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Measuring the latest iOS accessory market

One of the most startling announcements during the WWDC 2013 was iOS in the car. The mockup that was shown seems to indicate the use of the car’s in-dash display as an “external monitor” for an iOS device while control would come from inputs using Siri.

The technical details were not released so it’s hard to know the protocol used to accommodate this interface. However it seems that it will be generic enough that a number of launch brands signed up for the launch. The list includes Honda, Mercedes-Benz, Nissan, Ferrari, Chevy, Infiniti, Kia, Hyundai, Volvo, Acura, Opel and Jaguar.

Is this a significant opportunity?

Before we get excited, it’s important to note that this will likely take a very long time. It won’t even begin until 2014 and the number of new models may trickle into showrooms quite slowly. Consider that the time it took for automakers to universally support external audio input (mostly the trivial line-in) was about a decade.

 

To also curb our enthusiasm we need to realize that the car industry does not produce many units. In 2012 there were over 60 million cars produced (with the following regional mix:)

Screen Shot 2013-06-11 at 6-11-6.02.32 AM

In contrast, 60 million is about the number of phones sold every two weeks. In 2013 there will be more iPads sold than cars.

In particular the companies mentioned had the following production figures in 2011:

  • Honda (including Acura): 2.9 million
  • Mercedes Benz (Daimler): 1.44 million
  • Nissan (including Infiniti): 4.5 million
  • Fiat (Ferrari parent): 2.4 million
  • GM (Chevy, Opel parent): 9.1 million
  • Kia: 1.6 million
  • Hyundai: 6.6 million
  • Volvo: 315k
  • Tata (parent of Jaguar): 1 million

Including the parent companies and all vehicle types they produce, the total is about 30 million units, or about half of the world-wide production. Obviously, not many of the cars produced will have iOS in the car capability.

Therefore the total unit opportunity is not very significant, perhaps less than 10 million a year. Is there a per-unit cost that compensates for this?

This is harder to answer. The way Apple has been licensing accessory makers is through the MFi (Made for i) program. There used to be a flat 10% fee off of the retail price of the accessory sold. However, there may have been changes. The licensing fees are not public and it’s quite possible that the price is a flat amount per unit and that it’s a negotiable. It’s hard to know what terms are being negotiated with automakers but my bet is that it’s not likely to be a significant source of revenue per unit.

So the total revenue from licensing the “Made for iPhone” trademark to automakers won’t be significant.

But it is significant for the car industry. The significance is that cars have finally risen to the role of being phone accessories. They have acquired the ability to participate in a computing ecosystem. During all these decades when the world has embraced the information society and intelligence has been embedded in the fabric of life, automakers have resolutely avoided being a part of it. Automotive information, connectivity and user experiences have remained in a Galapagos Syndrome-like isolation from reality. The reasons are rooted in the crisis of rigidity that plagues the industry, something I’ve touched on briefly in The Critical Path podcasts (e.g. Asymcar).

So this is a hopeful development. If.

If it actually moves at a slightly-faster-than-glacial speed.

If sufficient cars get display systems (billions are produced for the pockets of  young and old, poor and rich; but cars have to be considered “luxury” to be graced with an LCD)

If standards are adhered to.

If all brands (which operate individually as autonomous divisions irrespective of group-level strategy) accept the notion.

If these and many other conditions are met, it would allow, finally, the migration of autos to the status of information appliances and, eventually, to being hired for jobs that are currently left undone.

  • orienteer

    “The significance is that cars have finally risen to the role of being phone accessories.”

    As usual, sir, you have nailed it.

  • obarthelemy

    Or you can stick tablets in a dashboard holder, and on the headrests’ back.

    • handleym

      This is not as stupid a statement as it appears.

      The real question, I think, is a technical one — how will the HW that supports this be integrated into the car frame?

