With numerous supply chain issues and disruptions affecting worldwide tablet shipments since Q1 2021, tablet market shares have shifted. Android tablets sales still lead the market, but the gap with Apple’s iOS is closing. Due to the tablet market reaching saturation, and newer volume-driving regions facing inflationary pressures and macro uncertainty, tablet shipments by OS are reflecting this change. According to Counterpoint Research’s Tablet Market Tracker, global tablet shipments have shown some alleviation by recording shipment growths in 2021, however in Q1 2022 contracted by 9% QoQ.
Figure 1) Global Tablet Shipments by Operating System
Figure 2) Global Tablet Market Share by Operating System
Despite the launch of new tablet devices and Samsung’s growth in the quarter, Android OS tablets as a whole have declined significantly reaching their lowest shipments in almost two years. With a YoY and QoQ decrease of 11% and 14% respectively, Android OS accounts for approximately 90% of tablet shipment losses in Q1 2022. Android serves as the base OS for a diverse set of brands including Lenovo, Asus, Acer, and Dell, which all saw notable decreases in the quarter. This decline can be attributed to several factors, one being increasing inflationary pressures and economic slowdowns which have negatively affected low to mid-tier tablet segments. Consumer demand for Android tablets has waned. Additionally, because Android tablets do not possess distinguishable qualities other than proprietary UI overlays, loyalty to a specific brand remains relatively low with brand switching commonplace.
iOS on the other hand, maintained its growth trajectory in the quarter, with its market share growing by an additional 4% points. With iOS’s unmatched synergy in the iOS device ecosystems, high consumer loyalty, and optimization for many use cases, iOS tablets remain resilient to demand swings prevalent in the market. The release of the iPad Air 5 also helped iOS market share remain stable throughout Q1’s weak seasonality and rally iOS demand.
Windows, the third most popular tablet OS followed a similar trend to Android with a shipment reduction of 11% QoQ. Despite its drop, Windows OS remains consistent with its previous market share of 6% increasing by 1% point YoY, focusing on targeting distinct work and business applications without overlapping with that of Android and iOS users.
Because the tablet market is currently experiencing a multitude of complications ranging from component shortages, supply chain disruptions, and slowing demand, changes will likely occur at a slower pace. Android currently holds the majority of tablet shipments, however, if current market conditions persist, the gap between Android and iOS will likely narrow further.
With a March quarter with many headwinds – inflation, component shortages, war and COVID-19 lockdowns – Apple recorded impressive results. Overall revenues grew 9% YoY while iPhone revenues were up 5%. Apple was able to grow its installed base to an all-time high even as all services hit new highs and all regions grew with the exceptions of Japan and Rest of Asia Pacific, which had tough exchange rates during the quarter. According to Counterpoint Research’s Q1 2022 OEM Market Pulse, Apple outpaced the global smartphone market sales volume, which declined 7% YoY, to record a 1% pt share gain for the quarter.
Key highlights from Apple’s March quarter
iPhone sales were very solid despite the company noting there were some shortages due to mature node chips. The iPhone 13 family and new iPhone SE 2022 were both strong during the quarter.
Regions:
The largest growth region was the Americas with 19% YoY revenue growth. All hardware and service categories contributed to the region’s growth.
Despite many headwinds and homegrown handset OEM competition, Apple grew 3% in China.
Apple stopped shipping to Russia in March, which cost it 1.5% of iPhone revenues. The European region as a whole grew 5%.
Japan declined 0.23% and Rest of Asia Pacific declined 7%. Dollar appreciation contributed to the declines.
Product categories:
iPhone: Supply did not keep up with demand for iPhones. But the iPhone 13 family will go down as a strong release. The iPhone SE 2022 fills a niche and Apple will be able to cost-erode and run it for many quarters.
Mac: Revenues grew 15% to $10.4 billion and hit an all-time high in the March quarter. The performance and marketing of the homegrown M1 chip helped. The past seven quarters have been the best for Mac as Apple has gained share aided by B2B.
Wearables, home, accessories: Revenues grew 15%. An interesting highlight is that two-thirds of Apple Watch buyers were buying their first Apple Watch. Counterpoint’s Smartwatch Tracker also shows Apple dominant within the space. New health applications, HR and sleep monitoring, and battery life continue to improve.
iPad: iPad revenues fell 2%, mainly because of component shortages within common and mature nodes. The impressive note here is 50% of iPad buyers were new to iPad. Key segments of B2B, government and education will likely see growth as shortages ease.
