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As many expected, Apple Inc. (NASDAQ: AAPL) unveiled the new iPhones at its September 12 event. Since Steve Jobs launched the first iPhone in 2007, the smartphone has generated a significant portion of revenue and results from Apple. Today, the most important division of the technology giant is still far away.
In its most recent earnings report, Apple sold 41.3 million iPhones in the third quarter, generating $ 29.91 billion on a total revenue of $ 53.27 billion. Although unit volumes increased only 1% year-over-year, the division's revenues increased by 20% due to higher average selling prices (ASP), according to management.
In addition to sales of the physical product itself, the iPhone has provided Apple with a gateway to reach hundreds of millions of users and sell new products and services via a distribution channel that we carry in our pockets.
The market is arguably more competitive today, as well-capitalized technology giants compete with massive device sales (not to mention billions of accessories), combined with recurring revenue streams. generated by the operators.
Battle for the smartphone market
There are not many products that have a total addressable market like smartphones. Market research firm Newzoo recently released a report containing highlights:
- There are currently about 3 billion smartphone users in the world. Newzoo estimates that this number will reach 3.8 billion by 2021.
- China, India and the Asia-Pacific region are the main markets in 2018, with respectively 783 million, 375 million and 441 million smartphone users. An example of the importance of the Chinese smartphone market is the fact that Apple has built new versions of its phones with dual SIM technology with physical slots since the eSIM technology of other versions is not widely compatible with networks. Chinese mobiles.
- By the year 2021, the number of smartphone users in China, India and the Asia-Pacific region is expected to reach 918 million, 601 million and 580 million respectively.
Not only is smartphone penetration expected to continue to grow, Newzoo also estimates that global spend on apps will grow at a compound annual growth rate of 20.7% through 2021. By 2018, overall revenue from apps is expected to reach $ 92.1 billion, according to their report. By 2021, they are expected to reach $ 139.6 billion and gaming applications, $ 33.3 billion.
Apple's service category, which includes sales of apps, music, movies, and other products on the company's devices, has become the second division behind the iPhone. In the third quarter of the year, revenue from services grew 31 percent year-over-year to $ 9.55 billion, according to Apple reports.
Apple has built much of its business on the smartphone, while other tech giants have tried to incorporate them later in the game.
Amazon.com, Inc. (NASDAQ: AMZN) Fire Phone's short-term led the company to take a $ 170 million charge related to the costs associated with the smartphone, the company reported in 2014. Shortly after, Amazon launched its virtual assistant Alexa. the features widely used on smartphones.
Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) Google has developed the Android mobile operating system, open source, and the most used mobile operating system in the world with 84.8% of market share in 2018, according to the research firm IDC.
And after many years of partnership with other manufacturers, Google has released two versions of its own smartphone, the Pixel. The next version, Pixel 3, should be launched at the company's next event on October 9th.
Overseas in China, Xiaomi and Huawei are two of the leading manufacturers. Both companies have grown over the years. Huawei had a 15.8% market share based on smartphone shipping volumes in the second quarter of 2018, placing it in second place Samsung Electronics Co. Ltd. (OCTMKTS: SSNLF) 20.9% market share, according to IDC. Meanwhile, Apple ranked third with 12.1% market share and Xiaomi ranked fourth with 9.3%.
What is the next step for smartphones? As they are already filled with essential features, many companies have focused on making incremental improvements, such as larger screens, better cameras, faster chips, and more. This allowed them to reach higher ASPs and increase sales faster than unit sales as customers were upgraded.
Technology analysts have already begun to think about what could replace the smartphone later. After the presentation of the new Apple Watch on Wednesday, a small number of analysts have estimated that the sales of the laptop could eventually exceed the iPhone at some point, although this seems far given the current sales figures of the company.
Technology companies also seem to think there is a potential for technology glasses. Apple would have worked for a while on a pair that could be launched in 2020. Google Glass is used by a number of major manufacturers, but it has encountered public acceptance difficulties when it was launched and has not been widely adopted as a consumer. product.
If history is a lesson, the smartphone may be destroyed by new technologies. But for now, the market should continue to grow.
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