Where will Apple go in the next decade?
Editor’s note: This article is from the WeChat public account “AI Frontline” (ID: ai -front).
Author | Liu Yan
Edit | Linda
After more than a year of hard times, Apple has finally fought a beautiful “turn over battle.” At the end of 2018, Apple reached the peak of “trillion-dollar market value” and soon fell off the altar, ushering in a “roller coaster” in 2019.
After experiencing a series of challenges such as the loss of the first year, the continued decline in iPhone sales, the absence of 5G, and the market value falling below one trillion US dollars, Apple has made a number of “self-help” efforts to restore the hardware trend. At the end of 2019, Apple finally “salted fish” from the plight of “Apple’s slow-selling and rescued Apple” at the beginning of the year, and its market value returned to trillions of dollars, creating the best market value and price-earnings ratio in ten years. Apple’s best year in ten years. And where is the future of Apple in the next decade?
Apple shares up 86% in 2019
According to data from S & P Global Market Intelligence, Apple’s stock price is up 86.2% in 2019. As of press time, Apple has a market value of 1.39 trillion US dollars, more than Microsoft and Google, equivalent to more than twice as much as Facebook.
For the past year or so, to Apple, it was like a long roller coaster ride.
In August 2018, Apple’s revenue reached a record high, and its market value reached the top of one trillion US dollars for the first time, becoming the first company in the world to exceed one trillion US dollars in a single market. No, the highlights didn’t last too long. Three months later, due to poor sales of the core revenue source iPhone, Apple’s performance fell, and the capital market suddenly turned cold. Apple’s market value fell below one trillion yuan. Apple decided to start “self-help” by reducing costs in the supply chain. Apple cut orders for three new iPhones, which made downstream suppliers miserable.
The beginning of 2019 is unfavorable. Due to factors such as the worse-than-expected performance of the Chinese market and weak iPhone sales, Apple has reluctantly lowered its revenue forecast for the first quarter. This is the first time that Apple has cut its revenue since the iPhone was launched in 2007 expected. With the release of Cook’s “warning letter”, the stock price plummeted by 10%, and Apple’s market value evaporated by $ 74.1 billion overnight.
In the next three quarters, iPhone sales continued to decline. According to Apple’s Q2 2019 financial report, Apple’s Q2 2019 revenue was US $ 58.015 billion, down 5% year-on-year. IPhone sales were US $ 31.05 billion, accounting for 53.5%, down 7.9% from the same period last year. In the same period last year, it fell by 12%, accounting for 48.3%, which was the first time below 50%. The decline in iPhone revenue in the fourth quarter of Q4 narrowed slightly, and fell by 9% year-on-year.
As Apple ’s flagship product, although the iPhone still contributes more than half of its revenue, with the decline in shipments, the iPhone ’s contribution to Apple ’s overall revenue is weakening. Apple must find a way to curb the hardware failure. Cook first hoped to luxuryize the product and reshape the high-end market. To this end, he dug out the former Burberry CEO Angela Arenz with a higher annual salary than himself. Responsible for the retail business. In April last year, Angela resigned from Apple, allegedly resigning because of blame, due to a mistake in high-priced strategies such as iPhone X and other products that caused sales to decline.
If the high-end route doesn’t work, then switch to the low-cost route. Learning from the failure of the iPhone XR pricing strategy, the Phone 11 series hit the lowest price in history, and the price reductions were very touching. Apple tried to drive the purchasing demand of low-end users. Phone 11 boosted sales to a certain extent with its low price advantage, but it is still difficult to turn back the decline, the root cause is the lack of innovation.
AirPods’ Explosive Growth “Saves Apple”
You must not “hang” on a tree, and the other “self-help” method is open source. To save the business, Apple is working to broaden its business boundaries and reduce its high dependence on the core product iPhone. Beyond hardware, Apple will focus on wearable devices and services.
The response from the capital market shows that Apple’s efforts to this end have achieved significant results. Since iPhone 11Since then, Apple’s stock price has risen by about 45%, and its market value has increased by about $ 400 billion. In other words, in the past four months, Apple’s stock price has not only rebounded against the trend, but has also peaked, and its market value has increased by about 4 Tesla.
In the beginning of 2020, Apple’s stock price continues to rise, and Apple has ushered in a “bull market”. On the 17th of this month, Apple’s stock price was reported at 318 US dollars, another record high, with a market value close to 1.4 trillion US dollars.
