Q2 2021: Apple Updates

Apple Marches Forward With Record FY Q3 2021 iPhone Sales

July 27, 2021

Apple continues to break records for iPhone sales, with FY Q3 2021 expected to be another banner quarter.  According to Counterpoint Research’s Monthly Market Pulse Model Sales, July 2021 Edition, iPhone sales for Apple’s FY third quarter will come in at 49.6m units. Q3 sales saw continued strong demand for the iPhone 12 series, and to a lesser extent the iPhone 11, which continued to surprise with its longevity.

Source:  Counterpoint Monthly Market Pulse, July 2021

According to Counterpoint’s North America Research Director Jeff Fieldhack, “iPhone sales did really well during the quarter for a number of reasons. First, the iPhone 12 saw a late launch so we’re actually a month behind in the cycle. Second, we’re seeing really strong performance in the US, which is coming from a combination of aggressive subsidies from carriers trying to secure new postpaid 5G subs with the 12, and prepaid players offering up attractive iPhone 11 promotions. Third, China again delivered, with its share of sales continuing to increase month over month.”

Apple has supported its sales efforts with strong supply chain management, avoiding issues from component shortages. Dale Gai, Research Director of Counterpoint’s Semiconductor and Components team, commented, “Apple is well protected from the component crunch as it has very strong relationships with its suppliers. Everyone wants a piece of the Apple pie, but to get a seat at the table you have to be able to deliver, hence, iPhone supply will always take priority.”

With demand and supply aligned once again, Jeff Fieldhack is calling for another Apple beat this quarter. “In terms of iPhone shipments, we’re actually ahead compared to some of the more bullish Wall Street analysts. FY Q1 – Q3 2021, we’re at 187m units, which means that a good Q4 will result in full year iPhone shipments in the range of 131m to 136m units.” Tempering his bullish comments Mr. Fieldhack concedes, “There are clearly risks we have not seen in the past. The Delta variant is obviously something we’re keeping an eye on, and we’ll continue to assess data coming from the supply chain. But for now, Apple is managing all fronts well and if there are any surprises this year, my bet is it will be to the upside.”

Apple Takes the Cake with Latest Results

April 28, 2021

Apple had a record-setting quarter with the highest revenues and earnings ever during the Jan-Mar period. All product segments saw record revenue highs. The Mac had an all-time record revenue quarter. All product segments hit record installed bases.

Keys takeaways from the quarter:

  • iPhone revenues were up a whopping 66%. Our Global Model Sales Tracker shows record high market share in the US and China. The iPhone 12 family is a tremendous success and it maintained momentum through the quarter. Only in March did supply meet demand.
  • Our numbers show record high iPhone ASPs. This is on the strength of the iPhone 12 family and in particular the iPhone Pro Max—a top seller in the US market. Globally, the higher priced Pro Max and Pro models accounted for over half of all iPhone 12 series devices sold.
Counterpoint Research Global Apple iPhone 12 Series Sales Share Breakdown
Source: Counterpoint Research Q1 2021 Global Mobile Sales Tracker

*Preliminary numbers for Q1.

  • All segment growth. iPad and Mac revenues increased 79% and 70% year-over-year. Of course, the pandemic caused work-from-home and school-from-home tailwinds. The school-from-home requirements will eventually return to in-school learning. However, the education installed base has dramatically increased. On the work-from-home side, there will be a high percentage of companies offering a continuation or part-time work-from-home scenario. This will not give iPad and Mac the bump it saw during the pandemic, but it will be higher than pre-COVID. In addition, the in-house M1 engine is impressive and helping with both upgrades and pulling in new consumers. Two-thirds of iPads purchasers were new to iPad.
Counterpoint Research Apple Net Sales by Category
Source:  Apple, quarter ending March.
  • Wearables saw double digit growth. Apple Watch Series 6 and Apple Watch SE had large quarters. 75% of sales were first-time buyers and new health apps and health services helped with stickiness of the hardware.
  • Services grew 27% year-over-year. Apple added 40mn paying subscribers sequentially and 140mn annually. There are now 660mn paying subscribers. Counterpoint Research believes Apple TV+ saw high growth.
Counterpoint Research Apple Net Sales, Products vs. Services
Source: Apple, quarter ending March.
  • As many OEMs struggle with margins, Apple saw a blended gross margin of 42.5%. 36% for hardware products and over 70% for services.
  • Regional growth across the board. Rarely do all regions see growth in an individual quarter. All regions saw tremendous growth with Americas being the smallest growth at an admirable 35%.

