APPLE INC IN CONSUMER ELECTRONICS (WORLD)

December 2011
SCOPE OF THE REPORT

Scope

 This profile of Apple Inc focuses on its operations in consumer electronics as Disclaimer
well as its product distribution lines, and examines future opportunities and Much of the information in this
briefing is of a statistical nature and,
challenges for the company globally. while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
Apple Inc held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
Consumer companies’ opinions, reader
Retailing discretion is advised.
electronics
This profile of Apple Inc
examines the company’s
operations in consumer
Electronics and appliance
Portable computers electronics and retailing, with a
specialist retailers focus on forward looking
analysis of its prospects in
computers and portable
consumer electronics. A brief
overview of Apple Inc’s content
Portable media players Internet retailing
retailing and operational
specifics is provided to
supplement the core analysis.

Smartphones

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 2

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
STRATEGIC EVALUATION

Key company facts

Apple Inc  Apple`s performance in 2010 improved

significantly with sales increasing by 52%, to
Headquarters Cupertino, CA US$65,225 million. The main factor of the
Regional Involvement Worldwide increase in growth was the continued success of
Smartphones, computers, the iPhone.
Category Involvement
portable media players  2010 followed a more moderate performance in
World smartphone 2009, when the company was transitioning from
16.1% sales of desktops, laptops and media players to
share (2010)
focusing on the iPhone and iPad as its core
Apple Inc Net Sales vs Net Profit products.
2006-2010  Asia Pacific emerged as the fastest growth area
70,000 16,000 for Apple with sales rising by 160%. However,
60,000 14,000 growth was from a low base as the region was
12,000 traditionally dominated by Japanese, Korean, and
50,000

US$ million
US$ million

10,000
Taiwanese brands like Sony, Samsung and Acer.
40,000
8,000
 In actual terms, Europe contributed most to
30,000 growth, with sales rising by 58%. Japan grew
6,000
20,000
faster at 75%. The Americas remained the most
4,000
important market for Apple, with US$24.5 billion
10,000 2,000 (excluding retail). The iPhone continued to be
0 0 Apple’s strongest performer in FY2009; in actual
2006 2007 2008 2009 2010
value terms, it accounted for over 50% of Apple’s
Net sales Net profit
net sales growth, with sales rising by 93%.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 4

STRATEGIC EVALUATION

Financial assessment

Quarterly Performance
% Y-o-Y 2010 on 2009
US$ million Q1 2011 Q1 2010 FY 2010 FY 2009
Growth % growth
Net sales 28,571 15,700 82 65,225 42,905 52
Operating profit 9,379 4,234 122 14,013 8,235 70
Operating margin 32.8% 27% +5.8pp 21.5% 19.2% +2.3pp
Source: Apple Inc

Yearly Performance by Product Line

 The success of the iPhone 4 and iPad 2 models
was instrumental in driving revenues and growing 2010 on 2009
US$ million 2010 2009
profitability in 2011. % growth
 Aside from revenue from hardware sales both iPad 4.948 n/a n/m
products serve as important content delivery iPhone 25,179 13,033 93
devices through which third party providers sell
Mac (total) 17,479 13,859 26
content and applications from which Apple Inc
derives an increasing revenue stream. Music (iTunes) 4,948 4,036 23
 In Q2 2011, Apple Inc introduced its iCloud cloud Peripherals 1,814 1,475 13
storage service, which allows users to store and Software 2,573 2,411 7
access media via the internet on the company’s
iPod 8,274 8,091 2
devices. The move follows similar product
Source: Apple Inc
launches from companies like Amazon Inc.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 5

STRATEGIC EVALUATION

SWOT: Apple Inc

STRENGTHS WEAKNESSES

Strong brand image Cross-industry presence Narrow product portfolio Developing markets
 Sleek, easy-to-use  Apple is present in  Apple Inc has been  Apple Inc has left itself
products and a vast consumer electronics reliant on the iPhone under-exposed to key
ecosystem of content and with a strong ecosystem and iPad to drive growth markets such as
applications have made of products and services revenues, but while Brazil, India, and China
Apple a desirable brand in addition to the Apple successful so far this largely due to the high
in portable electronics retail operations, Apple strategy carries a price point of its core
and computers with Stores iOS App Store significant risk of lost product ranges.
exceptional brand loyalty. and iTunes Store. market share as growth
shifts to new markets.

