To The Moon

Hello, Tigers! Today, let's talk about Apple. Takeaways: Compared to competitors like Google Pixel 7 and Samsung Galaxy S23, the newly released iPhone 15 doesn't bring substantial advantages. Order trends suggest overall revenue and earnings are on par with last year. The smartphone market has matured and become increasingly diverse. Without a major technological shift, this isn't favorable for Apple. Apple could face fierce competition from Huawei in the Chinese market and supply chain risks in the region. On September 12, 2023, Apple Inc. (AAPL) unveiled the iPhone 15 and its variants. While some media reports and loyal Apple enthusiasts have been positive, it has also garnered criticism from many for becoming a brand that only sells "colors." It's important to note that the smartphone market is a crowded space, highly fragmented globally, with countless varieties tailored to different budgets and usage parameters. With a lack of innovation, could this provide opportunities for other smartphone manufacturers? 1.iPhone vs. Other Flagships In recent years, Apple's iPhone series has faced competition from two rising competitors: Samsung's Galaxy series and Google's Pixel series. These two competitors have posed significant challenges to the iPhone's overall functionality. As seen in the chart above, except for a slightly better display resolution, the iPhone 15 doesn't offer many advantages for the average user. Overall, Pixel 7 has a significant lead, while Galaxy S23 is on par in terms of pricing. Some highlights of the iPhone 15 have also been criticized by many users: a.The "Titanium" casing of the iPhone 15. This product first appeared in 2017 with the "Essential Phone" created by Essential Products (which had support from Amazon, Tencent, and Foxconn). Furthermore, the titanium casing only extends to the frame, while the back still relies on glass. b.The "new camera" in the iPhone 15 Pro Max was used in the Huawei P30 Pro back in 2019. The 5x optical zoom function is equivalent to the Pixel 7 Pro and only half that of the Galaxy S23 Ultra. c.The 3D video recording (or "Spatial Recording") feature in the iPhone 15, a version of which first appeared in 2017 with the HTC EVO 3D. Apple claims users can capture precious moments in three-dimensional space when the Apple Vision Pro, set to launch in the U.S. early next year, is used. However, unlike the EVO 3D, users won't be able to view the content captured through their devices. It can only be viewed through the Apple Vision Pro headset, which starts at $3,000. d.Apple is transitioning from "Lightning" charging technology to the more universal USB-C standard. While some view this as a unilateral move in the interest of users, the reality may be slightly different. In fact, Apple's shift to the USB-C standard is to comply with the European Union (EU) Parliament's requirement that tablets, phones, and cameras must be equipped with USB-C by the end of 2024, and laptops must follow a similar standard by 2026. Apart from this, Apple users would need to purchase a Thunderbolt 4 Pro cable for up to 40Gbps data transfer speeds and up to 100W fast charging, priced at $69. Looking at Apple's new generation of products and similar products in the market, it's clear that Apple doesn't have a significant advantage, and the so-called "new technologies" merely incorporate some features from its competitors. 2.Financial Data Analysis Now, let's take a look at Apple's financial data: We can analyze Apple's net sales trends by region and product category: Compared to the same period in 2022 and the entire fiscal year, there doesn't seem to be strong demand growth in any region over the past 9 months. Demand appears to have slightly decreased in most cases when compared to the same period, and this fiscal year's performance is slightly below the standard set by the previous fiscal year. The 2021 fiscal year saw significant revenue growth (especially in China). The following year, 2022, while not as massive, still achieved net positive growth. In the 2020 fiscal year, the Americas region accounted for over 45% of the company's net sales. By the 2022 fiscal year, this proportion had dropped to just under 43% and further decreased to just under 42% over the past 9 months. China's share increased from just under 15% in the 2020 fiscal year to just under 19% in the 2022 fiscal year, and slightly above 19% over the past 9 months. Growth rates in Europe have hovered around 25% in all fiscal years and the past 9 months. So far, the iPhone has been the largest contributor to revenue growth in the 2020 fiscal year, slightly over 50% of net sales. Over the years, this number has continued to increase, exceeding 52% in the 2022 fiscal year and over 53% over the past 9 months. Therefore, the slowing revenue growth may be due to a decline in Mac and iPad sales, which have dropped from slightly over 19% in the 2020 fiscal year to just under 15% over the past 9 months. The "Services" category (including advertising, AppleCare, cloud services, digital content, and payment services) has also seen growth, increasing from just under 20% in the 2020 fiscal year to over 21% over the past 9 months. In summary: In terms of overall sales performance and key product trends, Apple's performance can be described as "so-so," with revenue and profits staying around last year's levels. However, without a significant technological advantage, it's becoming challenging for Apple's products to attract large-scale purchases from new users. Furthermore, the smartphone market, being a buyer's paradise, offers a plethora of product choices in most regions worldwide. On the other hand, the growth in "Services," including revenue share from its podcast network and subscribers to its streaming services, is a positive factor for Apple. 3.Future Risks for Apple (1) Competition Risk from Huawei Apple's biggest future risk could come from competition in the Chinese market, particularly from its longtime rival, Huawei, which is gearing up to regain market share. From the data, the intense competition between Apple and Huawei can be traced back to 2015. At that time, Apple held a leading position in the high-end smartphone market in China. Over the next four years, Huawei took away market share from Apple, growing to nearly 40% market share in 2019, while Apple's share shrank to around 6%. Then, the U.S. banned domestic companies from collaborating with Huawei and denied Huawei access to the Android system, preventing it from launching 5G-enabled phones. This effectively made Apple the only true participant in the high-end smartphone sector in China. By 2022, Apple's share of the high-end smartphone market had risen to over 45%, while Huawei's share was slightly above 10%. Now, Huawei is making efforts to reclaim market share. Recently, Huawei launched the new Mate 60 Pro, addressing hardware issues that forced Huawei to exit the high-end smartphone market in 2019. Notably, the new Huawei Mate 60 Pro features a four-camera setup, including a 108-megapixel main sensor, a 50-megapixel ultra-wide-angle lens, a 12-megapixel periscope telephoto lens, and a 3D ToF sensor. Additionally, the camera system includes 10x optical zoom, 100x digital zoom, and 8K video recording. The Huawei Mate 60 Pro also comes with a 6.8-inch OLED display, under-display fingerprint sensor, 5nm processor, 12GB RAM, and 512GB storage. What Apple investors are most concerned about is that nearly 90% of Huawei's technology comes from independent research and development in China. This allows Huawei to bypass U.S. technology restrictions, increasing the threat to Apple. Considering the stickiness of the iPhone ecosystem and the existing production volumes of Huawei phones, it may be challenging for Huawei's market share to recover to 2019 levels in the short term. However, as the Chinese government increasingly favors locally manufactured technology, competition between Huawei and Apple could intensify in the future. (2) Supply Chain Risks in China In the latest financial report, Apple stated: Now, although specific numbers have not been disclosed, it is estimated that about 90% of the iPhone's hardware comes from Asia, with much of it directly or indirectly related to China. Therefore, if tensions between the U.S. and China escalate further, imposing tariffs, sanctions, and other trade restrictions could significantly impact Apple's business model through its supply chain operations and its financial condition through taxation. Tariff impacts would increase the overall cost of Apple products. With this, we come to the end of this article. What are your thoughts on Apple's future? Remember to leave me a comment in the section below. I'll select outstanding comments for rewards, and each comment chosen will receive 5 Tiger Coins! Of course, if you're unsure how to analyze financial reports, the following free course might be perfect for you: "US Stock Financial Statements for Beginners."