Apple's AirPod business is big and could become much bigger

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Apple

The June quarter's financial results received a surprise boost from the company's portable equipment sector. At a time when iPhone sales were still low, wearing apparel technologies grew by more than 50%, driven by strong demand for both AirPods and the Apple Watch. The question now is: how big is Apple's apparel business?

UBS analyst Timothy Arcuri addressed this issue at the end of last week and concluded that apparel technologies "really move the game" on Apple's financial performance. It notes that Apple's apparel segment (the company also includes HomePod and accessories in this category) is now the size of a Fortune 200 company over a 12-month period. In June, Apple reported $ 5.5 billion in apparel products, surpassing the $ 5 billion iPad sold by the iPad, slightly less than the $ 5.8 billion sold by Mac over the past year. quarter and almost half the size of the services branch of the company.

UBS interviewed Apple iPhone users and found that only 7% owned AirPods. Arcuri expects AirPod's installed base to exceed 100 million in September 2020, with potential to generate nearly $ 10 billion in revenue by 2021. Combine that with its $ 20 billion revenue estimate. Apple Watch, he said. you get the revenue equivalent of selling 40 million iPhones. Arcuri notes that the adoption of AirPod could accelerate significantly if Apple finally goes completely wireless charging and removes the charging port of the phone.

According to Arcuri, the UBS survey has revealed (unsurprisingly) that the connection rate for AirPods is increasing for newer models – but even for the iPhone X generation phones, only 12% own AirPods. For iPhone 6 or older users, the attachment rate is only 3%. The UBS analyst concludes that the number of iPhone users also using AirPods is expected to increase as customers upgrade, especially in the fall of 2020, when the first 5G iPhones arrive.

UBS expects AirPod sales for the year 2019 of 40 million units, generating a turnover of 6 billion dollars and bringing the attachment rate to 8% at the end of the year. For fiscal year 2020, it expects sales to reach 51 million units, bringing the participation rate to 13%. Arcuri estimates that each percentage point of increase in the attachment rate equates to 10 million AirPid units and a turnover of about 1.5 billion USD at an average price of 150 USD.

In the meantime, the analyst estimates that the purchase rate for Apple Watch is a little higher than for the AirPod, about 12% in total and 20% for iPhone X or later. "We expect the adoption of Apple Watch to increase over time," he writes, "especially since Apple adds more features and health features." .

Write to Eric Savitz at [email protected]