OPPORTUNITIES THREATS

Economy range In-home entertainment Hardware price erosion Lack of IP in

telecommunications
 To capitalise on  As integration of content  In the increasingly  Apple Inc started out as
opportunities in on in-home and portable crowded smartphone a computer
developing markets and devices increases in and tablet markets, manufacturer which
late adopters in importance, the Apple Inc’s main resulted in a very
developed ones, Apple company needs a competitors are quickly narrow IP portfolio in
needs to develop low stronger presence in in- cutting prices and telecommunications
price ranges in computers home electronics, than accelerating price bringing about
and smartphones. Apple TV. erosion. numerous law suits.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 6

STRATEGIC EVALUATION
Key strategic objectives and challenges
Expanded price range
 In order to continue growing
Apple will need to increase its
presence in emerging markets,
which in turn makes it less
dependent on the US market.
 It is taking steps in the right
direction, with Asia Pacific sales
rising by 160% in FY2010.
Although impressive, the growth
is from a low base and the
region still only accounts for
15% of sales.
 Sales of the iPhone were the
main component of the strong
growth, but having exhausted
demand from early adopters
and wealthier consumers, Apple
Inc needs to create an
affordable smartphone to gain
access to a vast base of
consumers who use pre-paid
mobile service.
© Euromonitor International
In-home electronics
 In the developed world, Apple
Inc must work to develop a
presence in in-home consumer
electronics. This is particularly
important as consumers want a
platform that allows them to
easily access their content on a
variety of in-home electronics,
computers, and portable
devices. While Apple Inc has
been successful in both
computers and smartphones it
has not been able to make
significant inroads into in-home
electronics. This makes it
vulnerable to competition from
Google Inc whose Android 4.0
platform will likely be installed
on internet-enabled TVs and
set-top-boxes in addition to
tablets and smartphones.
CONSUMER ELECTRONICS: APPLE INC
Cloud-based services
 A key component of creating a
unified experience across
different types of devices is
cloud computing. Apple Inc is
very well positioned with all the
necessary ground work in place:
wide install-base of iOS in
computers and portable
consumer electronics, strong
services portfolio and a wide
distribution network.
 The iCloud service is a follow-
on to Apple Inc’s previous cloud
services iTools and MobileMe,
and allows users to store and
download data to their devices.
 A crucial missing component is
in-home entertainment as at the
time of writing the service was
not available on internet-
enabled televisions.
PASSPORT 7
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
COMPETITIVE POSITIONING

Changing the product mix paves way to current success

 Apple Inc’s line of iPod music players was instrumental in bringing it out of obscurity that it found itself in in
the late 1990s and early 2000s. Hoping to build on the success of the media players Apple Inc released the
iPhone in 2007, which was a significant departure from the smartphones of the time. The key difference
was that the iPhone was media and consumer centric, while smartphones running on BlackBerry, Windows
and Palm OS were mainly tailored for productivity-related tasks and the corporate customer.
 This departure proved to be a successful gamble and the iPhone along with the iOS App Store emerged as
key revenue growth drivers as demand for computers and media players stagnated since 2008. Demand for
the iPhone has increased with every refresh cycle, and in 2010 Apple Inc released the iPad which has
enjoyed a virtual monopoly through most of 2010 and into 2011 when Samsung Corp and Motorola Mobility
Inc among others released competing products.