Therefore, some people in the industry believe that the slowdown in iPhone sales growth in 2019 is actually not a “bane” for Apple. Instead, it is a blessing because of the misfortune. The ceiling of the smartphone business has forced Apple to start looking for other sources of income. To maintain a trillion-dollar market value, Apple must tell better stories for investors.
The strong growth of wearable devices and service businesses (including iTunes Store, App Store, Apple Pay, Apple Music and other services) such as AirPods and Apple Watch is the biggest driving force for Apple’s stock price rebound.
Among them, AirPods are the most amazing. In the Q4 quarter, Cook stated that AirPods achieved record growth in each market, with growth of more than 50% and still accelerating. According to the Strategy Analytics data report, in 2019, AirPods sales were close to 60 million, achieving a 100% increase. Analysts estimate that AirPod’s sales in 2019 are approximately $ 6 billion, almost doubling compared to 2018. AirPod’s revenue will reach $ 15 billion in 2020; annual revenue in the wearable device category, including AirPod Estimated at $ 16 billion, it is expected to surpass iPad and Mac by 2020.
This result can be said to be unexpected. Remember that when AirPods was launched in 2016, it was facing a question of doubt. People generally questioned that Apple has cancelled the 3.5mm headphone jack on the iPhone 7 in order to promote wireless. This makes many users very unaccustomed. However, the situation quickly reversed. After the listing of AirPods, because of the comfortable user experience, the number of fans has increased, and the sales have greatly increased. It has also led the trend of wireless headsets. Giants such as Microsoft and Amazon have entered the game. At present, AirPods has won 60% market share and 71% revenue in the wireless earphone market, firmly occupying the dominant position, and the industry’s second largest Samsung only accounts for 10% of the market share. It is difficult to have a big challenger in the short term.
Wearables are currently Apple’s fastest-growing business line, which has grown by 41% in 2019. Such a momentum will not exclude Air in the futurePods are expected to replace the iPhone as the main force for Apple hardware and revenue growth.
2019 is also the year in which Apple ’s services business has made the biggest breakthrough in history. With the sluggish iPhone sales this year, the service business contracted all the highlights of the quarterly financial report: Q1 service revenue was 10.875 billion US dollars, an increase of 19% year-on-year; Q2 service revenue was 11.45 billion US dollars, accounting for 20% of total revenue, and Q3 services Revenue reached 11.455 billion, accounting for more than 20%. By Q4, service revenue reached a record high of US $ 2.5 billion.
Over the past year, Apple has made many explorations and attempts in the service field. In the spring conference that was called the most disappointing in history last year, there was no hardware release, and the protagonist was replaced by four major services: Apple news +, Apple card, Apple Arcade, Apple TV +. The growth of iPhone users is weak, and Apple hopes to use content services to tap the value of existing users, increase user stickiness, and then promote hardware sales by increasing the added value of content services.
On January 8 this year, Apple released its service transcript for 2019: In 2019, the Apple App Store visited more than 500 million users every week. Over the past 11 years, developers have earned more than $ 155 billion in revenue, and in 2019 alone accounted for a quarter of that, over $ 38.75 billion. Analysts predict that Apple service sales are expected to increase to $ 54 billion by 2020, accounting for one-fifth of total sales.
Market value will rise to 2 trillion in 2020
A number of institutions have raised Apple’s stock price target to the highest level on Wall Street, and some analysts predict that the strong momentum of Apple stock’s rise may continue into 2020 and beyond, pushing its market value closer to $ 2 trillion. Investors ’confidence in Apple has greatly increased. They believe that the following factors can promote Apple’s future growth:
One is that, driven by the huge success of AirPods, the good growth of wearables will continue to accelerate, and Apple will shift more attention to wearables to create more like AirPods Explosion models;
Second, Apple will launch five new iPhone models in 2020, including the iPhone SE 2 which may be released in March this year and four other 5G-compatible models. There are rumors that the price of the iPhone SE is only $ 399, and the continued low-cost strategy may bring strong demand and drive sales growth.
Third, in the new year, Apple will benefit from the 5G cycle, and 5G technology will increase iPhone sales. It is said that Apple will launch a new iPhone version that will support Street 5r millimeter wave later this year, this 5G network speed is significantly higher than 4G LTE network.
