Apple makes money on hardware. Apple is a hardware company. Yes, the Services division continues to grow and in and of itself could be a Fortune 100 company, but Apple’s endgame is all about revenue and profits and that means hardware.
Look at Apple’s competition. Samsung is a hardware company which makes money. Google is an advertising company which makes almost nothing on hardware. Microsoft’s Surface PC sales have been going down. The cash cow is Windows and Office. Hardware is what makes money.
When it comes to hardware, Apple and Samsung are strange bedfellows. Both need each other to remain profitable. Apple uses Samsung as a vendor that provides memory, CPUs, and displays. Samsung uses Apple as a customer that needs memory, CPUs, and displays.
Among those in the smartphone industry that actually make money, it’s Apple and Samsung at the top of the list and nobody else is even close. Despite raking in tens of billions each year in the Services division, Apple’s endgame is all about hardware.
Without hardware sales and a growing customer base– all using Apple branded hardware devices– where would Services be?
Apple is almost unique in how it integrates various products into a cohesive ecosystem that differentiates itself from other hardware manufacturers and competitors. Think about how Apple and Samsung differ. Apple designs and manufactures hardware. Samsung designs and manufactures competing hardware. But like all other smartphone and personal computer makers, Samsung relies on software from others, while Apple differentiates macOS from Windows and iOS from Android, which sets the company’s ecosystem apart from competitors.
Apple’s hardware platform is relentless. Mac, iPhone, and iPad rule the competition with revenue and profits culled from the premium end of the product spectrum. Recently, the company has become more competitive on price but maintains the premium product persona. Apple Watch is stellar hardware with well integrated software and it rules the smartwatch technology segment and has become a major player in the watch industry.
What’s next? More hardware.
Augmented reality, AR, is available in limited fashion on iPhone and iPad now, but will get a massive boost this year in iOS 11 with ARKit, Apple’s new platform that will put augmented reality applications onto a few hundred million devices almost overnight.
What’s next? More hardware.
Not too far down the road will be a wearable companion to iPhone called Apple Glasses, and when it arrives, Apple’s ARKit will have provided app developers with a complete platform and an eager customer base to launch themselves into the future. More hardware equates to more software sales.
Will Samsung, Google and others create their own wearables? Of course. But Apple’s AR will rule hardware sales and profits.
What Will AR Do?
Good question. The most obvious directions are games and maps, but app developers tend to look for ways to differentiate their wares, so expect whole classes of AR apps to show up before the end of the year.
Word on the streets is that Apple is prepping a 4k version of Apple TV. See? More hardware. That means tens of millions more customers and with HomeKit integration, security cameras, FaceTime, and more, ARKit will find its way into big screen applications, too.
Services are an important element at Apple, but the company, ultimately, is all about hardware, and the Cupertino company segregates and differentiates itself from competitors with homegrown software, while the competition has to be content to use wares from Google and Microsoft.
Just remember, Apple is all about hardware.