Apple Inc: Global Retail Sales by Category 2008-2010

120

100
Smartphones

80 Portable Media Players

Million units

Peripherals
60
Tablets

40 Netbooks
Laptops
20 Desktops

0
2008 2009 2010

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 9

COMPETITIVE POSITIONING

Apple Inc has limited penetration within desktops and laptops

Computers: Top 5 Global Companies by  Apple Inc remained far behind it main
Category Volume Share 2010 competitors in computers, in desktops and
100 laptops, and had a negligible presence in
% volume share

80 netbooks in 2010. Although Mac computers

60
have gained popularity they remain priced
higher than most of the Windows-based
40
competition with a narrower software portfolio
20 and therefore remains a niche brand.
0
Desktops Laptops Netbooks Tablets
 The situation is reversed in tablets, where Apple
Apple Inc Lenovo Group Ltd Inc operated as a virtual monopoly through most
Acer Inc Dell Inc of 2010 as competing products did not enter the
Hewlett-Packard Development Co LP market until late 2010 and early 2011.
 Demand for Mac computers is mostly confined to the Apple Inc: Retail Laptop Sales by
developed markets, with nearly half of 2010 laptop Volume Distribution 2010
volume sales accounted for by North America.
 Although the brand is widely known, its computers are
not price competitive, which makes penetrating mass
markets in developing countries very difficult.
 A similar pattern has been observed in the sales of the
iPad with 74% of iPad volume sales accounted for by
North America. The iPad distribution picture in 2010 is
heavily skewed by the fact that the iPad was launched
much earlier in the US, with a global roll-out lasting
North America Western Europe Japan ROW
through 2010.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 10

COMPETITIVE POSITIONING
Apple Inc dominates within portable consumer electronics
Media Players: Global Retail Sales by Top
Brands 2010
60
Million units
40
20
0 lower-priced brands and Apple Inc’s iPhone, a
MP3 Players Multimedia Players
Koninklijke Philips Electronics NV Samsung Corp
Creative Technology Ltd Sony Corp
Apple Inc
 Aside from being an important source of revenue
for Apple Inc in 2001-2010, the iPod line provided a
foundation for the iPhone. Unlike the competition in
2007, the iPhone was largely centered around
media consumption in a smartphone and built to
closely resemble the user experience of the iPod
line, building on the content distribution Apple Inc
established with the iTunes store, expanding it to
applications in the iOS App Store. The content
distribution became an integral part of Apple’s
ecosystem of devices and services, a major selling
point for its devices.
© Euromonitor International
 Following its launch in 2001 the iPod quickly
emerged as the biggest selling portable media
player globally. However, the brand is having
difficulties gaining mass acceptance in key
developing markets like China and Russia
particularly with the iPod Touch line of portable
multimedia players which have to compete with
product that is functionally equivalent to the iPod
Touch with the telephony added. The iPod brand is
also less popular in markets where content piracy
is more prevalent as the iTunes store is much less
of a competitive advantage in those markets.
iPhone: Global Volume Sales 2007-2010
50
40
Million units
30
20
10
0
2007 2008 2009 2010
CONSUMER ELECTRONICS: APPLE INC PASSPORT 11
COMPETITIVE POSITIONING

Online services is key to Apple’s success

 Retailing forms a major part of Apple`s overall operation as the company’s content distribution platforms
(iTunes and iOS App Store) are its key competitive advantages. Although its retailing operations, especially
Apple Stores, saw increasing sales in 2010, its share of the company’s turnover declined as hardware
sales, especially the iPhone and iPad, grew significantly faster.
Apple Stores
 Apple currently operates a global network of almost 293 retail outlets.
 Apple outlets are located in flagship locations, like New York`s 5th Avenue and Tokyo`s Ginza Street or
high-profile shopping malls, like London`s Westfield.
 The outlet network is dominated by the US, where 207 of the outlets are located; thus the vast majority of
its retail revenue is derived from the US market.
 While important in increasing brand visibility, Apple Store sales are lagging behind its online retailing.
iTunes and iOS App Store Apple Inc: Retailing by Segment 2007-2010
 The two retailing brands are at the heart of the 25,000
company’s content distribution operations.
US$ mn, excl VAT
20,000
iTunes distributes music, films, shows and other
multimedia content, while the App Store retails 15,000
downloadable applications for the company’s
10,000
range of iPod Touch, iPhone and iPad.
 Both services are an integral part of the 5,000
company’s offering drawing in content providers
0
and application developers to provide third party 2007 2008 2009 2010
content for iOS devices. Internet retailing Store-based retailing

