Apple has a well established approach to launching its new products. The company designs in-house, sources its own components, and works with a contract manufacturer to assemble it for sale.
As the tech giant plots a move into the car market, it could adopt a similar strategy — working with a lesser-known contract manufacturer — after talks with some brand name automakers stalled.
To build a vehicle, Apple has three primary options. It can partner with an existing automaker, build its own manufacturing facilities, or team up with a contract manufacturer such as Foxconn or Magna Steyr.
The company has reached out to automakers including Hyundai Motor Group, but the discussions have not gone well. In this scenario, Apple would develop an autonomous system for the vehicle, the interior and external design, and on-board technology, while leaving the final production to the automaker. Such a deal would essentially ask an existing car company to shed its brand and become a contract assembler for a new rival.
A longtime manager at both Apple and Tesla said this would be like Apple asking bitter smartphone rival Samsung Electronics to manufacture the iPhone.
Apple wants to challenge the assumptions of how a car works — how the seats are made, how the body looks, the person said. A traditional automaker would be reluctant to help such a potentially disruptive competitor, said the person, who asked not to be identified discussing private matters.
Indeed, discussions between Apple and the car industry seem to have fizzled in recent months. Hyundai and Kia confirmed talks on the development of an electric car, but backtracked soon after.
Apple’s self-driving car team met with representatives from Ferrari last year. It’s unclear what was discussed, but the talks did not advance, according to a person familiar with the meeting.
In February, Nissan said it was not in talks with Apple.
Volkswagen Group CEO Herbert Diess said he is “not scared” of Apple’s entry into the industry.
BMW’s CFO recently said he sleeps peacefully, despite Apple’s possible plans.
For its computers, phones and tablets, Apple relies on contract manufacturers such as Foxconn, Pegatron, Wistron, Flex and Luxshare. The iPhone maker has avoided building its own factories, an effort that would cost billions of dollars in construction, worker pay and training, along with new liabilities and complex deals with local governments.
Factories are generally low-margin businesses. Apple leaves that to partners, while focusing on product design and development. The company’s profit margins dwarf those of suppliers such as Foxconn and Pegatron.
Tesla, the most successful electric automaker to date, has lost billions of dollars running its own factories and only recently began generating regular income. Last year, the company reported a profit of almost $700 million. Apple made more than $60 billion in the same period.
Auto industry “profit margins are lower than Apple’s current model,” Goldman Sachs analysts wrote in a recent note to investors. Some luxury brands, such as Ferrari, are more profitable, but those are “edge cases and potentially difficult to replicate at higher volumes,” the analysts added.
Apple is more likely to go with a contract manufacturer because that is the business model they are used to, said Eric Noble, president of consulting firm the CarLab. He thinks a partnership with an existing automaker would be a power struggle because both companies are used to tightly controlling their supply chains.
This is why Foxconn and Magna are two primary contenders for Apple’s business, according to industry insiders.
Foxconn, also known as Hon Hai Precision Industry, has an existing relationship with Apple as the main assembler of iPhones. And the Taiwanese company is already branching out into the auto business. In October, it introduced an electric vehicle chassis and a software platform to help automakers bring models to market faster. Last month, it unveiled a deal with startup Fisker to assemble more than 250,000 EVs a year.
An Apple employee involved in manufacturing said Foxconn is used to having Apple engineers tell it what to do and that the company’s factories are already filled with Apple-designed equipment. The person asked not to be identified discussing sensitive matters.
Magna has some history with Apple, too. The two were in talks to build Apple’s car when the iPhone maker first set out on this path about five years ago. Magna is also a lot more experienced at making cars. It assembles luxury models for companies including BMW, Daimler and Jaguar Land Rover.
The CEO of a well-known self-driving car company was surprised to see Apple talking to existing automakers when an option like Magna exists.
Magna is the most logical choice, said Noble, who has worked with the Canadian auto supplier on projects in the past and calls the company “amazingly good” at what they do.
