Mikey Campbell
According to independent analyst Horace Dediu, Apple's iOS hardware ecosystem and related services is on schedule to generate a cumulative $1 trillion sometime in 2017, a milestone for a consumer product.
As Dediu explained in a blog post on Wednesday, Apple is forecast to have sold about 1.2 billion iPhones by mid-2017, a gigantic number for a consumer electronic device.
Ten years in the making, iPhone's success has sparked an even larger secondary iOS device market that by Dediu's estimates will reach a collective 1.75 billion unit sales later this year. Given current trends the category, which includes iOS-capable equipment like iPad, iPod touch, Apple Watch and Apple TV, could exceed 2 billion units by the end of 2018.
Dediu's estimates put revenue from iOS hardware sales at about $980 billion by the middle of this year. Coupled with more than $100 billion in revenues from supporting services, including app content sales, the overall ecosystem's worth will come in well above the $1 trillion mark.
Those figures do not include payouts to app developers. Last August, Apple CEO Tim Cook touted a best-ever month for iOS app billings in July, saying developers had earned more than $50 billion since the App Store launched in 2008.
Describing what is perhaps the world's largest cottage industry, Dediu estimates Apple's rate of developer payments has reached some $20 billion per year.
As for the future of iOS, Dediu says that while past tech giants have seen precipitous falls from grace, included those directly disrupted by iPhone, he sees resilience in Apple's mobile platform.
Comparing the handset to those made by Nokia, whose dumbphones proliferated the 2000s market, Apple's product enjoys the stickiness of a full-fledged ecosystem complete with attached dependencies and services.
Android, the cheaper "good enough" iPhone, as Dediu puts it, was anticipated by many to put iOS on the ropes. While devices running Google's OS do enjoy a collective majority, Apple's premium products — and premium, paying customers — carved out a sizable chunk of the market too large to be pigeonholed as a niche.
The analyst notes users are now more likely to abandon Android for iOS instead of the other way around, as was once predicted. Indeed, Apple last July saw the highest level of iPhone switchers ever.
"As we look toward the second decade of the iPhone, the expectation isn't one of another 'big bang' but a process of continuous improvement," Dediu writes. "The market is nearing saturation so the goals must be to capture more switchers from Android. Apple has achieved this with the Mac: survival, persistence and eventual redemption."
Dediu wraps up by expressing excitement for upcoming technologies and products ancillary to iOS, including Apple Watch accessories, Apple Pencil and Apple's latest wearable, AirPods.
"The Apple Watch, the AirPods, Pencil and possible new wearables point toward a future where the iPhone is a hub to a mesh of personal devices. The seamless integration of such devices is what has always set Apple apart," he says.
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17 Comments
What I like about Dediu is that he wraps his arguments in figures and graphs.
The past is impressive and the future has great (or at least good) potential. Apple has the financial resources and technical capacity to realize that potential.
The only thing that could trip them up would be a failure of management.
If that $1T in revenue is a milestone for a consumer product company, then why is Apple always said to be doomed? It's not as though Apple doesn't have any cash resources to acquire whatever they need to move forward. There was some article I saw telling how Apple's next iPhone MUST become the greatest iPhone Apple has ever made or the company is going to be in big trouble. There's this idea that an amazing iPhone will somehow force consumers in poor countries to suddenly have an urgent desire to buy an iPhone they can't afford. To me, that's like if Lamborghini came out with the most amazing vehicle on the planet, I would do anything to buy one. Hardly. No matter how amazing and innovative it is I definitely won't be able to afford it.
Google is going in the opposite direction and I think their strategy makes more sense to promote smartphone sales. Google is trying to make the entry level smartphone cost about $30. (I thought Android One was already a failed strategy but maybe I'm wrong). I can hardly imagine some smartphone that cheap but maybe that's all third-world consumers can afford to spend on a smartphone. I don't know what group Apple is going to be able to convert unless it's to make current iPhone owners get a new iPhone. I know they claim there are switchers from Android smartphones to iPhones but I'm thinking that market might already have reached its limit. Those Chinese-manufactured Android smartphones keep getting cheaper and cheaper and they're always seen as a huge threat to Apple's iPhone business. Those are the smartphones the Indian consumer will likely be buying. If Apple isn't able to find a way to get at least a few more iPhones sold in poorer countries, the company will continue to be perceived as a failing company in terms of growth.
I sincerely hope Dediu knows what he's talking about but I think it will be very hard to convince Wall Street that Apple will be able to survive the threat of dirt-cheap smartphones. Everything Apple seems to do is viewed with doubt and great risk. I'm almost ready to give up hoping Apple will convince skeptics. Tim Cook simply doesn't inspire investor or shareholder confidence like other tech company CEOs do. With buybacks and dividends and good fundamentals, Apple seems like a strong company, but Apple's share price seems to be somewhat stuck in a tight range and the doom and gloom articles are always aimed directly at Apple.
He might be an "independent analyst" but I think it's safe to say he's usually pretty bullish on Apple. So it's not surprising he would say the future is bright for the company.