Richard Windsor
7 September 2017

Apple - SiriKit?

There are very good reasons to launch SiriKit

Apple has made some changes to executive responsibility for Siri that we see are a sign that things are not going very well and that changes are required. Given Siri’s weakness, we do not see much downside for Apple in allowing third parties to implement the digital assistant in their hardware presumably using an SDK called SiriKit.

Responsibility for Siri has moved from services (Eddy Cue) to software (Craig Federighi) which is pointing to much deeper integration of Siri into the Apple ecosystem. The way this kind of development works is that the services are developed on top of the finished product of the software department. With Siri as part of the software department it can be much more deeply integrated as the software is created and refined which should allow its functionality to be meaningfully enhanced. However, what is unlikely to change is that fact that Siri is just not that smart and is easily outperformed by Google Assistant and even Amazon Alexa on occasion. This is due to the fact that Siri has not been in existence for very long and that its global learning capability is hobbled by Apple’s implementation of differential privacy. The net result is that Siri is falling behind in the AI race and moving Siri to software will not really solve the problem.

To really improve, Siri needs to be used and this is where the problems really begin. Usage of Digital Assistants primarily occurs when users’ hands are busy which currently means in the car and in the kitchen. Apple’s position in both of these areas is quite weak and a $500 Home Pod that is nearly 4x more expensive than Google Home and 10x more expensive than the cheapest Amazon Alexa device is unlikely to help penetration. Apple’s strategy to date has been to drive differentiation and desire through software that can then be monetised by selling hardware at premium prices.
This is why it keeps all of its software to itself but Siri can be an exception. Firstly, we do not think Siri is differentiating for Apple because it is a substandard service. Consequently, if it was removed from Apple products or allowed to appear on the products of third parties, we do not think this would affect Apple’s ability to price its hardware at a premium. Secondly, Siri is driven by AI and the AI community is far more open and collaborative than Apple has been historically. For example, DeepMind published its method for creating AlphaGo which in our opinion was then immediately copied by Tencent to create its own AI Go player.

Apple has opened up a little bit and has begun sharing and publishing some of its methodologies for Siri which we suspect will increase over time. As a result, we see only upside for Apple in making Siri available for third parties to put on their devices. Siri on third party hardware is very unlikely to damage Apple’s hardware business and at the same time could result in many more devices in the places where digital assistants are most used. The net result would also be more data collection and learning that would help make Siri better. This would represent a big departure from the way Apple has been doing businesses and there is a possibility that Apple has become too big and too set in its ways (like Nokia was) to make a departure of this magnitude. Consequently, the probability of Apple launching SiriKit is pretty remote which is will to allow Google and Amazon to continue dividing the market between them. Our top picks remain Tencent, Microsoft and Baidu.

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