Daniel Eran Dilger
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A Product Transition: Giving MacBooks the iPhone Touch

macbook touch
Daniel Eran Dilger
The next big thing for Mac laptops: a color LCD touchpad that brings the company’s iconic touch interface of the iPhone to Mac users. Here’s how it fits into Apple’s previous work and how it adds value and differentiation at surprisingly little additional cost.

Articles in this Series:
What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0
Two Decades of Portable Macs: 1989 – 2009 (updated)
The iPod Power Behind Apple’s Big Mac Push
A Product Transition: Giving MacBooks the iPhone Touch
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Delivering the “state of the art new products at prices competitors can’t match” promised by Apple executives in the company’s July financial results conference call would require ‘something really new that captures people’s imaginations,’ as Bill Gates said of the original Mac nearly 25 years ago.

Software Differentiation.

Apple still has something really new that is capturing imaginations, something that Dell and HP can’t match: the software expertise and interface design savvy that is obvious to anyone who has seen the iPhone.

All of the PC makers have relied on Microsoft to do their software development, a strategy that worked only when Microsoft served as the common denominator across the entire PC industry and competition among PC makers was only related to hardware cost.

Dell differentiated itself by developing highly efficient PC distribution, while HP has struggled to plunge PC prices to compete, forcing Dell down with it. Neither were ready to compete against a reinvigorated Apple with unique software technology, particularly as Microsoft dropped the ball, exposing the entire monoculture of the PC market to a blight of consumer apathy with Vista.

Vista 1984

Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone
Windows Vista, 7, and Singularity: The New Copland, Gershwin and Taligent
Windows 95 and Vista: Why 2007 Won’t Be Like 1995

Hardware Differentiation.

Apple is not only competing against its PC rivals in terms of software, but also in hardware features. By putting an iPhone screen into its laptop line, Apple will draw a line of differentiation that will make it even more obvious for consumers that Macs are much more than just PCs running a different OS.

As the previous article pointed out, Apple has volume buying power in consumer electronics that dwarfs that of other PC makers. Apple already has orders in for tens of millions of iPhone touch screens.

HP and Dell don’t have more than a tiny fraction of that with their slow selling PDAs and failed MP3 players, and simply can’t afford to custom design any significant CE integration. They already do very little custom work on their PCs, and really only act as assemblers and resellers of commodity PC parts.

The iPod Power Behind Apple’s Big Mac Push

Something in the Air.

The MacBook Air demonstrated the demand for new technology. Pundits cackled about its price and tried to cheerlead for rival products the offered its performance in a bigger box, or less performance in a smaller box, or less of everything in a cheaper box, but the market demonstrated that people will pay a premium for a sexy, well designed product.

The MacBook Air has become a wildly popular, highly successful product, not just a flashy concept model as many other companies’ high end mobile laptops are.

The existing MacBook and MacBook Pro lineup is now due for a three year overhaul. Rumors suggest a new slimmer casing with a redesigned battery bay that exposes an easier to access hard drive and RAM. That’s all fine and good, but it’s not enough to carry Apple through another three years of differentiation. Adding a color LCD in place of its single button, multitouch trackpad will.

AppleInsider | Apple’s next-gen MacBook Pro casing design revealed

SideShow Bob.

Adding a secondary display is an easy gimmick. Take Microsoft’s Windows SideShow, which the company encouraged PC makers to add to their laptops as a feature of Windows Vista. The premise: users could poke at a four way joystick next to the the small display to access email and check contacts without having to open up their laptop and wait for Vista to slowly boot or wake from hibernation.

SideShow Vista

CNET raved about the wildly impractical boondoggle idea, which required the same kind of specialized support from developers to do anything useful for users, just like the Microsoft Surface. But most people haven’t even heard of the feature, in part because PC makers can’t afford to put it on their mainstream laptops, now selling at an average retail price of around $700. Additionally, why not just consult your smartphone to do those kinds of tasks?

SideShow is fixed to your huge laptop making it less than accessible while not even updating your information live; it only shows you a partial view of the static content on your laptop, not your current messages. SideShow is the kind of committee-designed foolishness that can only impress the reality-challenged gadget hounds at CNET who rave about poor selling consumer devices and can’t figure out why the public doesn’t share their breathless excitement for the empire’s new birthday suits.

That’s not to say dual screens are dumb idea. Many flip phones have a tiny screen on the outside to make it less necessary to open them up just as Microsoft tried to sell with Vista. Many desktop users plug in dual 17“ displays for a view that’s far more affordable than one huge display with the same overall resolution. Nintendo’s DS uses two screens to give it more flexibility and a distinctive identity at a cheaper price than Sony’s larger screened PSP.

Why Add a Color LCD Trackpad?