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 12

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
MARKET ASSESSMENT

Tablet volume sales to overtake laptops

 Increased reliance on cloud computing will likely make more powerful laptop computers less necessary and
the category will likely stagnate. Network data coverage is expected to continue expanding rapidly, meaning
that the global population as a whole will be increasingly reliant on the internet as a primary means of
obtaining information, creating demand for a low-cost device to access this content. The devices will likely
be highly dependent on cloud services for data storage and processing, so the expansion of cloud services
will facilitate volume growth and price erosion by decreasing the need for high-performance internal
components in tablets.
Global Volume Sales in the Main Computer
 By 2013, tablets will overtake Categories 2010-2015
laptops as the dominant form-factor 180
in portable computers. Growth will
160
be primarily driven by: growth in
availability and accessibility of data 140
Million units

networks, expansion of consumer- 120

orientated cloud computing services 100
and rapid price erosion of hardware. 80
Apple Inc has started to build on its
60
content retail brands to branch out
into cloud computing with the 40

launch of its iCloud virtual media 20

storage service in 2011, but is likely 0
to face an increasing number of 2010 2011 2012 2013 2014 2015

competitors in this lucrative market. Tablets Laptops

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 14

MARKET ASSESSMENT

Growth shifting to developing markets in smartphones

 The switchover from feature phones to smartphones will continue fuelling growth in the latter market across
the world, as global smartphone volume sales are predicted to grow by 42% in 2011 and 33% in 2012, to
reach 540 million units sold in the latter year.
 Asia Pacific will be the most important driving force in the global market, as North American and Western
European markets approach saturation. The biggest growth drivers in the region will be China, India,
Indonesia and Philippines. These populous markets have experienced rapid economic development and
have developed a demand propensity for feature phones over the review period. A similar picture will take
shape in Latin America and Middle East and Africa, where countries like Brazil, Argentina and Nigeria are
expected to drive smartphone growth. Despite the recent growth, large portions of the population in these
developing markets remain poor and will likely be looking for economy-priced smartphones with basic
feature sets, as they have done with feature phones.

Regions of Greatest Expected Smartphone Growth in 2011 and 2012

% 2011-2012 volume growth

70
Latin America
60 Middle East and Africa
50
Western Europe
40 Asia Pacific
30
Australasia
20 North America
10
0
0 10 20 30 40 50 60
% 2010-2011 volume growth
Size of bubble represents 2010 volume size. Range shown: 4.5-86 million units

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 15

MARKET ASSESSMENT

Store-based retailing to remain dominant

Electronics and Appliance: Retailing by Channel 2005-2015

1,200
1,000
US$ billion

800 Internet retailing

600 Specialist retailers
400
200
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

 Despite dynamic growth in electronics and Revenue by Market as a Percentage of Total Global Sales
appliance internet retailing, store-based 2010/2015
specialist retailers will remain the main 2015
2010
distribution channel for consumer
electronics globally. This is due in large part
to the likely slow growth of consumer
Total CE
electronics internet retailing in developing
markets compared to the growth of
consumer electronics in those markets.
CE
Problems with infrastructure and concerns Internet
about criminality are likely to continue Retailing

fueling distrust toward internet retailing in

0% 50% 100% 0% 50% 100%
developing markets despite rapid growth in
overall consumer electronics sales. Japan North America Western Europe ROW

