The iPhone is no longer a money cow. What does Apple make money from?

category:Internet
 The iPhone is no longer a money cow. What does Apple make money from?


For most of the past decade, the story of Apple has been the story of the iPhone. But during that time, Apple also learned a clever trick: how to make about one billion iPhone users pay for the growing number of non iPhone products and services.

This diverse way of making money is crucial because fewer and fewer people on earth have ideas, the ability to buy Apple products, and access the apple ecosystem.

Figure: the number of first-time iPhone buyers has fallen every year since reaching a historic peak of 129 million in 2016. In 2019, the figure is 63% lower than the peak.

According to Neil cybart, Apples independent analyst, the number of first-time iPhone buyers has fallen every year since reaching a historic peak of 129 million in 2016. The figure is 48 million in 2019 and is continuing to decline. However, Apples quarterly revenue hit a record high in the holiday season last year.

The money is earned by apple from consumers who use devices rather than buy them. Apple will host its first annual global Developers Conference online on Monday. In the run-up to the conference, the interests of apple and its developer community had never been so important, but the conflict had never been so intense.

Patrick Moorhead, President of moorinsights & strategy, a technology research firm, said that in a global economic downturn, the number of people who buy mobile phones is likely to decrease. Apple said in a recent earnings conference call that people have been holding iPhones for ever longer, and that the company has been trying to persuade customers to upgrade their iPhones by lowering prices for some time.

Analysts at Goldman Sachs predict that consumers who actually buy iPhones may choose cheaper models, which further reduces the average device price of Apples iPhone business, which is extremely important. Of course, as long as iPhone owners continue to spend money on other aspects of Apples earphones, such as airpods and apple music services, the impact may diminish, and Apples accessories and services have a higher profit margin than its high-end hardware.

Figure: the number of active Apple Devices in the world is still growing.

At Apples latest earnings conference call, Luca Maestri, chief financial officer, said the company sold $6.3 billion in wearable devices, home furnishings and accessories, including apple headphones, apple watches and smart speaker homepod, and that 75 percent of Apple watches sold in the quarter were first purchased by consumers. Apple has said that the scale of such product business itself is equivalent to that of a fortune 140 company, which means that this business alone can generate about $22.5 billion in annual revenue.

To get iPhone users to buy expensive Apple products such as laptops, Apple needs to do something it hasnt done for a long time: prioritize the MAC business.

Another lever apple can use for iPhone loyal users is to provide funds to buy Apple products. On June 15, Apple announced that consumers can buy Apple products with zero interest installment payment of Apple credit card. Of course, any fees incurred will also boost Apples service revenue.

Image: the new iPhone ESE, released in mid April this year, costs half the usual price of the new iPhone, targeting new customers in emerging markets.

According to the Brookings Institution, the number of middle-class people in the world will grow at an annual rate of 160 million by 2030 before the global economic downturn. At present, more than 3 billion people are eligible, and their daily income is between $11 and $110, adjusted by region. Most people cant afford the $700 iPhone 11, Apples flagship model. The $400 iPhone ese is not particularly cheap, but it may be more affordable for many people.

The key to Apples current strategy is that while the company is no longer so dependent on making money from selling iPhone devices, the iPhone business remains at the heart. If the iPhone loses market share, the momentum for Apples success may suddenly stop, or even reverse. If this happens, its either because Apple has been subverted by some of its competitors new technologies, or because the global economy has made it impossible for most people to buy iPhones anymore.

Apples growing business model also has a potentially fatal weakness: more and more institutions and organizations claim that Apple uses its monopoly position to charge abnormally high prices and suppress competitors, including EU regulators and technology companies such as spotify, tile and Basecamp. While Apple has never dominated the global smartphone market share, it does dominate its own device ecosystem. The more apple tries to use this advantage to drive growth, the more likely it is to be abused.

Its disappointing that the European Commission has fostered unfounded complaints from companies that just want to hitchhike and dont want to follow the same rules as others, Apple said in a recent statement We are proud of the countless developers who have innovated and succeeded through our platform.

Apple further argues that when Android is still the largest share of the global smartphone market, it is impossible for apple to become a monopoly or abuse the control of its own platform. Apple also recently announced that the app store has generated more than $500 billion in revenue for companies outside apple. It also points out that 84% of apps in the Apple App Store dont have to pay Apple anything. Although the scale is already quite large, Apple has found a way for the company to continue to grow, that is, through vertical integration, to attract consumers with more devices, accessories and applications, and to sell a large number of low margin mobile phones. But apple cant do it alone, and everything depends on software and content partners, regulators, and more than a billion loyal customers. (Chen Chen) source: Ding Guangsheng, editor in charge of Netease technology channel_ NT1941

Apple further argues that when Android is still the largest share of the global smartphone market, it is impossible for apple to become a monopoly or abuse the control of its own platform. Apple also recently announced that the app store has generated more than $500 billion in revenue for companies outside apple. It also points out that 84% of apps in the Apple App Store dont have to pay Apple anything.

Although the scale is already quite large, Apple has found a way for the company to continue to grow, that is, through vertical integration, to attract consumers with more devices, accessories and applications, and to sell a large number of low margin mobile phones. But apple cant do it alone, and everything depends on software and content partners, regulators, and more than a billion loyal customers. (Chenchen)