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Wednesday, 31 July 2019 23:24

iPhone sales account for less than 50% of Apple revenue - FANTASTIC! Featured

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Clickbait-loving naybobs of negativity once bemoaned that most of Apple's sales were attributable to its iPhone, and that there are no cheap mid-range models, but now that Apple has grown, adding newer products and services, 'lower' but still in the tens of MILLIONS of iPhone sales are... bad?

Over the past few years, Apple has been criticised for relying too much on sales of its iconic iPhone, with most of the company's revenue coming from a device that, twelve years ago, did not exist.

The iPhone became so popular that the myriad candy bar and flip phone designs of Nokia, Sony Ericsson, Motorola and others all fell by the wayside, with the glowing rectangle the standard for all smartphones today.

The iPhone also became so popular that uninspired critics, who revel in clickbait and disingenuous pictures of rotting apples, stated wondering if Apple was becoming too reliant on iPhone sales, which surely would one day no longer be Apple's big seller.

Well, that day has come - iPhone sales now make up less than 50% of Apple's revenue, and this, apparently, is bad news. It's actually fantastic, as it means Apple has diversified so much that it no longer needs iPhone alone to set new records, with the company achieving the tremendous goal of having more products and services to offer to more people on Planet Earth than ever before - and being wildly succesful at it.

However, we see it being reported as "bad news", which conveniently sweeps under the carpet the stark reality that Apple's wearables, being its Apple Watch and AirPods, are such big businesses of their own that they would qualify as a Fortune 50 company. Or that its other business units would be huge, massive companies all their own, also able to claim "Fortune" status, but instead ensuring that Apple is even greater than the sum of its parts. 

The Apple Music business has been spectacularly successful, outdoing Spotify in subscribers and total song library, with Apple's iTunes Store still selling movies, TV shows, books and yes - even music too. Apple TV long ago ceased being a mere hobby for Apple, and is now a major force in streaming media and set top boxes.

Apple Arcade is set to arrive soon, Apple has launched its own credit card to augment the additionally super successful Apple Pay service, Apple News+ continues growing (even if not yet available in Australia), and Apple has the best desktop and mobile operating systems, the best App Store for smartphones and tablets, the best privacy and security, highly profitable and ultra premium smartphones and tablets, and an ever growing range of Macs.

Apple has also promised new products this year, too, which adds to the ones already launched this year, and whether that is the rumoured 16-inch MacBook, the already announced Mac Pro, expected new iPads or even new categories, the future for Apple is looking very, very bright.

Apple owns enough 5G patents and comms engineers to eventually wean itself from Qualcomm's grip, it makes its own world-class-leading CPUs and GPUs, has major investments in its manufacturers, has the best sounding smart speaker in the HomePod, and has iOS 13, iPadOS, watchOS 6, macOS Catalina, tvOS, HomePod OS and more still to launch to the general public.

Name one Apple competitor that is in this position... there isn't one! Samsung, Huawei, Google and others are all trying to build an ecosystem as rich, powerful, versatile, easy to use and quick to learn as Apple, and even their combined efforts can't match what Apple has achieved.

Apple also has its iOS 13 operating system set to work on iPhone models as old as the iPhone 6s and iPhone SE, and with the Kogan and Dick Smith websites selling refurbished iPhone 6s models from A$205 (for a 16GB model, the next cheapest model is a 64GB unit for A$265) and it's clear that Apple has the mid-range phone market well catered for.

It's important to note the prices above are for the very cheapest iPhones in average condition - you'll pay more for refurbished iPhones in better condition, but the prices are still very competitive.

Need more proof? A refurbished iPhone 7 with 32GB storage starts at A$379, a refurb iPhone 8 with 64GB starts at $599.99

These phones run the iOS 13 beta just fine, even if obviously not as super fast as an X or XS model will, and they will run iOS 13 even better when the final version arrives.

With iOS 13 optimised as never before, an iPhone with iOS 13 is much better than an iPhone with iOS 12 or any version of iOS before it.

Sure, Apple doesn't directly make any money from Dick Smith selling iPhone 6s, SE, 7, 8 and other refurbished models at prices vastly cheaper than retail, but it sure makes money when those customers buy apps, pay for more iCloud storage, buy an Apple Music subscription, buy a new Apple Watch, iPad or Mac as part of the halo effect, buy accessories from Apple and plenty more.

The iOS operating system is more secure than Android, more private, has better app quality and more. Yes, Android has caught up in many ways, and mid-range Androids have never been more capable.

For those already in the world of Android, these mid-range Android models are an excellent upgrade for an older phone, but even if you're upgrading from an iPhone 6, iPhone users are far better served with a better iPhone of any model than the one they already have, than switching to Android.

