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Massive success paves way for automotive entry

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Apple’s Senior Vice President of Software Engineering Craig Federighi speaks about CarPlay on stage during Apple’s World Wide Developers Conference in San Jose, California on June 05, 2017.

Josh Edelson | AFP | Getty Images

In the early 2010s, automotive manufacturers and their suppliers were excited about building sophisticated apps for car dashboards that went beyond a CD player and a tiny LED screen.

Partnering with companies like Microsoft, car makers started to come up with services for maps, music, and on-road assistance, often bundled into an upgrade package. They entered into large consortiums to create industry standards to connect smartphones to cars.

Then Apple came in and changed everything.

Apple introduced CarPlay in 2014 as a way to integrate the iPhone and a car’s dashboard. Since then, it’s become ubiquitous in new cars.

Around the world, over 80% of new cars sold support CarPlay, Apple said last year. That works out to about 600 new models, including cars from Volkswagen, BMW, and Chrysler. Toyota, one of the longest holdouts, started including CarPlay in 2019 models.

It’s also a top feature for many drivers and car buyers. Twenty-three percent of new car buyers in the U.S. say they “must have” CarPlay and 56% percent are “interested” in having CarPlay when buying a new vehicle, according to a 2017 Strategy Analytics study. When Ford’s highly anticipated electric F-150 goes on sale, it will support CarPlay.

Apple was able to insert itself in between customers and car companies and make sure that its interface was the one that every iPhone user wants while driving. It’s an under-appreciated triumph for one of the world’s most successful companies. CarPlay doesn’t contribute direct Apple revenues or profits. But it ensures ongoing loyalty of iPhone users and gives Apple a pathway into the auto industry if it wants to expand.

The power of the smartphone

Easily control your music in CarPlay with iOS 13.

Most cars use an infotainment operating system based on Linux, BlackBerry’s QNX, or Google’s Android Automotive to run a screen embedded into the car’s dashboard. The infotainment systems often have their own music or maps software, and car companies sell wireless subscriptions and other upgraded features for them.

CarPlay runs on top of those infotainment operating systems and allows iPhone owners to access their most important apps while driving in a way that’s safer than looking at their phone. Through CarPlay, users can pull up Apple or Google Maps, play Apple Music or Spotify, or dictate a text message to send home. All that processing happens on the phone itself.

CarPlay, and a rival Android program, Android Auto, aren’t car operating systems. It’s really phone software, said Mark Fitzgerald, analyst at Strategy Analytics. Ultimately, it’s like using your car’s display as an external monitor for your phone.

“What’s in your car, when you plug it in, there is essentially a client software client that is just rendering stuff from your phone on your infotainment system display,” Fitzgerald said.

Many users find that’s all they need.

When users have both CarPlay and a built-in system, they tend to use CarPlay. 34% of CarPlay users surveyed in 2018 by Strategy Analytics said they only use CarPlay when in their car, and 33% said they mostly use CarPlay. Only 4% of surveyed users say they use the embedded system in favor of CarPlay.

Apple has also expanded CarPlay over the years to make it more valuable to iPhone owners.

When CarPlay first came out, it required a cord to connect your phone to your car. In 2015, Apple started supporting wireless Bluetooth connections, allowing users to start CarPlay just by getting in the car and having their phone connect. While it took a few years for new cars to support this feature, it’s now widespread.

Last summer, Apple and BMW announced that users could use their iPhone to unlock car doors or even start the engine, and Apple is participating in a standards group to spread the feature to more car makers.

Google has similar software, called Android Auto, that extends its Android operating system into the car’s dashboard. CarPlay and Android Auto are not mutually exclusive — a car that supports one typically supports the other. It’s popular, with its Android app having been downloaded 100 million times by 2020.

When it started to become obvious to carmakers that the computing power and software in smartphones would improve much more rapidly than they’d be able to improve their built-in infotainment systems, they tried to adjust.

The Car Connectivity Consortium, which includes most of the top car manufacturers and the most important suppliers, developed Mirrorlink, an open standard for connecting smartphones to car systems. It rolling out in 2011, but was quickly superseded by Apple and Google.

Samsung, the standard’s biggest backer, and which which also owns a major dashboard supplier, stopped supporting Mirrorlink in its phones last year. No other major Android brand is still supporting it and the consortium’s website lists only several older devices as supported devices.

A big leap to self-driving cars

The new Dashboard mode in CarPlay.

Mack Hogan | CNBC

Apple’s success with CarPlay explains the automotive industry’s interest in rumors that Apple plans to build its own car. If Apple had so much success taking over the dashboard, maybe the company can parlay that into a competitive vehicle.

Since 2014, media reports have said Apple is exploring at least the software for a self-driving electric vehicle. Earlier this year, Hyundai said in an official statement that it was in talks with Apple about manufacturing its car before it walked back, most likely due to Apple’s strict secrecy requirements. Hyundai eventually said it was no longer in talks with Apple.

