It may be better late than never, but it's still a shame that Apple's (NASDAQ:AAPL) HomePod missed the busy holiday shopping season, instead getting officially delayed in November until "early 2018." Apple's foray into the booming smart speaker market was initially scheduled to launch in December, and smart speakers were incredibly popular gifts over the holidays.
The good news is that the HomePod could be imminent.
The Taipei Times reports that Inventec, one of Apple's two contract manufacturers for HomePod, has just started shipping the HomePod to Apple, with the first shipment comprised of about 1 million units. Prior reports from last August suggested that Inventec was only expected to ship about 500,000 units in December (before the device was delayed). Inventec is not expected to generate meaningful revenue from HomePod assembly this quarter, according to an anonymous source cited in the report, although full-year 2018 unit volumes are expected to be in the range of 10 million to 12 million. Inventec and Foxconn will split those orders.
Apple reportedly needed the additional time in order to improve the integration of software and hardware, suggesting that manufacturability is not an issue for the device, as is often the case with other new Apple products.
Apple is still lagging its rivals
At 10 million to 12 million expected units, that would translate into $3.5 billion to $4.2 billion of HomePod revenue for the year, or about 1.3% to 1.5% of the $273.8 billion in 2018 revenue that the Street is currently modeling for. (Not exactly a needle-mover, financially speaking.)
However, market researcher Canalys estimates that global smart speaker volumes will reach 56.3 million units in 2018, in which case Apple could theoretically grab over 20% unit share at the high end if those estimates prove accurate. The challenge is that forecasting a market that's this young and growing this quickly is fundamentally difficult, and Canalys' estimates could easily be off.
Beyond financial results, HomePod is Apple's first voice-controlled smart speaker and remains quite important strategically. Smart speakers have emerged as a product category that is intricately linked to smart-home technology, and rivals have leapfrogged Apple in voice-controlled virtual assistants. Apple's unwillingness to support third-party integrations for Siri in the way that Amazon.com and Alphabet subsidiary Google do with their respective assistants (prototype products integrating Alexa and/or Google Assistant were featured heavily this year at CES) will also hurt adoption of its virtual assistant.
There's also the issue of only offering one product at a premium price point, making the prospect of buying multiple HomePods for different rooms extremely expensive, perhaps prohibitively so. Apple has been a laggard in the markets for virtual assistants and for smart-home technology, and that overall technological and strategic position probably won't change in 2018, even if Apple grabs meaningful unit share out of the gate.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends GOOG, GOOGL, AMZN, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.