      Anyone who cares about their car’s electronics knows that car manufacturers are short-sighted morons. They ship their systems loaded with buggy electronics, then provide no mechanism for even firmware updates and bug fixes, let alone a way to handle the inevitable improvements over just a few years.
      It is a pathetic, but true, fact that the $200 low-end after-market front panel I stuck in the cheap family car works vastly better than the stereo system in my 2007 Mercedes. Not only does it have iPod support and support for a flash drive, but it doesn’t have any of the myriad bugs that cause the Mercedes to lose its location on an MP3 CD once every two weeks or so (EXTREMELY irritating when you are listening to audiobooks).

      So what’s the plan for the auto manufacturers going forward? How modular are the systems they are going to be shipping? Because, in a device that costs $30,000 or so, and with a use lifetime of ten or fifteen or more years, I’m not interested in paying a premium for a buggy system which looks shiny in 2014 with its matching iPhone 6, looks dowdy in 2018, and no longer works with any shipping iOS product in 2020.

      • Mayson

        This is one of the ways that Tesla is pushing the state of the art forward. For example, see this: http://www.greencarreports.com/news/1083409_life-with-2013-tesla-model-s-how-a-software-update-worked

      • handleym

        Hmm. I’m rather less impressed.
        (a) Like I said, crappy software. The fact that Teslas have a plan to push updates doesn’t change that.

        (b) SW push ONLY fixes SW issues. That is not the whole problem. In just five years what we expect from our devices can completely change. If there is not a way to (easily, without spending thousands of dollars in labor) yank out the modular electronics (which includes, at the very least, the screens) then the system has obsolescence written all over it.

        obarthelemy has the point exactly correct — it makes no sense to yoke together devices with dramatically different expected lifespans.

      • http://www.facebook.com/iggy.pup1 Iggy Pup

        I’d like to take issue with point B.

        It is true that we think of cars as being hardware, but the truth is that they incorporate a lot of software which has a direct bearing on hardware performance.

        Whether these internal software systems should be exposed to the interent is a different, but very interesting, question.

      • obarthelemy

        I’m always puzzled by devices that try to mesh sub-devices with different constraints, lifespans… especially when that meshing brings only very tangential benefits.

        I still have 10+ yo monitors, hooked up to 2yo PCs. Ditto loudspeakers. I can see why car makers want to put cars on the same upgrade treadmill as PCs. I don’t see why we would actually desire that.

  • Luis Alejandro Masanti

    I can fake the math to contradict your assertion:

    “So the total revenue from licensing the “Made for iPhone” trademark to automakers won’t be significant.”

    Let assume you are right saying:

    “The significance is that cars have finally risen to the role of being phone accessories.”

    And that this is also true:

    “This is harder to answer. The way Apple has been licensing accessory makers is through the MFi (Made for i) program. There used to be a flat 10% fee off of the retail price of the accessory sold.”

    Then, if we take a $400,000’s Ferrari as an “iPhone’s accesory,” then Apple will get $40,000.
    OK, Ferrari will only built 7.000 this year, so: 7,000×40,000=280M

    You are right! This is pocket money for Apple.

    • http://www.facebook.com/iggy.pup1 Iggy Pup

      If you reas the rest of the article, you will note that Horace mentioned the possibility of the car makers negotiating a different licensing rate structure. The 10% in this case is an unlikely upper limit. A more likely rate for a $400,000 car would be 1% or even 0.1%, which would yield gross revenues of $28M or $2.8M respectively.

  • Walt French

    I wish I understood the archetypes of disruption theory better. So with apologies, it seems that Apple may be, for the first time, creating a modular information system for cars, versus proprietary systems.

    Yes, manufacturers may be slow to accept them, but consumer pressures ought to be strong. When we bought our Prius, the Nav system was available only as part of a $5K package that had little other benefit. A display that oughtn’t cost too much more than an iPad mini (yes, needs heat-tolerance, many other industrial design aspects), plus a $25 connector, is trivial. Now throw in a $600 phone and we’re all the way up to 20% of the alternative cost.