For its part, Apple appears to be designing its car with production in mind. The company recently posted a job listing seeking a “senior hands on manufacturing engineer” for its special projects group, the team leading its work on a car. The candidate will be responsible for growing a team of engineers focused on manufacturing strategy and the supply chain. The person is also required to have experience working with aluminum, steel and composites, key materials in cars.
Britain in talks with 6 firms about building gigafactories for EV batteries
Britain is in talks with six companies about building gigafactories to produce batteries for electric vehicles (EV), the Financial Times reported on Wednesday, citing people briefed on the discussions.
Car makers Ford Motor Co and Nissan Motor Co Ltd, conglomerates LG Corp and Samsung, and start-ups Britishvolt and InoBat Auto are in talks with the British government or local authorities about locations for potential factories and financial support, the report added .
(Reporting by Kanishka Singh in Bengaluru; Editing by Himani Sarkar)
EBay to sell South Korean unit for about $3.6 billion to Shinsegae, Naver
EBay Korea is the country’s third-largest e-commerce firm with market share of about 12.8% in 2020, according to Euromonitor. It operates the platforms Gmarket, Auction and G9.
Shinsegae, Naver and eBay Korea declined to comment.
Lotte Shopping had also been in the running, the Korea Economic Daily and other newspapers said, citing unnamed investment banking sources.
South Korea represents the world’s fourth largest e-commerce market. Driven by the coronavirus pandemic, e-commerce has soared to account for 35.8% of the retail market in 2020 compared with 28.6% in 2019, according to Euromonitor data.
Shinsegae and Naver formed a retail and e-commerce partnership in March by taking stakes worth 250 billion won in each other’s affiliates.
($1 = 1,117.7000 won)
(Reporting by Joyce Lee; Editing by Edwina Gibbs)
Canada launches long-awaited auction of 5G spectrum
The 3,500 MHz is a spectrum companies need to provide 5G, which requires more bandwidth to expand internet capabilities.The auction, initially scheduled for June 2020, is expected to take several weeks with Canadian government selling off 1,504 licenses in 172 service areas.
Smaller operators are going into the auction complaining that recent regulatory rulings have further tilted the scales in the favour of the country’s three biggest telecoms companies – BCE, Telus and Rogers Communications Inc – which together control around 90% of the market as a share of revenue.
Canadian mobile and internet consumers, meanwhile, have complained for years that their bills are among the world’s steepest. Prime Minister Justin Trudeau’s Liberal government has threatened to take action if the providers did not cut bills by 25%.
The last auction of the 600 MHz spectrum raised C$3.5 billion ($2.87 billion) for the government.
The companies have defended themselves, saying the prices they charge are falling.
Some 23 bidders including regional players such as Cogeco and Quebec’s Videotron are participating in the process. Shaw Communications did not apply to participate due to a $16 billion takeover bid from Rogers. Lawmakers and analysts have warned that market concentration will intensify if that acquisition proceeds.
In May, after Canada‘s telecoms regulator issued a ruling largely in favour of the big three on pricing for smaller companies’ access to broadband networks, internet service provider TekSavvy Inc withdrew from the auction, citing the decision.
Some experts say the government has been trying to level the playing field with its decision to set aside a proportion of spectrum in certain areas for smaller companies.
Gregory Taylor, a spectrum expert and associate professor at the University of Calgary, said he was pleased the government was auctioning off smaller geographic areas of coverage.
In previous auctions where the license covered whole provinces, “small providers could not participate because they could not hope to cover the range that was required in the license,” Taylor said.
Smaller geographic areas mean they have a better chance of fulfilling the requirements for the license, such as providing service to 90% of the population within five years of the issuance date.
The auction has no scheduled end date, although the federal ministry in charge of the spectrum auction has said winners would be announced within five days of bidding completion.
($1 = 1.2181 Canadian dollars)
(Reporting by Moira Warburton in Vancouver; Editing by David Gregorio)
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