Apple’s Amazonian Energy Strategy

Last week Apple became the first company to hit a $1T market-cap.  Lost in the hype of hitting that milestone and their Q2 earnings call was the announcement that they are also launching a $300M cleantech fund in China to “give fund participants greater purchasing power to pivot toward clean energy.”  

 

This looks eerily similar to a strategy Amazon has used for AWS, except applied to energy. Apple can be the first and best customer for new products and technologies as they’re incredibly large consumers of energy much in the way Amazon was for both data and deliveries.  It’s now a well-worn playbook and it would enable Apple to gain stability in energy consumption while being less exposed to the price volatility of the market… all while subsidizing development via their own purchasing power.

 

For consumers and startups, this development could be game-changing. In the same way healthcare needs Amazon as a major player because Amazon excels in efficiency and logistics, cleantech needs Apple to help it beat the economics of the alternative, and connect its evangelists to the mass market.  If Apple had superpowers, they would be the ability to create a luxury perception of their products, and the ability to create an ecosystem effect that makes their services sticky.

 

“It Just Works”
Apple’s DNA, dating all the way back to 1977 when Steve Jobs demanded the Apple II be as easy-to-use as any household appliance, is creating a product consumers can easily interact with on a daily basis.  Much like today’s early cleantech adopters, the tech evangelists of the 1970’s understood the potential impact of the technology to our every day lives, but could not actually figure out how to convince others of this fact until the Apple II was released.  Apple repeated this feat again when it released the iPhone in 2007.  These kinds of innovations add up over time and have created a bond between Apple and it’s consumers. With Apple you can feel safe trying the unknown, and in energy, as with all regulated industries, trust matters…A LOT.

 

Cheaper, but still expensive
The cost of chips and computer parts began their decline in the 1980’s and the same can be said for cleantech components today.  Solar panels, storage and the sensors are all experiencing some of the steepest price declines since their invention.  Yet, they are still more expensive than their alternatives which includes the status quo.  As it stands, there must be something stronger than economics to serve as the catalyst for massive adoption.  Who better to solve this problem than Apple? Case in point, Apple owns only 18% of the smartphone market and yet earns 87% of all profits and has done so by leveraging usability and lifestyle (i.e. community) to convince customers their most commoditized product is worthy of a price premium.

 

Tesla: The EV Elephant in the Room
Could a company that will repatriate over $200B in cash be interested in acquiring one that has a market cap of $60B and over $10B in debt?  Tesla is one of the first companies (the other being Nest) that has made an environmentally friendly product “cool.”  At the very least, they’ve provided Apple with a playbook to enter the market from the consumer side if they so choose, but an acquisition begins to make a lot of sense if current trends hold. 

 

Despite it’s success, Apple has been under increasing pressure to “do something innovative” as most of its hits post-iPhone have been comparatively minor.  AppleTV, Apple Watch, and AirPods are all best-in-class devices, but none of them triggered a major innovation cycle in the way the Apple II and iPhone did.  Could energy be the next step for the first $1T company to become the first $2T company?  Time will tell.