On January 9, 2007, Steve Jobs announced the first iPhone at the Macworld convention. The iconic smartphone went on to sell 6.1 million units over five quarters. Fast-forward thirteen years and the tech giant is now predicted to sell its two-billionth iPhone in fiscal 2020.
According to analysts polled by Bloomberg earlier this week, Apple is on track to sell nearly 195 million iPhones in its fiscal 2020, an increase from the estimated 186 million iPhones sold last year, bringing the total number of iPhones sold since launch to about 1.9 billion.
Apple’s boss Tim Cook said in late 2018 his company was “about to ship our 2 billionth iOS device.” Note he mentioned iOS devices, not iPhones, because that figure also includes iPod touches and iPads with the latter selling at a rate of approximately 1 for every 4.9 iPhones.
Since those early days, the business of iPhone has evolved significantly. The global smartphone market is saturated. And while Apple still relies on sales of new devices, its business model is increasingly tied to the ecosystem surrounding the iPhone.
While unit sales have been dropping, Apple’s active installed base of iPhone reached an all time high at the end of December 2019 when the company disclosed it had 900 million active iPhones in the wild and 1.4 billion total active devices out there.
What that tells us is two things.
Firstly, people continue to hold on to their iPhones longer due to higher prices and the fact that models released in the past few years with their sophisticated Apple-designed chips are able to support annual iOS software upgrades for years to come.
And secondly, people are increasingly signing up for Apple’s various services and appear to be increasingly using them on an everyday basis. Keep in mind that analysts’ estimates cited in the Bloomberg article are just that, estimates.
Apple stopped reporting iPhone unit sales at the end of the calendar 2018 holiday quarter.
Meanwhile, Services in 2019 captured its highest revenue so far.
During the September 2019 quarter, for instance, it raked in 12.5 billion in quarterly Services revenue, a new all-time high. To put it another way, Apple’s annualized Services revenue is now in excess of $50 billion.
If analyst forecasts are correct, the number of iPhones sold this year will be well below the total number sold during peak iPhone years of 2015, 2016, 2017 and 2018. And yet, Apple is expected to generate record revenue this year of more than $275 billion thanks to its evolving business model.
Some of the product lines whose revenues are reported under Services include App Store, Mac App Store, Apple Music, iTunes Store, Apple TV+, Apple Arcade, Apple News, Apple News+, Apple Card, Apple Pay and iCloud storage.
What I see as critical to the Apple story going forward is its ability to convince consumers to keep buying new iPhones because Apple is primarily a hardware company and the iPhone still is the dominant source of its business.
“And much of Apple’s services revenue growth is only possible because of all the iPhones in the pockets of smartphone users around the world,” as Bloomberg wrapped it up nicely.
What a difference 13 years make…