The State Of Apple Business Model – Q2 2020

Apple used to be solely a product company. Yet its strong products also brought it to develop into a service company. It’s important to highlight that those two segments walk hand in hand. There would be no Apple’s services, if there were no Apple products. 

Therefore, forgetting this simple premise, might make analysis or business people in genera, be fooled by looking at numbers in a sterile way. No doubt that the service side is interesting because it has much higher margins than the product side. But once again, without great products there wouldn’t be any service company. 

Therefore, Apple business model can be broken down into two main broad categories: 

  • Products. 
  • And services. 

The service side of the business has been developed over the years on top of the product-side. The product side of the business comprises three core products, and a set of new products: 

  • Core products: iPhone, Mac, iPad.
  • Other products: Wearables, Home and Accessories.

Within the core products: 

  • iPhone: which is the core company’s products that by June 2020, made up 53% of its revenues. 
  • Mac: the core Mac products, and the most sold are the MacBook Air and the MacBook Pro.
  • iPad: with the new generations of iPads Apple managed to maintain momentum. It’s interesting to notice that the tablet segment is almost as big as the computer segment. 

The other products comprise Wearables, Home and Accessories, such as: AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and Apple-branded and third-party accessories. 

Some key highlights of the Apple business model, as of June 2020.

iPhone SE sustained Apple’s phone sales 

iPhone net sales increased as of June 2020 compared to the same period, in 2019. primarily to net sales of the new iPhone SE released in 2020. Year-over-year iPhone net sales also increased primarily to higher net sales of iPhone 11, 11 Pro and 11 Pro Max.

MacBook Pro and MacBook Air sustained computer’s sales

Mac net sales increased during 2020 compared to 2019 due to higher net sales of MacBook Pro and MacBook Air. Year-over-year Mac net sales increased especially thanks to higher net sales of MacBook Pro.

With new iPad models, tablet segment is becoming as big as the computer’s segment

iPad net sales increased in 2020 compared to the same period in 2019 due primarily to higher net sales of iPad Pro. Year-over-year though net sales increased especially thanks to the sales of iPad Air.

It seems that after years of development of this new market, this is finally surpassing the computer’s segment. 

Accessories as fastest growing product segment

Wearables, Home and Accessories net sales increased in 2020, compared to the same period in 2019, due primarily to higher net sales of AirPods. AirPods sales became the most profitable within the new product line. 

Product-based company, building a solid service and advertising business

Services net sales increased in 2020 compared to the same period of 2019 due primarily to higher net sales from the App Store, Video and Cloud Services. Year-over-year net sales from services gained momentum thanks to the App Store, Advertising and AppleCare. 

Advertising net sales includes net sales from licensing arrangements and the Company’s advertising platforms.

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