The point of having an LCD trackpad on the MacBook would solve a different problem. It wouldn’t just be a stupid gewgaw like SlideShow. It would turn the trackpad from a simple input device into an infinitely configurable input and feedback mechanism.
It is unrealistic to add a 15” touchscreen to a laptop’s main display, both because of cost and because of the strain related to holding your hand to the screen to smear around oily fingerprints. However, an iPhone-sized touch screen would give Macs a powerful touch input system that would put rapid access to menus, widgets, and lists literally at your fingertips.

The iPhone already proves how to seamlessly interact with regular controls such as popup menus on the web, converting them from devices designed to be navigated with a mouse pointer into dials that can be flicked through more naturally with a finger swipe. Two fingered zoom, scroll, rotate and click controls are already exposed on the MacBook Air.

Imagine if your trackpad could present customizable options for enhancing those controls with whatever level of complexity you desired, from a simple way to dial through menus faster than the careful mouse-pointer targeting currently required, to a fully custom panel that could accommodate anything from a ten key to the most sophisticated touch input and feedback system one could imagine in software.

Applications could invent their own specific uses for it, but out of the box it could offer an immediate way to target menus, launch apps, put existing Dashboard widgets at your fingers, and perform other shortcuts faster than the user can navigate the main interface with the trackpad. It would also silence critics who still think the Mac only supports a one button mouse.

Lcd-Trackpad

200809010232

“A State of the Art Product Transition…”

Of course, adding such a highly visible feature would throw a wet blanket on existing laptop sales. Who would buy an existing regular MacBook when the new model had a dual screen input device? One might also ask, “Who would buy a iPod mini after the Nano came out?” Or a PowerBook G4 after the Intel MacBook Pro was announced, or an iPhone after the iPhone 3G was released.

In each case, Apple let inventories dry up dramatically in the weeks before the new model, most recently taking a major hit in iPhone shipments despite a healthy demand prior to the availability of the iPhone 3G. If you haven’t noticed yet, today’s Mac laptop inventories are severely constrained.

Apple would incur a cost hit when installing an iPhone-style screen into the MacBook. According to speculation by iSuppli, the original iPhone’s bill of materials and manufacturing costs amounted to around $260. The company guessed that the display and touch screen made up 20% of that, around $56. Base on those figures, for Apple to add the feature profitably it would have to charge around $100 more for its laptops in an already competitive market.

However, what if Apple added the feature to blow away competition in the laptop space rather than to make a profit on $56 of additional hardware? That might result in a “product transition” that would cause a short term hit on margins, yet result in greater revenues and ultimately profitability in the long run that made the jump worth it.

The transition to Intel involved lots of short term costs that were clearly worth it, and the design of the iPhone and MacBook Air required initial investment that took months to pay back. The fact that Apple has already warned investors of this “product transition” means the company is ready to hit the ground running.

“… at Prices Competitors Can’t Match”

Dell and HP don’t have any in house expertise in the kind of software integration needed to deliver such a product. They rely upon Microsoft for that, and Microsoft is current working to deliver touch features in Windows 7 and Windows Mobile 7 that won’t be ready until at least the end of 2009.

That’s assuming that Microsoft can pull it off, can do it on time, and can do it without compromise given Apple’s recent furious efforts to patent all of its work. So far, Microsoft has only demonstrated copycat touch technology already delivered in the MacBook Air and iPhone.

While Microsoft was able to copy the original Macintosh, in large part because Bill Gates forced John Sculley to hand over a free license to use Mac inventions in 1985 or else risk the immediate termination of Excel on the Mac, it has been stymied to clone Mac OS X.

Instead, Vista had to deliver clumsy and inferior alternatives to Exposé and other familiar elements of the Mac desktop due to Apple actually working to protect its inventions this time around. Microsoft was also unable to deliver a functional iPod replacement that any consumers wanted to buy. So HP and Dell might never get delivery of the technology they would need to copy Apple’s highly visible LCD trackpad.

Office Wars 3 – How Microsoft Got Its Office Monopoly
Ten Myths of Leopard: 10 Leopard is a Vista Knockoff

CE Clone Home.

Other phone makers have similarly rushed to market iPhone clones, but those models either lack multitouch features or just deliver simple tap screens that require awkward pressure, a fingernail, or a clumsy stylus to use them. CNET and other sites have done their best to distract from the very real differences between the iPhone’s touchscreen and those in inferior imitative devices, but users are seeing the differences themselves.

Even if Dell and HP could figure out a reasonable approximation, the fact that they currently aren’t selling ten million iPhones means they’d lack the economies of scale to risk putting such a screen on their laptops, because the higher price would cause them to lose sales to cheaper machines lacking any fancy LCD touchscreens.

In the commodity world of PCs, cost is often the only competitive factor. Adding $100 to a $700 laptop is far harder than hiding $56 dollars of hardware within models ranging from $1,000 to $3,000 where Apple sells its products. Additionally, Apple’s buying power would allow it to buy up all of the high quality components, leaving Dell and HP to buy reject components on the cheap.

Lots of New Buyers.

