How Apple’s investment in Didi Chuxing fits into its grand vision

Image credit: PublicDomainPictures.net

Last year, I speculated that an alliance between Didi Kuaidi, Grab, Lyft, and Ola was inevitable, given how much they stand to gain by uniting against Uber. Luckily, I was right, and the stage was set for an epic battle.

I might’ve been wrong on one count: underestimating just how gigantic the battle would become. Here’s what I wrote:

Uber will find itself fending off a mega-entity brokered by Alibaba and Softbank, probably consisting of some combination of Didi Kuaidi, GrabTaxi, Ola, and Lyft. It’ll end up becoming a two-horse race, much like Apple and Microsoft in the past for personal computers or Apple and Google today for smartphones.

What I didn’t count on was Apple entering the fray, which it did in spectacular fashion by investing US$1 billion in Didi Chuxing (previously Didi Kuaidi).

While the investment does bring about some short-term benefits (which my colleague Steven has cogently written about), I want to discuss the possible long-term play: that Apple itself could be entering the on-demand transportation fray to compete against Uber.

We all know that given Apple’s vast resources, it can do whatever it pleases.

But let’s examine why it makes perfect business sense. And it starts with two words:

Vertical integration

Apple designs its own chips, and integrates that with its hardware. Image credit: Wikimedia

Apple’s edge lies in how it controls so much of its supply chain. Here’s how Time’s Ben Bajarin eloquently puts it:

Competing with Apple is difficult because Apple is actually four diverse and thriving companies all wrapped up into one. It’s a hardware company, a software company, a services company, and a retail company. Most technology companies in the world can manage one or two of these disciplines, but only Apple has all four entities working in harmony.

Apple’s massive pivot

Apple’s Didi

Caveats