Saturday, February 13, 2021
Monday, February 8, 2021
The Start Of Another iPhone 'Super Cycle'
Over the years, some of my Apple-loving friends tried to get out of the notoriously sticky Apple 'ecosystem'. Guess how many of them succeeded? None. Some lasted weeks, others lasted months. But all of them reverted back to Apple within a year. You would think a raging 2nd wave of covid infection between Oct to Dec 2020 (particularly in the US and Europe) might affect Apple's sales. No way. Its moat is strong. There is a reason why Warren Buffett's Berkshire Hathaway has Apple as its top holding at 47.8%. Apple is probably the only company in the world that is able to charge customers US$550 for a headphone and US$69 for a pair of magnetic ear-cups. According to Tim Cook, they couldn't produce these fast enough. Demand is outstripping supply. I can buy a brand new PlayStation 5 with that money!
Apple delivered a record quarter. Sales revenue tops US$100B for the first time. With remote working and learning becoming the norm, I believe the demand for Apple products and services should remain robust in 2021. Furthermore, the iPhone line-up is poised for another 'Super Cycle' since 2014. Back then, a wave of consumers upgraded to the iPhone 6. According to the management, the Pro models are selling particularly well. There is pent-up demand in China where iPhone 12 sales have been strong. Millions of existing users are upgrading to the iPhone 12, lured by its 5G capabilities.
The subscription business model is growing too. 620 million paid subscriptions across its services, which is an increase of 140 million from last year. Almost 75% of people buying an Apple Watch are new to the category. Just like the iPad, the Apple Watch is the market leader in the smartwatch segment. The next-gen M1-based Macs is a game-changer and could pull more customers away from Windows PCs. The much-rumored Apple 'Car' remains a wild card and the management declined to comment on it. But Tim Cook did mention that Apple will continue to work on business areas where they can deliver hardware, software and services in a fully-integrated manner. An autonomous electric car sounds like a suitable medium.