iPhone and Services sales represented the main revenue drivers in 2022. Within the service revenues, the fastest growing sub-segment was the advertising business Apple built on top of the App Store, followed by the Mac, Accessories & Wearables, and the iPad.
A long-term perspective on Apple’s sales
By taking a long-term look at a decade, four main products (iPod, iPad, iPhone, Mac), and its other products, a few insights are coming up:
- Over the years, Mac remained a stable product. However, Apple, which started as a computer company 10-15 years, became an entirely new company, powered up by a new business model and a whole new set of products. The Mac was once the company’s main product, making up most of its revenues. Over the years became a “niche” compared to the iPhone. In 2018 all the Mac products made up about 10% of the total net sales for Apple. While we can expect the Mac to still be relevant in the coming decade in the professional world, its net sales might remain relatively stable over time. It might be possible that its sales share in comparison to other products might get smaller and smaller.
- The iPhone has been a massive success. Nothing new about it. Yet it is interesting to notice how the iPhone cannibalized the iPod. In conventional business strategy, cannibalization is something to avoid in most cases. In this particular scenario, the iPhone did cannibalize the iPod, yet it also opened up a much broader market. This blue ocean made Apple reach a completely different scale, bringing it into mass consumers’ hands. Today the iPhone represented 63% of Apple’s net sales.
- From 2011-14 iPad and related products and services surpassed the Mac. This might have given the impression that the tablet market was ready to take over the portable computer market. Yet, that didn’t happen, or at least not as imagined. Starting in 2015, the Mac picked up momentum, and in 2018, the Mac still generated more sales than the iPad. Therefore, Mac and portable computers, in general, have shown a resilience that made them a relatively stable product for Apple.
- The iPod has been a massive success as Apple also introduced a new way of consuming music via iTunes. But the iPod eventually became more of a transitioning product, ultimately leading to the iPhone and iPad. Today iPod sales are comprised of other products.
- The other product sales in 2018 more than doubled compared to 2014. Other products comprise AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and other Apple-branded and third-party accessories. Some of those products might turn out to be hidden gems.
How did things change through and post-pandemic?
As of 2022, Apple still has wide margins on its products.
For instance, the company generated over $205 billion from the iPhone in 2022, and on the new product, the iPhone 14, the company still keeps a 120% markup, which is extremely high for a tech product.
This is thanks to branding, a powerful distribution strategy, and an incredible hardware product with a powerful chip, coupled with a marketplace that enables users to get the most of the things they need for free.
Chips shortages and supply chain issues created by macroeconomics and geopolitical instability might also induce Apple to inshore more and more.
Meaning Apple will try to bring its manufacturing capability, from chip to phone manufacturing, closer (geographically) to California.
But, even more important, try to (over time, and this is a 10-year process) internalize it.
While this would reduce margins and change the overall capital structure of Apple, it would also make Apple way more solid in the long term.
Whereas now Apple depends a lot on China.