Services: Revenues grew an impressive 17%. Each category and each geography registered growth. Apple called out its 240 awards within Apple TV Plus. The space is super-competitive with many big spenders — not all doing well. If the rumors of Apple moving to buy the NFL Sunday Ticket (rights to NFL games) are true, it would add a lot of stickiness, especially to the North American market. Paid subscribers registered strong growth. Even as iPhone volumes go flat, revenue growth via services is significant.
Outlook:
Apple warned of component shortages lasting through 2022, which will likely cost the company $4 billion to $8 billion over the June quarter. Luckily for Apple, due to the stickiness of iOS and its services, a large percentage of this revenue will likely be “pushed” and not lost.
Final assembly factories are back up and running in China. However, it is unknown how long key cities in China will remain in the grip of COVID-19.
Inflation is a concern for all Apple competitors. Apple is slightly shielded from this as commentaries from Microsoft and Qualcomm highlight that the high-end market and B2B/government/education sectors remain solid.
Apple is reportedly working on a subscription model for iPhone and other hardware products. The news made headlines across the tech world. Apple’s influence and strength position it to effect a dramatic shift in the way smartphones are sold. A hardware subscription model comes with its own set of opportunities and challenges. While Apple is most equipped to implement such a plan and become immune to industry challenges, others may find it hard to replicate.
A hardware subscription should not be confused with hardware financing or Apple’s annual upgrade program offered in the US — the key difference here is “ownership”. Apple already offers device financing plans in many regions and some carriers also offer the option to lease the device for two years (after which the consumer is expected to return the device or pay the residual value). The value proposition for Apple lies in driving higher stickiness within its ecosystem while enabling faster upgrades. Therefore, bundled subscription plans with the option to pick and choose more than one hardware and service product will give a big boost to Apple’s “power users” which generate a much higher monthly ARPU across the brand’s products and services.
Hardware subscription model: Kill many birds with one stone
Hardware subscription can potentially make Apple immune to key challenges faced by the industry.
Firstly, replacement cycles are getting longer with hardware improvements. The average replacement cycle for iPhone users has increased to more than 30 months. The users are holding on to the devices longer because of their great quality and Apple supporting multi-year updates (at least 3-4 years). Since Apple cannot scale back on this value proposition, which is good build quality and software, it has to find newer ways to increase iPhone sales. Hardware subscription is one way to make sure users upgrade to the latest and greatest devices more frequently.
Secondly, the average selling prices (ASPs) have stabilized. Note that iPhone is not the most expensive smartphone in the market anymore, as it was 4-5 years back. A hardware subscription will allow Apple to minimize the cost of entry for a new user, enabling the brand to target higher ASPs.
Thirdly, Apple’s service revenues have seen significant growth but still accounted for 15.7% of its revenue for Q4 2021. Apple realizes that a “power” iPhone user can generate a much larger “customer lifetime value (CLV)” over a period of time if locked into a subscription bundled with services. According to Counterpoint Research Ecosystem Analysis, Apple can potentially generate a monthly ARPU of ~US$400 or an annual revenue of ~$4800 from a “power user” subscribing to its latest hardware, software and services. Apple’s bundling of services with hardware subscription will guarantee long-term subscription to Apple services with a stable revenue stream and outlook. Note that equity markets hate elements of uncertainty and a stable outlook is highly desired.
Monthly ARPU (Hardware + Services) for Apple Power User ~400
Source: Counterpoint Research Ecosystem Analysis, 2021
Fourth, the smartphone market structure is different across countries. There are three typical models – open-channel market, carrier-driven market with device subsidized and carrier-driven market with device financed. While carriers play a significant role in keeping the smartphone cost down in carrier-driven markets, consumers pay full price upfront in open channel markets. Although third-party financing options are emerging in open channel markets, the uptake for such services is still limited. We believe that the hardware subscription model will have less impact in markets where devices are already subsidized through carriers. But a subscription model will also bring all three types of markets on a level playing field, minimizing the cost of entry and giving another boost to the iOS installed base.
Last but not least, the hidden element and the most promising gameplay here could be a stronger hold of the secondary market, i.e. smartphone’s second life. At present, the refurbished smartphone market is dominated by Apple devices but the whole value chain is heavily segmented. Apple devices manage to grab an attractive value for used phones as well. With power users upgrading more frequently through Apple, hardware subscriptions will complete a full circle, creating an opportunity for Apple to extract full value from the end-to-end device lifecycle. It will enable Apple to control the whole refurbished value chain (right from device collection, grading, repair/refurbishment to resale) and potentially put Grade A devices back into the hardware subscription cycle as refurbished devices. This will also be in line with global sustainability initiatives and boost Apple’s original spare parts program.
