By Tripp Mickle
Apple Inc.'s plan to add thousands of jobs in Austin, Texas, San
Diego, Seattle and Culver City, Calif., draws a road map of its
transformation away from its identity as an iPhone maker toward a
future reliant on services and higher-priced devices.
Each location where it announced expansion plans Thursday
reflects a different facet of Apple's evolving model. Culver City
gives Apple a Hollywood homebase as it pushes into video
programming. Seattle is a machine-learning hub where it can develop
algorithms that personalize streaming-music playlists and improve
Siri. San Diego and Austin offer semiconductor engineers who can
advance the customized-chip efforts that help Apple wring more
money out of its iPhones, iPads and Macs.
The mix of software and services and higher prices are key to
Apple's effort to offset slowing iPhone unit sales. Though the
company reported record annual revenue on Nov. 1 due to higher
iPhone prices, it also said it would stop reporting the number of
iPhones sold--a metric that has been stagnant lately--a decision
that many analysts interpreted as signaling the iPhone's growth
years are in the past. Apple's stock price has declined by nearly a
quarter since then.
While the push beyond its Silicon Valley home could aid those
efforts, it also will test a highly centralized company that has
thrived due to a concentrated workforce located near its Cupertino,
Calif., headquarters, analysts said.
"This idea of 'Designed in Cupertino' has really been the ethos
of Apple, and now you're going to have AI and services designed
outside Cupertino, " said Gene Munster, managing partner at
investment and research firm Loup Ventures. "It's a shift that adds
complexity to the culture."
Co-founder Steve Jobs wanted as many employees near headquarters
as possible to speed decision making and foster a strong culture.
He inspired Apple's new $5 billion campus with its
2.8-million-square-foot circular building, believing that bringing
Apple's diffused staff under one roof would improve the exchange of
ideas. Apple's workforce has exploded to about 132,000 employees
from 16,000 before the iPhone's debut.
Carolina Milanesi, a technology analyst with Creative
Strategies, said she has visited Apple offices in London and
Beijing and found they feel like headquarters. She expects offices
from San Diego to Seattle will be the same way. "It might be you
don't get the Silicon Valley vibe," Ms. Milanesi said. But she
said, "It's a culture thing and not a location issue."
As a company focused on selling devices, Apple over the past
decade created millions of low-end manufacturing jobs in China at
the contractors who assemble its gadgets. While such assembly jobs
aren't likely to return to the U.S., Apple has increasingly
emphasized adding other types of workers at home.
On Thursday, Apple said it would add 1,000 jobs apiece in Culver
City, Seattle and San Diego. It will invest $1 billion in a new
Austin campus for 5,000 employees--its second there.
Culver City is expected to be the base of a Hollywood operation
to which Apple last year allocated an initial $1 billion for
developing programming and poaching top talent. In January, the
company leased 128,000 square feet of office and retail space in
the Los Angeles-area town, which is home to Sony Pictures
Entertainment and its Culver Studios, where classics like "Citizen
Kane" and "Gone With the Wind" were made.
The additions in Seattle promise to deepen Apple's presence in a
hub for machine learning, a type of artificial intelligence.
Amazon.com Inc. and Microsoft Corp., along with the University of
Washington and Allen Institute for Artificial Intelligence, have
helped draw leading AI scientists to the area. Apple pushed into
Seattle's machine-learning community with the 2016 acquisition of
Turi Inc., a startup led by a University of Washington professor,
and has kept its operations there.
Machine learning is critical to personalizing software services,
said Matt McIlwain, managing director of Madrona Venture Group LLC,
a Seattle venture firm. It helps Spotify Technology SA suggest
songs that listeners might like and aids Amazon's Alexa in fielding
queries, he said.
"The two layers of the cake that are ubiquitously important for
all apps and services are cloud computing and data science," Mr.
McIlwain said. "Apple's got to come to terms with that."
Traditionally, gadget makers like Apple have bought chips made
by other companies. But in the past decade, Apple has expanded its
semiconductor efforts to include the Bluetooth chip that powers
AirPods and graphics processors for the iPhone. Its efforts helped
enable the facial-recognition technology that it introduced with
last year's iPhones, a feature that helped justify raising the
starting price of the iPhone X by more than 50% to $999.
Apple has added jobs in Austin, where it agreed to build its
first campus in 2012, to support those efforts over time.
The San Diego area and Southern California, meanwhile, have been
the hub for two of the key developers of communications chips:
Qualcomm Inc. and Broadcom. Apple can poach engineering talent from
those two companies and potentially push into their areas of
expertise, developing its own modem and radio-frequency chips, said
Robert Maire, president of Semiconductor Advisors, which advises on
chip-related transactions.
"If you're doing chip design, that would be the place to be,"
Mr. Maire said of San Diego.
Developing a modem chip would also ease Apple's dependency on
Qualcomm, he said. Apple sued the chip supplier nearly two years
ago over what it called unfair licensing practices, and has been in
a bitter legal battle with the company since then.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
December 14, 2018 08:14 ET (13:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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