Recently, there’s been a lot of talk about Apple ever since they became the first US company to reach a trillion dollar valuation. Apple first made a name for themselves with their user-friendly personal computers, becoming the only company to seriously compete with Microsoft in the early days of computing. They then revolutionized the industry with the release of their first iPhone in 2007. Being the first in the smartphone market gave them a sizable lead, but competitors are gaining and their global market share is beginning to shrink. As both PC and iPhone sales are now starting to slow down, the question becomes what will be Apple’s next source of big growth?
The iPhone has proved to be a massive driver of revenue growth for Apple. The iPhone currently accounts for more than two thirds of Apple’s revenue, generating more than $30 billion for the company in the most recent quarter alone. However, iPhone sales on their own cannot continue to support this trillion dollar company. 2016 marked the first time that iPhone revenue fell year over year. Recent research has also found that more people are now holding on to their older iPhones for longer. This has forced Apple to raise prices on new devices in order to continue to grow revenue and make up for their falling sales volume. Since this is clearly not a sustainable practice (as people are already upset with the insane prices of the iPhone X), Apple needs to find other areas of growth to focus on. Their solution, according to experts, may lie in wearables.
Apple first entered the wearables market in 2015 with the release of their original Apple Watch. This was met with immediate success as the Apple Watch quickly became the best-selling wearable device thus far with 4.2 million sold in the first quarter after its release. Since then, Apple has continued their push into wearables with multiple newer versions of the Apple Watch and the recent release of their AirPods. A tech research firm, IDC, recently named Apple the wearables market leader, with an estimated 17% of the global market share; but Apple won’t stop here. Tim Cook has famously said that Apple strives to “give you things that you can’t live without that you just don’t know you need today.” As Apple continues to develop new wearable products, the iPhone will take on more of a supporting role and will become even more of a platform than it already is.
Christopher Mims of the Wall Street Journal has a series of articles about Apple’s future that I would highly recommend checking out. In one of them, he predicts that the iPhone will soon become less a phone and more of a local hub for the “body area network”. Mims suggests that the iPhone’s primary purpose will become managing the ever-increasing number of sensors and devices attached to your body. To this end, Apple’s main focus is currently shifting towards developing health sensors and augmented reality wearables.
In the realm of health, Apple has: acquired the sleep-tracking hardware maker Beddit, announced a new health-tracking platform that’s in works with the FDA, and patented a new system for tracking heart rate through earbuds. According to the book The Inevitable which I read for class over the summer, it will soon be commonplace for all of us to want to track every piece of data possible about our own health. People already track basic stats such as the number of steps they take in a day or their average heartrate, and Apple wants to be there to enable even more personal health tracking moving forward.
Even more exciting than health tracking though, is Apple’s commitment to wearable augmented reality devices. Apple currently has the ARKit which allows developers to add digital objects to what you see through your iPhone camera. While this is limited at the moment to placing virtual Ikea furniture in your home or catching Pokemon in Pokemon Go, there is a lot of potential here for a new App Store like platform that closer connects the virtual world to the physical world. Apple also recently acquired the startup Akonia Holographics which makes lenses for AR glasses. Although any fully functioning AR glasses are likely very far off, this acquisition shows that Apple is serious about their new direction.
In order for Apple to continue growing beyond their trillion dollar valuation, they need to look beyond new iterations of the iPhone and double down on new products we can’t live without, that we don’t know we need yet. While this will likely include new health tracking devices and augmented reality wearables, it will almost certainly also include other devices that we can’t even imagine yet, and I for one am extremely excited to see what they come up with.