    For that, the manufacturer cuts the provisioning cost of emergency roadside services, GPS and a whole host of services that have to be negotiated on a one-by-one basis. Somewhat like Verizon sells the VZ Navigator app for $5/month (!), they can build ordinary iPhone (or, we must assume, Android) apps that are easy to build/maintain/upgrade, but only work with their brand of car, meaning that having a nice interface between the car and the phone can support a whole host of features that customers may want.

    Apple has a bit of a plus with the hardware connector. But in truth, a radio transceiver placed a couple of inches away from the phone would be able to handle all the interface to the car, and of course it is both standardized and soft-upgradable. I personally would presume that Apple will change their connector technology (again—Lightning is the iPod’s third standard) within the lifetime of cars sold in 2014, so either wifi, BlueTooth or some other radio standard makes more sense to the different heartbeats of the car-vs-phone technologies.

    Obviously, a $5K upgrade pack is much more profitable than a $500 display and interfaces to several other systems on the car. *IF* they sell, that is. Pretty sure that only a small minority of those 60mm vehicles will be sold with high-margin upgrades when a competitor offers same/better capability at a fraction of that. That boosts those fixed costs as a share of the product—I presume it’s obvious that the smartphone marks the end of many bloated options, and that car companies will have to make it up on the volume of smart interfaces. If Apple does it right, the transition could happen much faster than you seem to think.

    • http://www.facebook.com/iggy.pup1 Iggy Pup

      I’m imagining car makers trying to regain some lost profit through in app purchases for performance enhancements. “Smart” braking? $1.99 is a small price to pay for the safety of your family. On the other hand, I could also see the argument for ad supported air conditioning.

  • http://www.isophist.com/ Emilio Orione

    I have seen an interesting “home” button at the bottom of the display. It seems that Siri, touch and classic home button will be the input (the home button without touch makes no sense, you return to what, a siri input screen?).

    If it has touch it must have processing power. Even if it act as an I/O interface for an external iPhone it must have some OS on it, basically it seems a mini iPad embedded in the car. Are we sure it needs an external device?

    • John Willis

      Having a touchscreen controller chip (like the ones embedded in the touchpad a on a MacBook) and a physical button (also like a touchpad), is a very minor accessory. Think of it like adding a Magic Pad to the car.

      The display has to have a video controller, but it would already have one for the normal functions of the head unit. There would be a CPU/OS there as well, because there is the radio, GPS, etc, but the iPhone would only be interested in giving a video feed to the display and talking to its touchscreen controller (and the button).

      The Video adapter, however, would have an “embedded” OS. Whatever they use to connect up to the car, they will need to adapt the IPhone’s AirPlay stream to something (HDMI,etc) and they currently do that with an adapter that actually has a tiny CPU and an OS that it downloads and boots from the iPhone (Apple’s lightning to HDMI adapter)

      So if the device manufacturers are told to put this style of small arm CPU into their setup, it will download the OS from the phone, boot in under 1-2 seconds, and it will provide the video feed for the screen, and (in Theory) talk to the USB controller for the touchscreen chip and the home / volume control buttons

      This means apple would be in control of making the device better once its adapter is in place.

      • http://www.isophist.com/ Emilio Orione

        True, this would work like the demo.
        I was thinking at the title: iOS in the car.
        It could describe your solution but also a new full iOS device embedded in the car deck that could be functioning without an iPhone at all, only an AppleiD.

  • FM

    Horace,

    The significance of having a durable good become the accessory for a disposable item such as a smartphone is that the durable good becomes a platform lock-in element.

    Example: I was recently given at work a brand new Nokia N9. This phone worked fine with two of our cars but not with our smart ForTwo, because our smart has the MBRDNA smart Integration Kit for iPhone, and is thus unable to communicate with any other smartphone. After a couple of weeks, I decided the Nokia N9, much as I loved it, simply does not fit our setup.

    This is interesting, because at first I had thought the N9 MeeGo wouldn’t fit because of the apps. Nonetheless, all my key apps including Skype, WhatsApp, Newsblur, AIM, and Podcasts turned out to be available. So it was not the software that killed it, but the hardware.

