Apple Inc.'s Project Titan Just Sped Up
For a company at the very top of the corporate ladder, some of the most important shifts in its vaunted history still lie ahead for technology giant Apple .
As it continues to lay the foundation to grow sales and profits, while the iPhone and iPad mature, Apple has a number of intriguing growth drivers making their way to the marketplace. The Apple Watch arrived earlier this year, although its financial impact has yet to be felt. Apple has also continued to position its HomeKit OS to benefit from the eventual rise of the connected home.
However, Apple's much discussed automotive effort, dubbed Project Titan, has perhaps captured investors' imaginations the most since details first surfaced earlier this year. And given the massive potential that Project Titan carries, recent news that Apple has accelerated its production schedule could prove the most significant Apple storyline this year, beyond the debut of the iPhone 6s.
Apple's Project Titan revs into high gear According to recent reporting from The Wall Street Journal, Apple has accelerated the timetable for Project Titan, granting it the title of a "committed project" internally. Citing sources at the company, management has reportedly increased the resources dedicated to bringing Project Titan to market, including allocating its leaders the resources necessary to triple the project's headcount from the roughly 600 currently working on it. These additional resources are apparently part of a broader internal push, which has seen Apple attach a target ship date of 2019 for the project.
It's worth noting that the term "ship date" doesn't necessarily reflect the target date the product will be available. The term can also refer to the deadline by which engineers must approve of the core design. And given Apple's preference for nailing product design at the expense of timing, the target ship date of 2019 is probably less ironclad than it might appear. This all sounds great on paper, but I, and plenty of other analysts, find this timetable problematic for a few critical reasons.
Real artists shipAlthough the timeframe has tightened a bit in recent years, typical automotive design cycles run for seven to eight years. However, it does feel as if a lot will have to go perfectly for Apple, a company with no experience in the automotive industry, to meet this ambitious deadline.
Apple is perhaps the best company in the world at managing its supply chain, with Apple CEO Tim Cook playing an especially pivotal role in creating its best-in-class inventory management practices. But even with its reputation for design and supply chain excellence, can Apple rewrite the industry rules? Apple also reportedly plans on continuing its successful contract manufacturing practices with Project Titan, but with contract manufacturing largely a niche practice within the auto industry, Apple's ability to find a capable assembly partner to help it meet this aggressive schedule just adds one more wrinkle.
A massive market to disrupt If Apple can skirt the low-margin aspects of the automotive business, as it has successfully done with its consumer electronics businesses, there's an attractive financial opportunity for the company and its shareholders. Consider that the global automotive industry accounts for roughly $2 trillion in annual economic output each year, with North America accounting for $500 billion of those sales. Given the extended timetable, estimating the degree to which Project Titan could influence Apple's own financials is almost pointless.
Apple has ccome a long way from the focused 2x2 matrix that Steve Jobs reportedly drew when refocusing Apple's product portfolio upon his return to Apple in 1997. However, for Apple to continue to disrupt new industries and produce returns for its shareholders, the company must continue to take big risks. So while Project Titan remains years away from contributing to Apple's bottom line, investors can take solace in knowing that Apple remains as ambitious as ever.
The article Apple Inc.'s Project Titan Just Sped Up originally appeared on Fool.com.
Andrew Tonner owns shares of Apple. The Motley Fool owns and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.