Key Implications
Apple’s hardware subscription plan can have a multifold impact across different market elements. Overall, some mobile network operators won’t entirely welcome the news, but this was inevitable. Equity markets will be very happy to see a strong and stable revenue outlook.
Further, end-to-end control of buying and selling experience of hardware, software and services also opens the door for many other opportunities. eSIM and availing financing in-house means it now owns a critical (and previously painful) part of the customer journey. The initiative dubbed as “breakout” mentioned Apple targeting payment processing, credit checks and many other fintech services. A hardware subscription will lock premium iOS users, allowing Apple to monetize daily financial transactions through a range of its possible fintech products.
A subscription model will establish a stronger relationship with premium iOS users with more frequent transactions compared to the existing one-time purchase transaction. This will have a multifold impact across Apple’s existing and future products, driving a much higher dollar value relationship with its user base.
Apple posted a record December quarter which included record revenues, record installed base, tremendous growth in all business units (exception: supply constrained iPad), and double-digit revenue growth in most regions (Japan the lone region with a decline of 14%). If there was suspicion that the iPhone 13, Apple’s second generation 5G smartphone, would be a weak upgrade, these results squashed this thinking. Counterpoint Research estimates Apple led all competitors, shipping 67.2 million smartphones during Q4 2021.
Details of the quarter:
iPhone: iPhone 13 had a great opening full quarter — a record $71.6 billion in revenues, which was 9% growth over Q4 2020. Additionally, iPhones were supply constrained but less supply constrained than most of its competitors. Apple does an admirable job locking in components by using many customized parts and locking in volumes early — even if it means additional upfront costs. In addition, with large volumes and limited SKUs, it has massive scale to be suppliers’ #1 customer. Apple has even invested in R&D support for some suppliers.
In multiple countries, the iPhone 13 Pro Max was the top seller, bumping Apple ASPs and overall revenues. The elongating life cycles are now baked into Apple sales. There is less of a large year followed by a weaker year. The iPhone holding period has grown — over three years in most regions and almost four years in some regions. This means a more regular upgrade since there is always a substantial part of the base holding an aged iPhone ready to be upgraded.
Mac: Mac saw the largest percentage growth among Apple business units, growing 25% YoY in Q4 2021. Mac revenues rode the wave of increased PC purchases during COVID-19. Second, its in-house designed M1 chips are now powering the latest Macs and have impressive performance metrics. Finally, Apple has gained PC market share within education and business verticals.
iPad: iPad was the single business unit which saw revenues decline. Revenues declined 14% YoY in Q4 2021. Main reason for the decline was component shortages. Common components between the iPad and iPhone were prioritized for iPhones. Supply constraints for iPad were worse in Q4 than Q3. Pent-up demand within education and business will likely help sales in Q1 and Q2 as component shortages ease.
Apple Watch: Apple Watch and AirPods make up the vast majority of revenues which are lumped into ‘Wearables, Home and Accessories’. The category grew 13% YoY in Q4. Apple Watch continues to gain momentum. Apple Watch will likely continue to see revenue growth as the health and fitness utility continues to improve. Health coach, sleep analysis and heart rate analysis during exercise continue to improve. Apple continues to successfully market health and safety features, such as fall detection and the ECG feature for early detection of irregular heart rhythms.
Services: Apple services hit new highs in Q4 2021, growing 24%. There are over 785 million active service users. Music, video and the app store registered all-time revenue highs. Apple continues to see very low churn to Android and receives very high satisfaction ratings for all of its hardware. The active installed base of Apple devices has eclipsed 1.8 billion – this is a great flywheel for growth within services.
Apple Fitness+ is a unique service. Combined with Apple Watch, it has some interesting synergies for tracking health improvements. With its $203 billion in cash, there are other accompanying fitness hardware companies it could purchase (think Peleton) or develop on its own to increase the utility of Apple Fitness+.
Regions: Apple’s installed base of devices grew in every region. Two years ago, China was a huge problem due to its slowing economy and US-China trade tensions. In Q4 2021, China witnessed 21% growth, highest among all regions. Rest of Asia Pacific grew an impressive 19%. Japan was the lone region which did not see growth — revenues fell 14%. There are a few reasons for the decline in Japan. The main one being the Japanese government’s ban on SIM locking. This has hit operators’ ambition to subsidize iPhones if consumers can freely switch operators.
Outlook: Apple did not give formal guidance for the March quarter. However, the company did comment that its assumption was COVID-19 pandemic would not worsen. In addition, it is expecting solid YoY growth for the March quarter despite some challenging comps due to last year’s lockdowns, which helped companies such as Apple, Netflix and Amazon.