    • FM

      And Spotify. The MeeGo Spotify client is awesome.

    • John

      This is exactly what I’ve been thinking since iPod dock started appearing in cars years ago. When Apple changed the connector, I was wondering if they knew that would inflict serious damage to their ecosystem. Change the connector is comparable to MSFT ditching Win32 API.

      So it’s hard to measure the benefit in dollar term. The main benefit will probably be consumer’s perception.

      That said, Blackberry has been busy pushing BB10 which has had a stronghold in the auto industry as QNX. Interesting battleground.

    • Peter

      I agree. This does not seem to be much of a revenue generator given the relatively low volumes, but as cars have a long life there is a lot of potential to lock-in the driver (and possibly spouse). If your car kit talks to your iphone, you’d be foolish to change to a non-compatible phone when your contract is up for renewal.

  • Tim_Watt

    ….another if for you – if they don’t fall foul of NHTSA anti-driver distraction rules.

    I see the iOS in the Car description says “you can connect your iPhone 5 and interact with it using the car’s built-in display and controls or Siri Eyes Free”

    So you can interact not necessarily via Voice control – which if requiring more than 2 seconds distraction from driving eyes on the road will fall foul of the latest NHTSA draft guidelines that is subject of dispute with car makers.

    See: https://connect.innovateuk.org/web/intelligent-mobility/articles/-/blogs/12060890

    • FM

      Regulation such as the one you mention is one of the reasons why technology moves more slowly in the automobile industry than in the computer industry.

      You see, there is no NHTSA for computers (yet).

      • Walt French

        Regulation is *MEANT* to keep us from doing things that have unintended consequences.

        I note this morning’s news that even using hands-free texting (à la Siri) was found to be MORE distracting than making a voice call. Our opinions notwithstanding, the human brain is largely set up in ways that focus attention on particular tasks. It would seem that our enthusiasm for constant contact needs to be balanced against circumstances, but that is the very weakness noted. With individuals being demonstrated unable to balance concerns, regulations are a favor to us all.

      • Tatil_S

        I agree. I would not mind regulations that restrict even the eyes free, hands free gadgets to navigation and music in automobiles. They can add a 911-only contact option to report emergencies or hazards, but anything more is fairly dangerous.

  • RM

    Seems like just snapping an ipad into an empty dash slot would be both easier and better.

  • bennomatic

    What’s interesting to me is Apple’s growing role as kingmaker. Carriers need the iPhone in order to get, keep and profit from their customers. Car makers clearly feel they need to support the iPhone in order to increase sales. Blackberry needs BBM on iOS to remain relevant. When I’m standing in line at Starbucks, as many people seem to be using their iPhones to pay as those using all other payment methods combined…

    Where else can Apple make iPhone support indispensable?

    • Pointebasic

      Bennomatic,

      I still see Passport as a potential grab at the “charge card” (aka Visa) business. Potentially a disrupter of the credit card industry. Seems large retailers (Target, Macy’s, etc.) have always been pushing their own charge cards, but most people don’t want to carry 10+ charge cards in their wallets. Passbook makes that irrelevant. I can carry 20, 50, 100… electronic charge cards in my phone. The big retailers get to by pass the credit card fees, promote frequent shopping with better rewards, etc. Target already offers free shipping from their on line retail when using their charge card.

      Pointebasic

  • http://www.davidlam.ca/blog David Lam

    When iOS6 was first unveiled at WWDC 2012, BMW was amongst the automakers listed:
    http://appleinsider.com/articles/12/06/12/nine_auto_makers_partner_with_apple_for_eyes_free_siri_support

    And yet when iOS7 was unveiled at WWDC 2013, BMW was noticeably absent. What happened?

    • synthmeister

      And I don’t understand what has changed from the 2012 announcements?

      Glacial speed indeed.

      Me, I’d be happy if all my maps and music info would go to the built in LCD screen on my 2013 Accord. The USB interface is already there.

