Where Apple Makes Its Money

Apple(AAPL) launched its latest iPhone model, the iPhone 15 earlier this month. Investors in Apple are eagerly waiting to see if this version would be a huge success or a failure. In the US, the mobile phone carriers will be helping push the model on to consumers through various deals. So the success or lack there of, of this phone would depend on how well carriers are able to make their customers switch. In many other countries, the iPhone holds a major market share relative to others. For instance, in the UK iPhone accounted for 50% of handset sales last year according to an article at Fidelity UK. In other big markets like China and India, Apple does not command a leading market share as consumers in those countries cannot afford to buy its costly phones or they are able to find even better phones at cheaper prices from the competition.

Where does Apple make its money? The following short excerpt from the piece provide some insight:

iPhone still key – but Apple is diversifying

You can gauge the importance of the iPhone to Apple when you examine how it has made its money over the years.

In the years following its launch the iPhone rose in importance until it accounted for around 80% of Apple’s gross profits by 2015. Since then, its role had diminished somewhat thanks mainly to the expansion of Apple’s ‘services’ business, which includes App Store sales and digital offerings including iCloud and Apple Music.

Using the same data, it’s possible to see how profits from different areas of the business have come through. In particular, you can see how earnings from iPhone have been highly cyclical, rising and falling with each new iPhone launch. Compare that to the steady rise of services where user subscription models have provided more steady revenue.

Source: How important is the iPhone 15 to Apple’s success? by Ed Monk, Fidelity UK

Following the auto companies, Apple is trying to see how far customers are willing to go to get its new models. The iPhone 15 Pro version would cost an astonishing $1,199 in the US. It would be interesting to watch how many of these units Apple ends up selling.

The entire article linked above is worth a read.

Disclosure: No positions

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