Often successful brands have difficulty keeping the interest of the next generation, which wants to be different. This has not been the case for Apple. It remains an aspirational and ‘hip’ brand to the young. This makes the outlook for Apple, at least medium-term, very promising.
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 showrecord 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.
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.
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.
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%.
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.
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
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.
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.”
At its Spring Loaded event in April 2021, Apple made a bunch of announcements on new iMacs, Apple TV, iPad Pros, AirTags, and more. Apple also introduced the new purple color variant for the iPhone 12 and iPhone 12 mini. But among all the announcements, the iPad Pro with M1 chip took the center stage. The Apple Silicon chip not only makes it the most powerful and expensive iPad to date but also the one with top-notch specs.
Apple Silicon: M1 Chipset to Rule Them All
Before we deep-dive, it is important to understand the positioning of Apple Silicon. By using the M1 chipset in the iPad Pro, Apple is showcasing the ARM-based SoC’s scalability across different form factors – be it laptops, personal computers or tablets. This means it can power a portfolio of offerings even across different price points, right from a $699 Mac mini, a $799 iPad Pro and a $999 MacBook Air to a $1,299 iMac.
Unlike Intel’s tiered chipset strategy (from i3, i5, i7 to vPro) across different generations, the M1 is designed to target different types of applications and user segments from consumer to enterprise. Apple is driving scale with a single SKU of M1 SoC with consistent experience and performance across devices. Thissimplified positioning and messagingis thekey differentiator for Apple.
Source – Apple
But it is not just about the power and efficiency of M1, the chipset unlocks a lot of potential in terms of bringing smartphone-like capabilities to devices, from Augmented Reality (AR) to 5G. The immediate competitors are the Microsoft Surface series of laptops, mostly powered by Intel or AMD series, and an odd model like the Pro X, powered by Arm-based customized Qualcomm silicon (Microsoft SQ1/2). Recently, Samsung also debuted a new Galaxy Book line-up, all powered by Intel chipsets. It is the only series that is closer to converging the smartphone and PC connected experiences.
The M1 chipset is based on the same fundamental ARM architecture as the A-series chips that we have been seeing on iPhones and previous iPads. This makes it seamless for the apps developed for A-series devices to become compatible with the M-series devices, expanding the opportunities for developers beyond iPhones and iPads.
Top-notch Specs Bring Fluidity and Future-proofing
Apple has been setting gold standards when it comes to memory and storage to complement its powerful SoCs, making it an ultimate device for rich content creation and consumption. Drawing parallels from iPhones, according to our Component Price Tracker, the average NAND flash storage capacity in smartphones has been rising. Talking particularly about Apple, the average NAND density was 141GB in Q4 2020. The increase in demand for storage capacity can be attributed to higher resolution cameras capable of capturing high-quality photos and videos, storing audio, video and other types of content, and more. The maxed-out version of M1 iPad Pro also has 2TB of onboard storage which allows content creators to store those large video files without worrying about storage space, thus making it future-proof.
Now, having 16GB of DRAM can be termed as bragging rights for the iPad Pro M1, but it also means that it is nearly as powerful as the laptops. Having more RAM will not only speed up tasks like video post-processing and loading large files in apps like Adobe Illustrator, Photoshop and Procreate, but also make the tablet future-proof for the next few years. This makes the entire experience fluid for the users.
Commenting on this specs strategy, Counterpoint Research Associate Siddharth Bhatla said, “The 16GB RAM in iPad is a big jump from its 6GB predecessor, signaling a major overhaul, either in the iPad apps or the iPadOS altogether. The larger RAM paves the way for bringing full pro-grade desktop apps into the iPad ecosystem and facilitate in a better way the multi-tasking needed in typical professional use cases. Video-editing apps like Final Cut Pro need large swathes of RAM for editing videos. As the videography is transitioning to 8K HDR, processing high bit-rate files will be a whole lot smoother with ample RAM. Beefy 3D simulation tools like ANSYS currently depend on the cloud to render frames, but a powerful processor like the M1 creates room for moderate simulation rendering on iPad.”
Source – Apple
Bhatla added, “The iPad has traditionally been a media consumption device, whereas the iPad Pro is positioned towards the content creators and users looking for a highly portable but powerful device on the go. With this massive RAM upgrade, Apple has given wings to the app developer community for bringing the best out of iPads. With the upgrade to the 40Gbps Thunderbolt port, the new iPad Pro has to power to drive a 6K XDR display and support massive data-transfer rates, both of which can be a boon to the content creators. Apple Pencil on iPads further unlocks multiple use-cases which are not ideally convenient on most PC form-factors.”