      I’m a bit surprised the automakers are finally considering this. Those OEM GPS systems have always been overpriced cash cows.

      • Pointebasic

        Synthmeister

        I would guess in nearly all but the high end vehicles it became increasingly impossible to up sell a $1000+ navigation system to customers who already have “free” navigation on their phones.

        I would say this is potentially good news that (at least some) automotive industry decision makers have seen the writing on the wall and have stopped trying to paddle against the current.

        Cheers,
        Pointebasic

      • synthmeister

        Yes, one would think that even the most pointy-haired boss couldn’t ignore the proliferation of GPS options on every mobile device.

    • Jessica Darko

      BMW may be totally happy with Apple, but the “iOS for Cars” may not fit their strategy, or the paperwork hasn’t made it thru their legal department yet. I wouldnt’ take them not appearing on the slide as an indication that the partnership has been a failure.

  • Roger

    What totally baffles me is how Android vendors ignore accessories. For example look at Google’s Nexus site where accessories don’t exist or came out far later than the original device release. It isn’t particularly hard to convince people to buy cases, docks, extra power adapters/cables etc at time of purchase of the original device and you can make back the profit lost by selling the device cheaper.

    • obarthelemy

      these are commodity items that everybody buys for $2 on amazon.

    • JohnDoey

      Android devices come and go in 6 months. iPhones last 3–4 years. Not only is the iPhone 4 and all its accessories still selling, but users had a 4 for 2 years and then a 4S for 2 years and used the same accessories throughout. The long life of iPhone accessories means a better return on investment for the maker. That is the key factor in developing an accessory ecosystem.

      Also, many accessories for iOS rely on OS X subsystems like CoreAudio and CoreMIDI that are part of iOS, making it easier for a maker of Mac accessories to port their accessory to iPhone. I have music and audio tools that came with a Mac cable and an iPod cable and a Lightning cable, and the device just works with whichever one you plug into. In some cases, these were Mac-only a few years ago.

  • JohnDoey

    What is important is getting this in place as each car line goes electric. It won’t be that long before San Francisco and many other cities make gasoline cars illegal. Batteries are moving forward with Moore’s Law. Once your car runs on batteries it is just a big mobile computer. If your phone is your keys and wallet and universal remote control, then of course your car has to speak to the phone.

    • FM

      This is wrong. Battery technology is not even remotely moving cuadratically.

      • JohnDoey

        Not necessarily the batteries themselves in isolation, but the entire cars or computers they are in also get more power-efficient and the result for the user is a Moore’s Law -type improvement. For example, the new MacBook Airs have the same battery as last year, but get almost double the battery life because of increased power-optimization in the whole system. In a couple more years, the battery life may double again (or the battery shrink by half) because of advances in battery chemistry. A decade from now we will look back and see dramatic progress. There has already been dramatic progress these last 5 years. Moore’s Law wasn’t obvious for decades because computer chips went from really really slow to just really slow, but at a certain point it became obvious. With battery-powered tech we are still in the 286 era — going forward it will become more obvious. But we can routinely get 10 hours of wireless Web browsing today from multiple devices at Apple Store, and just 3 years ago, only 5 hours was routine.

        The infrastructure for electric cars is coming faster than we think because the existence of one functional electric car exposes the glaring bugs in gas cars and has dramatically changed consumer perception. We put up with asthmatic kids and oil wars and dirty cities when we thought there was no other way, but now the other way is parked in our neighbor’s garage. The head of Nissan said they are working on electric cars because his customers expect his company to stop wrecking the environment with exhaust fumes. At some point, gas car companies will be held liable for that damage because it stops being a fact of life (that’s the best car we have) and starts being a choice (unlike Tesla, we make and ship gas cars that cost the community billions of dollars in suffering and health care costs.) Gas cars and infrastructure gain liability every day now at the same time that superconductors that can charge a car to full in a few minutes are coming online. Electric cars get a tax break right now — at some point that flips to gas cars being taxed heavily.

