iPanel

Tell me again. Why do we think Apple will make a TV set?

April 17, 2012: 4:30 PM ET

After four years of speculation there's still not a shred of hard evidence

A lot of analysts talk about Apple's (AAPL) plans to make a television -- an actual TV set, not just a set-top box -- but last week, Jefferies' Peter Misek did something most have been careful not to do.

Citing "increased confidence" that Apple's iTV is coming, he wrote into his published forecasts the revenue from its sales: 2 million units in the second half of 2012 and 10 million in 2013. He even factored in a "halo effect" for what he now believes will be called iPanel, whereby anybody who buys one will also purchase either an iPad or an iPhone.

Hold on just a minute. How do we know this thing is coming?

In his latest note, Misek cites three reasons:

  • The $800 million Hon Hai (A.K.A. Foxconn) spent to buy a 50% interest in Sharp's  large-panel TV plant in Sakai, Japan.
  • Reports that small quantities of polarized films, filters, and IGZO components have begun to ship to Apple's Asian panel suppliers.
  • Reports Apple is doubling the size of its already massive North Carolina data center.

Suggestive, yes. Dispositive, no. I can can think of a half dozen explanations for each of Misek's reasons that have nothing to do with Apple making TVs.

More to the point, there are plenty of very good reasons Apple would NOT want to get into TV manufacturing business. For starters (with thanks to Marco Arment and others):

  • The market is crowded with low-cost producers
  • The margins are terrible
  • The machines are big and heavy and often require professional installation
  • They need large retail display areas and lots of warehouse space
  • There's no single global market. (It's ATSC in the U.S., DVB in Europe.)
  • People tend hold on to the TVs for decades. (Apple prefers to sell products that get frequently replaced -- every two years for iPhones, every three years or so for Macs.)
  • Dealing with the cable companies that control the local delivery of content is like dealing with mob.

That said, there are a lot of people rooting for Apple to do what it does best: smooth and simplify the proliferation of remotes, the tangle of cables, the nightmare interface that is today's television.

We know Steve Jobs was keenly interested in TV, and not just as a hobby. Before his death he famously told his biographer that he had cracked the interface problem -- perhaps using voice commands. And we know that he was trying to talk the networks into letting Apple sell a monthly subscription service that would offer viewers, in essence, the best of television without the headaches.

But as Asymco's Horace Dediu pointed out last December, these are software, not hardware problems. They can all be accomplished by perfecting what he calls the solution that's "hiding in plain sight."

It's called Apple TV.

It costs $99. You plug it into your existing HDTV, or beam the signal wirelessly over Air Play.

You don't need to buy a new TV set from Apple.

One more thing. No one has championed the idea of an Apple-branded TV set longer or more enthusiastically than Piper Jaffray's Gene Munster, who has been writing about it since 2009. But what set him going down this path? The answer came in a Munster profile published last Friday in Bloomberg Businessweek:

"Somebody close to Apple said we needed to be doing more work on the television and that started it all," Munster says. "You start with these crumb trails, then it turns into a dirt road, and now it's a paved road."

Indeed it is. But what if Munster's tipster was trying to lead him to Apple TV, the set-top box, and not some still-mythical TV set?

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