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 16

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
CATEGORY OPPORTUNITIES

Sharp dip in prices projected within smartphones

 Growth in smartphones is shifting toward developing markets and late adopters in developed ones. This
makes lower-cost smartphones instrumental for growth in 2012-2015. China, for example, will emerge as a
key market, but in 2010 just less than 1% of Chinese households had a disposable income exceeding
US$65,000 (compared to almost 50% of US households), although this is set to increase by almost 70% by
2014. It will still represent 5.7 million households, a market smaller than the Netherlands.
 Lowering device costs is key to capitalising on growth in developing markets where phones are
predominantly purchased as part of a pre-paid plan, or phone-only. Low-cost smartphones are becoming
increasingly important in developed markets like the US, where an increasing number of consumers have
switched to pre-paid price plans faced with prolonged financial difficulties. Without moving into lower price-
bands, Apple Inc will face an uphill battle for mainstream consumers in the biggest developing markets,
where competing smartphone brands have a wide product portfolio including low-cost handsets to
capitalise on the decline in the popularity of the Symbian OS.
Smartphones by OS 2010 Mobile Phones by Type of Contract US
100% 2002-2010
90% 120
80% Other 100
70%

Million units
Symbian 80
60%
Android 60
50%
40% BlackBerry 40
30% iOS 20
20% 0
10% 2002 2003 2004 2005 2006 2007 2008 2009 2010
0%
China India Russia Brazil US Monthly Contract Pay As You Go Phone Only

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 18

CATEGORY OPPORTUNITIES

An Apple ultra-tablet?

 The iPad was a big part of Apple’s financial success in 2010 and 2011, but its power as a revenue source
is fading fast as competitors enter the market and cut prices. In the long run, this price erosion will drive the
tablets market, which will largely replace the netbook as a low-cost computer. In laptops, computer
manufacturers will turn to ultrabooks: slim, low-voltage, clamshell computers that incorporate some
touchscreen capabilities.
 Apple Inc has an opportunity to build a touch-centric ultrabook, largely a more powerful version of the iPad
with an optional keyboard to differentiate from other tablets and maintain margins. The key competitor in
these hybrid products will be Microsoft Corp’s Windows 8 OS. Due out in 2012 it is a platform that is touted
to be equally well-suited for touchscreen and traditional clamshell portable computers.

Global Tablets Market Volume Sales vs Price 2010-2015

700 200
180
US$, constant 2010 prices

600
160
500 140

Million units
400 120
100
300 80
200 60
40
100
20
0 0
2010 2011 2012 2013 2014 2015
Average unit price Retail volume

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 19

CATEGORY OPPORTUNITIES

Harnessing the health and wellness potential in media players

 Apple Inc’s line of iPod portable media players played a crucial part in the company’s growth over 2000-
2010, but demand for portable media players is declining due primarily to competition from smartphones.
 Spending on health and wellness products has been growing dynamically in food and non-alcoholic drinks
with related products also reaping the benefits. Garmin Inc’s in-car navigation business has also faced
declining demand with growing smartphone sales, but the company’s Forerunner line of watch-sized, GPS-
enabled, personal fitness computers became increasingly popular in 2011.
 Demand for health and wellness-related products is on the rise in the US, where much of the attention is
focused on combatting obesity, but the trend is quickly proliferating to some of the largest developing
markets. iPods remain very popular globally, and adding a line of rugged, fitness-orientated models with
integrated GPS and heart-rate monitors would be the best way to maintain margins and volume demand by
differentiating from smartphones.
Health and Wellness: Spending by Country 2005-2015
800
700
600
US$ billion

500
400
300
200
100
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ROW US Brazil Russia Indonesia India China

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 20

STRATEGIC EVALUATION
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BRAND STRATEGY

Building the Apple name

 A key to the success of Apple Inc has been its unified approach to the consumer experience creating an
ecosystem around its core products consisting of:

Portable
Hardware Services Content Computers Consumer
Electronics

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 22

BRAND STRATEGY

Apple Inc’s hardware

 Apple Inc designs its hardware in a polished minimalist look. While usually not a record setter in terms of
hardware performance, the company’s devices are slim, ergonomic, user-friendly and tend to command a
price premium over most competing products.