        So the point is that we are transitioning right now from gas to electric cars, and the electric cars are basically computers, and so Apple bringing in an iOS interface to cars is significant even if it takes years to implement. On the other side of that transition is electric cars that have as standard an iOS interface.

      • Space Gorilla

        It feels like we’re near a tipping point, maybe just a few years away. When a consumer can walk into a car dealer and an electric car is the obvious choice over gas, it’s going to snowball like crazy from that point. That scenario isn’t quite true yet, but it will be, sooner than most people believe.

      • obarthelemy

        not at all. Even electric cars don’t rely that much on semiconductors, Moore’s law only has a very secondary impact on peripheral systems, the core of the product (energy storage and power train) is another ball game entirely.
        the computerization of cars is mostly independent of these 2 parameters, be it on the entertainment side or on the operating side.
        finally the environmental impact is not that different between electric and petrol cars.

    • obarthelemy

      I’m not sure what over-arching impact power train technology has on this issue

    • nuttmedia

      Give some thought to the logistics, politics, and capital involved in establishing the necessary infrastructure for a fully electric ecosystem, even at a micro-level, let alone a large city.

  • fritzlan

    I am very excited about this. My wife has a Nissan Leaf and I have a Tesla on order. This would be a wonderful convergence of two great Technologies.

  • Davel

    While it was interesting to see this get a bullet point in the presentation and the feature set got extended how is this a surprise? This is an iterative improvement in the franchise and one of the few products that extend to third parties.

    For the past year or so car manufacturers have increasingly been integrating Siri ( hands free ) into their cars.

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  • Cashewer100

    This is yet another major step for Apple to get deeper into the lives of their users. I expect many not to like this. I absolutely love their ability to enrich my live.

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  • http://micahtcollins.com micahtc

    It’s part of the developer ecosystem mindset. Each opportunity doesn’t need to be top-line beneficial to Apple in direct ways, but the network effect benefits unlock the long term value.

    iPod/iPhone/iPad users are fairly accustomed to the availability of “compatible” accessories via the MFi license program. Their expectations are thusly primed to expect higher value integrations in logical instances and environments. Car makers have, to date, done a modest job at supporting more “native” audio integration through MFi dock connectors and sometimes bluetooth. But for additional networked services via apps, particularly things like navigation, where smartphones will always be farther up the innovation vector on average, it makes sense to try to leverage the mobile platform. They refresh more frequently than in-car system modularity, and the time-period of car ownership life-cycles allow.

    I think it also may be the case that Apple’s first-party interface for cars, which they previewed last week, kind of gets out in front of the inevitable attempts by car makers to roll their own in-car interfaces using third-party apps that push UIViews to in-dash displays via HDMI. If that were to happen, and it still may, Apple can never be sure the in-car experience has their UX stamp that they deem meets a minimum bar of functionality and quality, not to mention they may want cars to have a level of functionality that only private APIs can deliver. And further, that HDMI is probably no one’s first choice of an in-car smartphone interface. Once accessory developers demonstrate the desire (explicitly or implicitly) to use existing interfaces and APIs and possibly kludge things together and create crufty experiences, it’s time for Apple to step in and ensure these experiences are supported in a more native, sustainable way.

    This represents the highly differentiated discipline that the Apple accessory ecosystem guys manage with sophistication – considering challenges along the platform’s frontier daily, and looking for ways to extend its reach into third-party accessories in more strategic ways over time. It’s a discipline that probably sounds very familiar to Cocoa devs.

    Cars would be one of those big hairy audacious goals for such an endeavor, and it looks like they are making progress.

    Afterall, many people spend a lot of time in their cars, and it has very specific human factors to consider, and I am sure someone wants to tell a story how the smartphone is an asset to the driving experience, rather than a liability, as it stands today. A somewhat orthogonal discussion to add context, but I am sure someone has done some math that demonstrates that better smartphone integration in cars will save many lives. And with that type of math, most ROI formulas go out the window.