Automotive execs showed outward confidence but respect for the challenge an automotive Apple might present. Volkswagen’s CEO said he was “not afraid” of Apple entering the market. BMW’s CEO said he “sleeps peacefully at night” in response to questions about Apple’s plans. Toyota’s CEO warned that making a smartphone is much different than making a car.

Apple’s ultimate plans remain unclear. According to a Reuters report, Apple still could decide to sell software and hardware — an autonomous driving system — to carmakers, instead of designing its own vehicle.

But if Apple were to enter the car world, it would require a fundamentally different strategy than CarPlay.

CarPlay is mainly about making the iPhone more desirable. It also offers also other benefits to Apple, such as making Apple Music subscriptions more valuable — people want to play music in their car, but need an easy way to control it while driving. In a March note, Citi analyst Jim Suva estimated that CarPlay could add $2 billion to Apple’s annual services sales.

But CarPlay in itself is not a moneymaker. Currently, CarPlay is free in most new vehicles, from basic models all the way up to luxury SUVs. BMW used to charge users a monthly fee to access CarPlay, but stopped in 2019 after customers complained.

Apple says doesn’t charge automakers to use the software. It’s not a licensing business. (If it were, Apple could bundle it at $750 per unit and sell 9 million units by 2025, generating $6.5 billion in sales, Suva estimates.)

Apple could use its foothold in the car to support more of its ambitions. It’s already using its App Store distribution platform to encourage software developers to optimize their apps for the car, in categories such as finding a car charger, ordering food, or finding a parking spot. Those features would be a core part of an Apple in-car experience. Apple also collects data necessary to run CarPlay, and even if this data is anonymized to ensure user privacy, it gives Apple a lot of raw information about what people do in their cars.

But CarPlay could not power a self-driving car, which requires different chips and specialized hardware that’s been qualified for use in the car.

If Apple were to sell software to self-driving car makers, it would take a different form than CarPlay. Google’s automotive fragmentation is a good example: It’s building Android Automotive as a car operating system, Android Auto as a CarPlay competitor, and funded the development of Waymo, a self-driving technology company and car service that’s now a sister company within Alphabet.

Still, CarPlay’s success could create built-in demand for an Apple Car — or at least ensure that consumers don’t dismiss the idea as crazy.

Apple typically unveils updates to its CarPlay software at its annual developer’s conference, WWDC, which starts on June 7 this year.

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More money chases Indian tech start-ups as investors shun Chinese names

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Zomato food delivery partners is seen on a road in Kolkata , India.

Debarchan Chatterjee | NurPhoto | Getty Images

At a time when investors are selling Chinese technology stocks, more money is chasing Indian start-ups.

Shares of food delivery app Zomato soared as much as 82% in their debut Friday on the National Stock Exchange of India. The initial public offering was priced at 76 rupees per share, or a little more than $1 per share. The stock opened more than 50% higher, valuing the company at about 910 billion rupees or $12.2 billion.

Jayasankar Venkataraman, head of equity capital markets at Kotak Investment Banking, said before trading started that the IPO was oversubscribed for institutional and retail investors.

“I think Zomato’s successful IPO might open the floodgates,” said Anirudh Suri, founding partner of the India Internet Fund. Suri has invested in 20 start-ups across India.

Tech giant Uber sold its India food delivery business to Zomato last year in an all-stock transaction that gave the U.S. company a stake. Zomato’s other prominent backers include Indian internet company Info Edge, Alibaba-affiliate Ant Group and Singapore state investor Temasek.

Sources told CNBC that after listing in India, Zomato has plans to make its debut in the U.S.

As to which companies will be next to go public, Suri said he’s betting on Paytm, which claims among its backers Japan’s SoftBank, Ant Group and Berkshire Hathaway.

India payments company Paytm recently filed its IPO paperwork with a goal of raising $2.2 billion in its public debut this November.

Overall, Indian start-ups raised $12.1 billion in funding in the first six months of the year, compared with the $5.3 billion raised during the same period last year, according to Venture Intelligence.

What’s behind the recent pivot to India?

Somesh Dash, general partner at venture capital firm IVP, said that investors are waking up to the idea that China no longer has the best growth story in town.

“China doesn’t have a lot of young people. India does. What the Indian economy presents is a growing middle class and a dynamic workforce: one of the largest populations in the world. It’s very attractive from a longer-term perspective,” Dash said.

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Amit Anand, co-founder of exchange-traded fund company NextFins, expects Indian tech IPOs to price at a premium multiple compared with Chinese companies, citing growth in internet penetration.

“Investors recognize the long runway for internet penetration. E-commerce penetration in India is 7% versus 25% in China. Smartphone penetration in India is about 30%, less than half of China’s 60%,” said Anand, who formerly worked for Axial Capital.

