather seeks smaller models with better performance, essentially to make them more suitable for end-to-end deployment.

Wall Street doesn't want to see just "iPad New Year"

However, under such special events, Wall Street certainly does not want 2024 to be just Apple's "iPad Year".

At a recent earnings conference, Cook had a heated argument with analysts about the revenue issue of iPhones in China.

In the first quarter of 2024, Apple's Greater China region, which accounted for 18% of revenue, saw a year-on-year decrease of 8% to $16.4 billion in revenue. Meanwhile, independent institutions such as Counterpoint have reported that as of March this year, iPhone sales in China have decreased by 19% year-on-year. IDC also stated that Apple's iPhone shipments in the region decreased by nearly 10% during the same period.

However, Cook said that Apple still saw iPhone growth in some markets, including Chinese Mainland.

An analyst directly questioned, "When we look at the repeatedly reported data points for this quarter, Tim, I'm curious, what did we miss?"

Although analysts explained afterwards that the reason for the "disagreement" may be due to the different ways in which Apple and analysts confirm revenue.

But Apple's decline in the Chinese market is no longer just reflected in its financial reports. According to Counterpoint's data, in the first quarter of 2024, Huawei's market share in the Chinese smartphone market increased from 9.3% in Q1 2023 to 15.5%. Ivan Lam, Senior Analyst at Counterpoint, stated that Huawei's products have directly impacted Apple's performance in the high-end market, and Apple's quarterly sales have been suppressed. In addition, with the increasing demand for seasonal changes, Apple is facing a more intense competitive situation.

Image source: Counterpoint Research

Of course, Cook was not idle either. After a high-profile trip to China in March this year, he witnessed the landing of Apple's new store in Shanghai. The Silicon Based Research Laboratory has learned that Apple has many actions to take in response to the Chinese market. For example, with the launch of the iPad at this press conference, Cook clearly mentioned during a conference call that there is still a lot of work to be done to improve the above.

In addition, news about the Vision Pro Chinese version is also constantly emerging. In March, Cook also visited a domestic game manufacturer, Paper Stacking Game. It is reported that in early February, the Vision Pro version of the paper folding game product "Love and Deep Space" was officially approved.

After launching a $100 billion buyback plan in May, Wall Street unanimously believed that Apple's worst moment had passed, and Apple was still searching for its next big event. Wall Street was also waiting.

At the recent "Investment Spring Festival Gala", the attitude of "Stock God" Buffett towards Apple may also bring some inspiration. Despite reducing his holdings in Apple, Buffett said that Apple is highly likely to remain Berkshire's largest single stock by the end of 2024. "We will still hold stocks of Apple, Coca Cola, and American Express for the long term."

Silicon based research laboratory

Silicon based research laboratory

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