The higher price of new iPhones reflects the premium nature of these devices, the cost of making them, supporting them, creating the most powerful processors for them, creating the best operating system and plenty more.

The value of money has also fallen in this time, making things more expensive, as inflation eats away at the value of fiat money. Power and electricity costs more. The US dollar has to support well over $20 trillion of US national debt, with countries and people less inclined to buy US treasuries and other debt instruments.

Costs of labour have gone up in China. All of these things put pressure on prices. Apple has chosen to focus on quality and profit, so it can profitably stay in business.

Yes, Apple's products earn Apple a healthy profit margin! But it is with these profits that Apple can afford to create the next generation of products and services, and to push technology forward.

Meanwhile, Chinese manufacturers operate on razor thin margins... and use Apple as their R&D department to figure out what to copy next.

As for higher prices for newer products, well, Apple hasn't abandoned you. Of course you still need to pay, but Apple offers trade-in programs and credit programs, telcos offer the ability to pay smartphones off over 12, 24 and 36 months, and Apple ensures your smartphone lasts longer than any competing model from any other vendor.

Hence the iPhone 6s still getting an iOS 13 upgrade.

There are even entire businesses that just sell refurbished Apple products - I walked past one in Kent St in the Sydney CBD today, which proudly advertised the great savings that are possible with refurbished products over new!

All of this quality and longevity has seen Apple's iPhone sales slow. That is why the company embarked not only on new products, like the Apple Watch, or AirPods, but its range of services already listed near the start of this article.

Apple knew that ensuring iOS would work on many more generations of smartphones than its competitors would cause some buyers to hold onto their smartphones for even longer.

Apple's Macs famously last for years, too, but eventually, a new (or refurb) purchase needs to be made.

You can also buy second-hand, but with refurb prices so good these days, and coming with a warranty, actual refurbishment and more, and guaranteed not to be stolen, why take the chance to save a few more bucks on a second hand model when refurbs are so affordable?

Even Apple sells refurbished products, although at prices higher than the Dick Smiths of the world.

In any case, Apple knew that sales would slow, but in the meantime, it has grown to over a billion iOS users. Quality users who spend twice as much money buying apps than Android users - a stat you can easily verify with a Google search from many sources over many years.

You don't have to be Sherlock Holmes to realise this was coming, and to prepare by offering services - as well as new products - that would appeal to existing owners.

After all, it's a well known maxim of marketing that it is easier and cheaper to sell to existing customers than it is to new ones, although companies are always trying to do both.

So, while Apple prepared, mealy mouthed pundits wrote mind-numbingly inane clickbait about how lower Apple iPhone sales was bad for the company.

It was bad when iPhone sales accounted for more than 50% of revenues, and now it is bad that iPhone sales account for less than 50% of revenues. With genius-level analysis like this, it's obvious why some people write, or become analysts, because that's obviously about the best they can do.

It's worth noting here that I, of course, am a writer too, pushing pixels, but writing isn't the only thing I do and I endeavour to make a dent in the universe too - and am still working on that.

In any case, when Apple breaks a record in the June quarter - you know, the one before new iPhones are sold, the one when there's the lowest interest in buying new Apple products because people KNOW that new models are just over two months away - what does that tell you?

That the company is doing a quadrillion times better than the average journalist out there, desperately scraping out a living making a few pixels appear on a screen.

What kind of quarter do you think Apple will have over Christmas 2019, before which all of its new products will be released?

And what kind of quarter do you think Apple will have before and during Christmas 2020, when the new 5G iPhones and iPads are released?

The 2020 launches will come at a time when 5G networks are far larger and more established than the tiny pinpricks of coverage they offer today, in 2019.

We'll also see 5G chipsets in their second or third generations, and they will appeal to a lot of iPhone buyers who took advantage of upgraded older iPhones through iOS updates who simply have decided it is time to get a shiny, super fast new model with 5G, keeping the old iPhone as a spare, or a hand-me-down to a family member or friend, or sold to help fund the new purchase.

In the meantime, we get bleating nonsense about how Apple's results "weren't as bad as analysts expected", as if that actually means anything in the real world to real people who aren't sitting in ivory towers getting a gazillion dollars to analyse things for Wall St, or to journalists who think "clever clickbait" is actually worth anything of real value. 

Apple make the best products for people who understand that the value of something is more important than the price of something, even if you need to go on a payment plan or settle for a refurbished product, simply because it is a better choice than the competition on many different levels.

Anti-Apple fanboys who know the price of everything but misunderstand the value of things look at their dewey eyed anti-Apple, anti-common sense analysis, and think they understand how the world really works.

Apple understands how the world really works - just look at its results, its user base, customer satisfaction and everything else, and then ask yourself whether the pictures of a rotten apple used in clickbait articles truly depict Apple - or something else.

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Alex Zaharov-Reutt

One of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.

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