Counterpoint Research Apple Net Sales by Reportable Segment

  • Recently announced AirTags will give some incremental revenues in coming quarters—especially Q4 2021.
  • Apple is also being hit by chip shortages. It warned that chip shortages will reduce the June quarter’s revenues by $3 billion to $4 billion, mainly within the Mac and iPad lineup. Because of the uncertainty of the chip shortage, Apple did not give revenue guidance for the June quarter.
  • In 2019, there was a lot of angst about the China market. The latest March quarter allays those concerns with China revenues growing 88% on strong iPhone, iPad and Mac sales.
  • Apple has some nice corporate boasts. This is timely as there is political pressure on many technology names (Google, Amazon, Facebook etc):
    • The new OS update will give users options to opt out of app tracking.
    • Over $200 million in new, green investments are being made.
    • The company is investing $430 billion and creating 20,000 new jobs in the US.
    • Although there has been some controversy on the Google-Apple COVID contact tracing tech, it has been rolled out in some states. There are also useful vaccine and test tracking apps.
    • More on these brags here.

The outlook for 2021 remains strong for iPhones as more countries and regions roll out 5G. iPad, Mac, TWS, and wearables all have good outlooks. With the growing installed base of Apple products, services will also see solid growth in 2021.

Apple’s October – November iPhone Sales Signal Record Quarter and 2021

December 23, 2020

Apple is likely to break previous iPhone sales records during its FY first quarter, according to Counterpoint Research’s Global Monthly Sell-Through Tracker, setting up the company for what could be the biggest year ever for the iPhone.

Although Oct-Nov 2020 global sell-through was down YoY, it declined by only low single digits. That is positive considering the four to six-week launch delay of the iPhone 12 versus the iPhone 11. There is now the possibility of a December sales surge, driven by the new iPhone 12, which would bring the quarter’s sell-through number into record territory.

Apple iPhone sales - iPhone 12 vs iPhone 11 - US launch sales performance
Source: Counterpoint Research, Weekly Sales Tracker, USA

 The popularity of the new model is evident when comparing iPhone 12 and iPhone 11 post-launch sales in the US market on a YoY, week-for-week basis.

Jeff Fieldhack, Counterpoint Research’s Director of US Mobile Devices and Carrier Strategies, commented, “The iPhone 12 consistently outperformed its predecessor during the first six weeks from launch – with the exception of week two, when strong early demand and ample supply delivered an exceptional sales week for the iPhone 11.”

He also noted, “Double and triple-digit weekly sales increases for the iPhone 12 over the iPhone 11 – despite 12 Pro and 12 Pro Max shortages – is sending a strong signal, and we believe the iPhone 12 will bolster global quarterly shipment growth for all iPhones to 21% YoY.”

US out-performance bodes well globally, and Counterpoint Research expects record iPhone shipments for the quarter to be driven not only by North America, but also China, Japan, India and Europe.

“What we’re seeing is a combination of things driving iPhone growth globally,” stated Peter Richardson, Global Head of Research. “These include pent up demand for a new 5G iPhone with both operators and consumers hungry for the new iPhone products, attractive prices on the iPhone 12 aided by bountiful promotional offers. iPhone SE sales also helped momentum together with iPhone 11 longevity, and solid Singles Day, Black Friday and Cyber Monday performance.”

Acknowledging that Apple faces issues, especially around supply, Mr. Richardson stated the company “is well positioned to mitigate the risks. The iPhone Pro and Pro Max are on backorder in the US, but lead times have dropped significantly over the past three weeks. Power management ICs remain constrained, but Apple is likely a favored customer going to the head of the line. The India Wistron controversy is not material and Apple is managing the situation. And in terms of their output capability globally, it is better than last year on increased hiring, overtime incentives and factories running more hours.”

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What Apple Announced in the Steve Jobs Theatre

Apple had its yearly pilgrimage to the orchard above the Apple campus to announce new hardware. As usual, the Steve Jobs Theatre was packed with both media and Apple employees. Going in, the key question was would Apple be able to maintain the enthusiasm of its base despite being behind many of its competitors with 5G?

Let’s begin with the announcements.