Some analysts said that the current stage of 5G development is in the hype period, and in the coming year Apple will rely on this boom period to gain a certain amount of heat. However, some people are cautious and think that excessive 5G hype may “harm” Apple.
5G is the biggest vent in 2019. Major mobile phone manufacturers have launched 5G mobile phones in fear of falling behind, especially Huawei. Its 5G technology advantages will help its smartphones occupy a great advantage in the 5G era. Apple was unexpectedly absent.
The difficulty of launching 5GiPhone in the short term is mainly because Apple and Qualcomm have been engaged in patent licensing lawsuits, unable to buy 5G chips from Qualcomm, and the substitute Intel has lagging behind in the development of 5G chips. After reconciling in April last year, the 5G iPhone is expected to be equipped with Qualcomm’s 5G baseband chip, but the 5G modem is very complicated, and Apple will launch a 5G model as soon as 2020.
Apple is also developing its own 5G network chip, but this R & D cycle will be long. It is expected that by 2025, Apple will have its own 5G modem. Last December, Apple acquired Intel’s smartphone modem business for $ 1 billion. This transaction will undoubtedly help Apple’s 5G chip power.
These actions indicate that 5G will be an important part of Apple’s future development plan, and obscurity is only short-lived.
In the next decade, when will the magic of innovation fatigue be broken?
2019 has instead become the best year in Apple’s past 10 years. In 2019, Apple’s stock price and price-earnings ratio have reached the best levels in the past 10 years, which also makes investors look forward to Apple’s development in 2020 and the next decade. But what is certain is that before the next revolutionary innovative product appears, doubts about Apple’s weak innovation will not easily dissipate.
For a long time, Apple seems to be in the dilemma of innovators, especially after Jobs died in 2011 and Cook took over. Questions about whether Apple is still innovative are endless. Last July, the departure of Apple’s soul designer Jonathan Ivey further exacerbated concerns about Apple’s innovation capabilities. Previously, Ivey had said, “I will not leave Apple” and later added, Leaving? Unless Apple loses innovation. “
The biggest challenge for Apple throughout the 2010s was that after the death of the soul character Jobs, the Apple company led by Cook did not create a new disruption.Sexual innovation. Apple’s most innovative products are still the work of the Jobs era-the MacBook Air and Phone 4 with high replication rates. IPhone is one of the most successful consumer products in history. Ten years later, it is still the largest contributor to Apple’s revenue.
In the ten years since Cook was in charge, there have been only two of the biggest hardware innovations: the Apple Watch and AirPods released in 2015. These two products obviously cannot be compared with the previous revolutionary products. Although the success of these hardware is far from the previous revolutionary products. “But it’s not exactly Cook’s fault. The industry will go through a long period of flatness. In the past ten years, no company has launched a hot consumer electronics product like the iPhone.” Comment by columnist Walt Mossberg is very relevant.
Although Cook is a successor to Jobs ’s choice, he is not a product expert. He is good at marketing and controlling costs. Although he did not launch a disruptive and innovative product at the IPhone level, he maximized the commercial value of the IPhone and continued to expand new growth areas, establishing the Apple ecosystem.
Most not to be overlooked is that Cook’s 10 years in office is also the 10 years in which Apple’s revenue and scale have continued to expand. Data show that since Cook became the head of Apple in August 2011, Apple’s stock price has risen by about 480%, and in 2018, it became the world’s first company with a market value of one trillion dollars. In 2019, despite the ups and downs of Apple’s market value, it finally realized a contrarian rebound at the end of the year, and the market value reached a record high again.
Apple has gone through a glorious decade. With the start of the 2020s, where will Apple go in the next decade? In addition to services and wearables, Apple is also actively deploying in areas such as AI, autonomous driving, and 5G, which will be strategic priorities that Apple will actively embrace in the next decade.
In the next decade, challenges will remain. When will the decline in iPhone sales be stopped? Can the service business replace hardware as a new revenue driver? When will disruptive and innovative products emerge? As a hardware company, is “softening” the right strategic choice for Apple? In the future, Apple may no longer be a pure hardware company, but a company that “walks” on the three legs of hardware, software, and services. These questions can only be answered with time.
Reference link:
https://www.theverge.com/2019/12/17/21026112/apple-tim-cook-iphone-watch-tv-decade-blockbusters-walt-mossberg