For many years, the iPhone has been the major source of growth and profit for Apple. But starting with iPhone 6s, Apple reached peak growth. Demand was way lower than expected, leading to a surprise cut in production
. People started using their devices for a longer period of time, going from a 2-year replacement cycle to almost 3 years. To counter the decline, Apple increased the prices, resulting in higher profits but overall shrinking sales.
At the same time, they started working on a future where they wouldn’t be as reliant on iPhone sales as they were back then. Apple was always very strong in creating an ecosystem where its own hardware and software would match perfectly while at the same time creating high barriers for third-party solutions. So it was only natural for them to look at the areas close to the iPhone: Accessories and Services.
Apple Watch and AirPods both have seen incredible success, although they faced harsh skepticism when they launched. The HomePod on the other hand, Apple’s smart speaker, is considered to be a flop, not really fitting into any niche or customer segment to sell it to. With Siri, it’s not as smart as say a Google Home and as speaker alone, it’s not that impressive.
But in the end, these accessories created an additional profit off from existing customers, further enhancing the customer lifetime value.
The other big area Apple is focusing on is what they sum up under the term Services. It became so important actually, that this year, Apple held their first ever keynote where no new hardware was announced, only new services.
Why am I talking about this right now? Well, Apple reported earnings for Q3 on Wednesday and services revenue is going through the roof, surpassing almost every other division for the first time. And the iPhone? It’s not nearly as important for Apple’s income as it was a few years ago.