Apple Arcade and Apple TV+:

Unlike previous years, Apple kicked off the day with its announcements on its new service offerings – Apple Arcade and Apple TV+. Unveiled earlier this year, Apple finally revealed details on the launch date and pricing for the new services. Arcade will launch September 19 in 150 countries and is priced at US$4.99 per month for unlimited access. Access will be through the Arcade tab on the App Store for the iPhone and iPad, while Apple TV users get a separate Arcade app. Apple does have a growing brag list of developers. Although, for hardcore gamers, the experience is still lacking. At US$5 per month, it will be sticky for much of its base.

Apple TV+ will be available November 1 and is also priced at US$4.99 per month—a cost that caught most by surprise and sent Netflix stock downward. It is early, but this is probably not an either-or choice. Apple has a growing portfolio and will have the cash to build its own original content. It does not have to compete with Netflix. At US$5 per month, it needs a couple of quality hits from many to give it a try. Again, further stickiness for its installed base. However, Apple is not restricting access to the service to only its own hardware users. Apple TV+ will be available through the Apple TV app on select Samsung smart TVs and will come to the Amazon Fire TV, LG, Roku, Sony, and Vizio platforms in the future.

In addition to a low monthly price, Apple is including a year’s subscription to Apple TV+ with new device purchases. This will help it overcome any potential resistance from content producers that might be put off investing time and effort in exclusive content for Apple on the basis of limited distribution potential.

iPad 9.7:

Apple announced its seventh generation iPad. New is the iPad 9.7, which ships on September 30. Key brags of the new iPad are the A10 Fusion chip, which Apple stated sports a 2x performance improvement. There is also deeper iPad Pencil integration.

Some of the marketing focused on the OS, which has improved multi-tasking and an ability to ‘fan out’ open applications or ‘glide over’ them. The cost will be US$329 with an ‘education’ version priced at US$299. This is still a premium over Android options, but the hardware is quite elegant, and the display is best-in-class. A key enhancer is the ‘smart connector’, which is a smart keyboard attachment with a classy protective cover.

Apple Watch 5:

Apple Watch continues to differentiate with new health applications. All things irregular within heart health remains a focus area. The company has also added a hearing study and how volume and electronics impact daily hearing health. Apple also announced a women’s study focusing on infertility and osteoporosis.

Key features of Apple Watch 5 include 18-hour battery life, improved and brighter display, an ‘always on’ display option if raising wrist is difficult, and a built-in compass for which direction one is facing. The Apple Watch 5 is available September 20 and is priced at US$399 and US$499 for the cellular variant.

The story of Apple Watch may be that Apple Watch 3 falls to US$199 while the Apple Watch 4 will be discontinued.

iPhone 11, iPhone Pro, iPhone Pro Max:

The main announcement was left for last. Three devices were officially unveiled. With iPhones, the key will be how it delivers in the real world. Most of the required specs were checked off—excluding 5G. First impressions are the display is vibrant, the textured glass back is refined, and overall the hardware looks elegant.

Apple went out of its way to promote the camera brags, which did seem impressive. But we will have to wait to see what real-world usage brings. The camera bump is sizable and polarizing. Apple bets the cameras’ performances, and 30,000 photography apps will overcome the aesthetics. The demos of ultra-wide view shots were impressive. So was the demo of ‘deep fusion’, where nine images are shot, and machine learning is used to deliver an optimized low-noise shot.

The A13 Bionic chip built on 7nm process was advertised as 15% more efficient. It will be interesting to see how Apple has converted on owning the complete hardware stack, OS, and own chip design.

Will Apple be able to maintain the enthusiasm of its base? The lack of 5G will be tricky as some OEMs will be on version three when Apple announces its first. The lack of 5G on the new devices will limit the amount of switching from Android to iOS on the high-end. Keep in mind that Qualcomm has announced over 150 5G design wins, mostly smartphones. Therefore, there will be plenty of options for 5G devices from Chinese vendors that will come at the pricepoint of two-year-old LTE iPhones.

Apple did enough to hold serve on its iOS base with the new launches. The additional stickiness that Apple TV+, Apple Arcade, Apple Watch, and other services bring sufficiently overcomes the lack of 5G this year. Apple is pivoting, slowly, to being a services company. Nothing announced today undermines that strategy shift; it maintains sufficient strength in hardware to fend off any competition from the Android ecosystem, while adding further muscle to its services proposition that will develop steadily.

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