Anand and his partners at NextFins launched the Nifty India Financials ETF on the belief that investors will want more exposure to India’s secular growth story, especially as internet and smartphone penetration continue to rise. INDF’s assets have tripled since the beginning of the year and are up 50% since June.

“Investors are betting that as these people enter the workforce, they will consume more and need financial products like credit cards, mortgages and auto loans. That’s why e-commerce and fintech companies have been the primary recipients of venture capital investment in India,” noted Anand. With more tech companies going public in India, he now has plans to launch an ETF focused on Indian tech stocks.

“The tech indices in India currently track the large outsourcing companies; there is no way for investors in either India or the U.S. to target faster-growing internet companies,” he said.

Some of the country’s unicorns, those companies worth $1 billion or more, continue to raise additional rounds, capitalizing on the strong interest in India tech. Hotel start-up Oyo, backed by SoftBank, raised an additional $660 million. E-commerce platform Flipkart raised $3.6 billion at a mega-high valuation of $37.6 billion, the largest fundraise for an Indian company. Key investors include the Canada Pension Plan Investment Board and Walmart.

Like China, data privacy issues do exist in India. Last week, Indian regulators banned Mastercard from issuing new credit cards to customers in the country after not complying with data privacy rules. Key question venture investors are trying to answer are whether India’s government will carve out its own path or follow China’s lead on the topics related to regulation and overseas listings.

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Asia-Pacific stocks set for mixed start after Wall Street record close

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SINGAPORE — Shares in Asia-Pacific looked set for a mixed start after the major indexes on Wall Street sailed to record closing highs last week.

Futures pointed to a higher open for Japanese stocks. The Nikkei futures contract in Chicago was at 28,230 while its counterpart in Osaka was at 27,910. That compared against the Nikkei 225’s last close at 27,548.

Australian stocks, on the other hand, looked poised to open lower. The SPI futures contract sat at 7,335.0, against the S&P/ASX 200’s last close at 7,394.40.

On the economic data front, Singapore’s industrial production figures for June are set to be out at 1:00 p.m. HK/SIN.

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On Friday, the Dow Jones Industrial Averaged closed above 35,000 for the first time ever while the S&P 500 jumped 1.01% to 4,411.79 and the Nasdaq Composite gained 1.04% to 14,836.99. Friday’s moves upward saw all three major indexes stateside at new closing highs.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.885 following a recent bounce from below 92.8.

The Japanese yen traded at 110.53 per dollar, weaker than levels below 110 seen against the greenback last week. The Australian dollar changed hands at $0.7368, above levels below $0.732 seen last week.

Here’s a look at what’s on tap:

  • Singapore: Industrial production for June

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Stock futures hold steady ahead of a huge week of Big Tech earnings

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Traders working at the New York Stock Exchange (NYSE), today, Wednesday, April 21, 2021.

Source: NYSE

Stock futures opened little changed after the major averages finished the previous session at record closing highs and ahead of a busy week of earnings reports from technology’s heaviest hitters.

The Dow Jones Industrial Average eased by 5 points, or 0.01%. S&P 500 and Nasdaq 100 futures dipped 0.03% and 0.01%, respectively.

In the previous session, the Dow jumped 238.20 points, or 0.68%, to 35,061.55. The S&P 500 gained 1.01% to 4,411.79 and the Nasdaq Composite climbed 1.04% to 14,836.99.

All three of the major averages finished at record closing highs last week after the markets tumbled at the start of the week on concerns about the spread of the delta variant of Covid and how it would potentially hinder the economic recovery. The uncertainty briefly sent bond yields lower, and investors jumped into tech stocks. Both bonds and equities rebounded quickly by the end of the week.

Tech stocks rose last week on better-than-expected second-quarter earnings reports, as well as the continued spread of the delta variant. Twitter and Snap each surged Thursday following better-than-expected second-quarter earnings reports. Twitter ended Friday 3% higher, while Snap shot up 24%.

One of the busiest weeks of earnings reports is on deck in the week ahead, with Tesla kicking it off after the closing bell. Last week, CEO Elon Musk said the automaker would likely start accepting bitcoin for vehicle purchases again.

Big tech giants Apple, Alphabet and Microsoft are all set to report on Tuesday, and Google, Facebook, and Amazon will also report later in the week.

Investors will be watching the Fed’s two-day policy meeting, beginning Tuesday. The Federal Open Market Committee and the Board of Governors are expected to issue a statement on the stance of monetary policy Wednesday. On Thursday the Commerce Department will report second-quarter GDP data.

On Monday morning the U.S. Department of Housing and Urban Development will release new home sales data and the Federal Reserve Bank of Dallas will release its monthly business activity index for manufacturing in Texas.

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