Apple is the largest IT company in the world. It’s revenues were $294 billion in 2020 – the equivalent of everyone alive on the planet spending $26.52 on its offerings. It’s business grew substantially on the introduction of the iPhone, expanded as we recovered from the Credit Crunch and has proved resilient during the pandemic. It’s time to question whether it can continue to thrive as the severe economic effects of the pandemic spreads.
Apple stopped publishing unit shipments by product in its financial statements from Q3 2019 onwards, so I’ve estimated them in the Figure above from the revenue splits it still shows. My guess is that it shipped 354 million in 2020, which was a record due to the growth in iWatch sales making up for the decline in unit sales of iPhones, which have decline since 2015.
On a regional level (see my Figure above) Apple’s revenues in 2020 grew most in Europe (15%), least in the Americas (7%); it achieved double digit growth in Japan (13%), a 9% increase in China and 12% other Asian Pacific markets. It’s a victim of its own success in its US home market, where upgrades, enhancements and new offerings make up for the greater penetration of its products. For the future has opportunities are to expand its business in Africa (part of its ‘Europe’ market) and in other Asia Pacific countries where mobile computing is growing on an infrastructure enhanced by new submarine fibre networks and the build-out of new (mainly 4G) telecom networks. However it will face strong competition from Chinese vendors, who have often made the first moves to stimulate ITC markets.
Apple’s market share of the whole IT market grew massively from 1% to 6% over the period from 2006 to 2015 (see my Figure above); since when it has levelled off. In subsequent years its success has been measured by how it has improved its profits. I don’t expect this to change substantially in the next couple of years.
Since 2014 Apple’s profitability (its net profit divided by its revenues in my calculations) has been between 21% and 23% – substantially higher than most of the top hardware vendors with the exception of Cisco, but lower than software leader Microsoft or cloud leader Amazon. My Figure above shows a comparison between Apple’s profitability and absolute net profit on a long term basis – its absolute/net profit (‘shareholder value’) is of course the main measurement of its success.
Some of the challenges to Apple maintaining its high net profit in coming years include:
- The inevitable increases in taxation in the US, the UK and other countries which decide they no longer need to give special discounts to large suppliers,
- Its aim to become carbon neutral by 2030, which is hard for a company so dependent on Chinese manufacturing
- The very severe economic recession brought on by the pandemic and
- Its own highly successful penetration of many countries and a change in purchasing preferences of its customers and prospects.
However it will most likely overcome these – it has the best business planners, researchers and lobbyists in our industry.