M1 iPad Pro with 5G Connectivity Unlocks Many Possibilities
The iPad Pro M1 is the company’s first iPad with 5G connectivity. With blazing-fast 5G speeds at your fingertips, you can stream high-quality videos, and quickly upload or download files on the go. The low-latency network also means you can play your favorite and immersive mobile games on the go. Even the AR applications benefit from the high-speed connectivity.
Source – Apple
The LiDAR sensor on the iPad Pro M1 also unlocks immersive AR capabilities by creating a depth map of any space around you. The powerful ISP (Image Signal Processor) on the M1 chipset can focus on images more accurately, even in low-light conditions.
Can M1 iPad Pro be your Laptop Replacement?
The iPad Pro, with its premium price tag, is aimed purely at professionals. But whether or not it is a laptop replacement is a tricky question to answer. The “workflow” will play a crucial role here, besides the budget. Take, for instance, a graphics designer, an interior designer, or a professional photographer. These are the type of people who use apps like Adobe Illustrator and Photoshop to create designs or edit photos. The M1 iPad Pro with Apple Pencil could prove to be a perfect tool to quickly draw rough sketches of designs they are thinking about. Procreate, a popular illustration app, is getting support for the M1 iPad Pro in its next update, which will enable painting 3D models, and will be up to four times faster. On a regular laptop without touchscreen or stylus support, it will not be easy to draw this quickly.
Source – Apple
Next, think of an on-the-go content creator, someone who is using an iPhone to shoot 4K videos on travel or food, or for regular vlogs. Transferring videos to the iPad Pro using AirDrop is quick and easy. And with apps like Adobe Rush, iMovie and Luma Fusion, editing pro-grade videos on the go is easy. But one of the pain points of all apps is the time taken for rendering videos and exporting them.
In my MacBook Air M1 first impressions, I did a small test. I shot an 8K video, imported that on iMovie, edited it and then exported it in 4K 60fps. The rendering just took under a minute, whereas the same on my Windows 10 laptop, running Intel Core i7 processor and 16GB of RAM, took about seven minutes. So, if the M1 iPad Pro can deliver the same performance, it could mean less wait time for content creators to get the final video rendered.
Source – Apple
The third category of users will be executives who generally keep traveling to client offices to give presentations about their products and services. Such users could also include CEOs who attend meetings and have to travel a lot. In this case, carrying a portable tablet seems more apt than a bulky laptop. And having 5G cellular connectivity means they don’t need to rely on the Wi-Fi network at the hotel or public places to access emails or continue working on cloud documents.
Pricing will play a crucial role here. For example, the Wi-Fi-only base iPad Pro model with 128GB storage and an 11-inch screen is priced at $799 and goes up to $2,099 for the 2TB storage model with 5G connectivity. The 12.9-inch model, on the other hand, starts at $1,099 for 128GB storage and Wi-Fi-only connectivity. The top model with 2TB storage and 5G connectivity will be available for $2,399.
The one important thing to note here is that the MacBook Pro M1 laptop with 2TB storage costs $100 less at $2,299, compared to the top iPad Pro model with M1. Add $129 for Apple Pencil and $299 for the Magic Keyboard, the total cost for the iPad Pro with M1 and accessories goes to $2,827.
But for someone with no budget restrictions, having workflow flexibility and heavily invested in the Apple ecosystem, the M1 iPad Pro may just be an apt choice given the compactness, touchscreen, efficient battery life, Apple Pencil support and 5G connectivity. So, Apple is now offering a wide range of powerful computing options with differentiated capabilities for the users looking for a tablet form-factor instead.
Demand for M-series iPads to Soar
Apple introduced the iPad Pro in 2015, featuring the powerful Ax-series chipsets. But over the years, Apple has been looking to bridge the gap between iPads and MacBooks. Introducing Universal Apps that run across Apple devices – iPhone, iPad and Mac – was the first step. The M1 chipset-based iPad Pro is the second step towards bridging the gap.
The M1 iPad Pro is launching around mid-May in key markets such as the US. In other markets, it may take a little longer. The demand for M1-based iPads will be very high but with Apple’s warning about chip shortages in H2 2021, we estimate the share of M-series-based iPads to remain at close to one in ten iPads shipped this year. For the second half this year and the next, we estimate that almost one in five iPads shipped will sport an M-series SoC.
Also Read: Strategic Reviews and Insights on Latest Smartphones and Laptops
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 showrecord 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.
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.
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.
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%.
Source: Apple, quarter ending March.
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.
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 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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Key highlights from Apple’s March quarter
Source: Counterpoint Research Ecosystem Analysis, 2021