That gives Apple the opportunity to blow away users with a feature that would clearly differentiate its mobile line for years, more closely associate its Macs with the iPhone brand, and jump from today’s 8 to 10% of the US market to a figure closer to 30% within just a year. We already know Apple has 66% of the consumer-oriented retail market for machines above $1000 in the US; why not take the rest?

This suggests Apple could take the unusual step of releasing its new MacBooks and MacBook Pros together, perhaps even at the same time that it launches its new iPods, which do not appear to be taking any huge risks in terms of wild new designs this year.

By giving iPods a little bump and releasing them next to a new fleet of iPod touch-integrated laptops, Apple would blow out huge publicity right after having sold out its existing inventory of laptops to back to school buyers, who got free $299 iPod touch models as part of the deal.

And what about existing MacBook users? There’s no technical reason for not letting them plug their iPhone or iPod touch in via USB and activating it as a color touchscreen to expose the exact same functionality. That might prevent existing Mac and iPhone users from rushing to get a new LCD-equipped MacBook, but Apple really needs new buyers, not just more of the same.

The company plans to sell lots of iPhones over the next year, reportedly taking orders for 40 million. If only half of them also ended up buying a new laptop, Apple would double its entire installed base of Macs and triple its annual unit sales, easily outpacing Microsoft in revenues.

So far, the evidence is only circumstantial. Leaked images have only shown what purports to be the back of the new MacBook cases, not the touchpad area. We can only infer that Apple would want to sex up the trackpad in the same way that it lit up the PoweBook’s keyboard, and to continue following its incremental progress to deliver increasingly sophisticated multitouch trackpads in recent MacBooks and again on the Air.

We’ll have to wait a month or so to see if Apple will revolutionize its Mac laptops using the technology it has already paid for on the iPhone. I’m betting it will.

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  • Realtosh

    @ dicklacara

    #2) It does not matter whether you or I consider your slate product a cell phone. All that matters are the contractual obligations in the written agreement between Apple and ATT. The contract may cover all cellular devices made by Apple, or just a subset of cellular devices. You happen to believe that the agreement only covers a small subset of cellular devices. I t would make sense that ATT would want their agreement to at least cover all iPhones, including all updates to the iPhone and iPhone 3G. Whether the exclusive agreement also covers all cellphones and/or all cell phone devices is unknowable.

    The only condition about which I can feel certain, at least since the renegotiation, is that the exclusive agreement covers more than just the iPhone 3G. Whether it covers all cellular devices, no one outside of the involved parties can know or can reliably guess.

    Also consider that all of Apples devices so far have been based on GSM technologies. So one can reliably predict that much of Apple’s cellular research has centered on GSM technologies. Apple has the most experience with products that use GSM technologies, although they have most certainly hired some number of engineers that have experience working with CDMA cellular phone technology. It would make sense that Apple would develop products that incorporate cellular technologies with which they are most familiar. For now that means GSM technologies.

    lastly consider cross-selling. Apple would want any hypothetical cellular capable computer device to be available wherever the iPhone is available as well next to other Mac products where those are sold. It makes little sense to have an Apple data-capable cellular device with CDMA technology for sale at Verizon, and at the same time having its’ landmark cell phone, the iPhone 3G, for sale at competing cellular carrier ATT.

    It makes no sense to have Apple CDMA tablet or netbook for sale at Verizon, where they’ll be encouraged to purchase an iPhone competitor phone.

    I understand why people would want to see Apple devices on the major competing network to ATT, especially when ATT is dropping the ball with the reliability of its’ 3G network. The load from all the new iPhone 3G phones sold seems to overwhelm ATT’s 3G in a number of metro areas.

    Still, it makes sense for Apple to wait until the iPhone can be opened up from its’ exclusive agreement with ATT before thinking of adding CDMA-based products. If they spend the engineering resources to develop CDMA products, it makes sense to be able to use that engineering investment across their cellular product line. Plus, Apple will want carrier partners who offer Apple products to be able to offer the entire Apple cellular product line.

    As much as many would like to see an Apple CDMA data product on Verizon, it won’t happen unless 1) Apple is contractually able to do so, based on their exclusive agreement with ATT and 2) Apple would want to get back at ATT for providing sucky service.

    If Apple negotiated a faulty network service opt-out clause with ATT, the clause would almost certainly also apply to the central product of the exclusive agreement, the iPhone. That means that a Verizon netbook would be offered simultaneously with a Verizon iPhone.

    But don’t hold your breath. I’m not predicting such a drastic move. It makes more sense for the partners to work together to make the product the best they possible can as fast as humanly possible or faster.

    Listen up ATT. Stop antagonizing Apple.

    Apple is used to providing the best service to their customers. Having partners ruining Apple’s customers experiences is not something that Apple will tolerate for long. So, I thoroughly expect that ATT is at this moment building additional cells and adding as much capacity as possible to the urban centers that have experienced less than stellar 3G service.

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