• The company’s products are among the most user-friendly,

emphasising simplicity in operation and a minimalist design,
Pros along with key performance features like battery life.

• Most criticism of the products stems from the sacrifice in

functionality for design. Notably the launch of the iPhone 4
Cons was accompanied by allegations that the phone’s antenna
malfunctioned when the phone was held a certain way.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 23

BRAND STRATEGY

Apple Inc’s software

 The iOS mobile operating system is centered around media consumption and third party applications. The
platform was a significant departure from smartphone platforms of 2007 when it was launched, as it focused
on user friendliness instead of native productivity applications and multitasking.

• Apple Inc’s primary content offerings are at the core of its

delivery platform. Films and music are primarily purchased
Services through iTunes, but an increasing number of on-demand
music services have been made available on iOS devices via
applications downloadable via the App Store.

• A key competitive advantage for iOS is the wide selection of

software. The company has a significant following in the
Content developer community with most applications being written for
iOS first, with subsequent releases for Android and Windows
Phone 7.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 24

STRATEGIC EVALUATION
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OPERATIONS

Productions and sourcing strategies

All manufacturing operations outsourced to third parties

 Apple outsources the manufacturing of all its products. The majority of the manufacturing is conducted by a
small circle of large suppliers including: Samsung Corp, Hon Hai Precision Industry Co Ltd and Quanta
Computer Inc.
 Amid litigation over patent infringement with Samsung Corp and the bad press Hon Hai Precision Industry
Co Ltd received over a string of worker suicides, it is increasingly likely that Apple Inc will broaden its
supplier base with possible candidates including LG Corp and Taiwan Semiconductor Manufacturing
Company.
Final assembly conducted by Apple and selected outsourced partners
 Apple owns a manufacturing facility in Cork, Ireland, which is used primarily for the final assembly of Apple
products such as iPods, iPhones, etc.
 Other outsourced assembly operations are located in the US, China, the Czech Republic and South Korea.
Warehousing, distribution and other operations
 Apple owns one warehousing facility in California, USA, and outsources warehousing operations in the rest
of the world.
 Company headquarters are located in Cupertino, California, and there is also a data centre in Newark,
California, with a second data centre expected to be opened in North Carolina over the next few years.

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STRATEGIC EVALUATION
COMPETITIVE POSITIONING
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CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
RECOMMENDATIONS
Hardware diversification
Low-cost smartphones
 The iPhone has performed well
since the device was initially
launched in 2007, but with the
emergence of a wide variety of
Android phones, Apple Inc risks
missing out on growth in
smartphone demand among
low-income consumers in
developed markets and
mainstream consumers in
developing countries.
Affordability will be key for
consumers especially in
markets where phones are
primarily bought outside of
service contracts. The absence
of low-cost mobile phones is the
main threat facing the company
over the foreseeable future as
smartphone growth is shifting to
developing markets.
© Euromonitor International
Fitness-orientated line of iPods
 With sales of portable media
players expected to continue
falling, Apple Inc along with its
major competitors shifted their
focus to smartphones and
tablets. This leaves an
opportunity to take advantage of
the growing health and wellness
trend with a line of media
players that incorporate GPS
and biometric sensors to track
and aid workouts. Apple Inc
remains the leader in portable
media players and has a
significant following among
young, urban consumers
making it more likely than not
that a line of Apple-branded,
fitness-orientated portable
media players would be
successful.
CONSUMER ELECTRONICS: APPLE INC
Ultratablets
 The iPad has been successful
in 2010 and managed to
maintain an edge on the
competition in 2011, but the
market is fast developing and
the emergence of low-voltage
touch-orientated clamshell
computers will likely present a
significant challenge forcing
tablet manufacturers to
concentrate more on facilitating
content creation and productivity
in tablets, rather than just
content consumption. This will
likely require a hybrid
laptop/tablet device that
incorporates the functionality of
a laptop and the battery
performance portability of a
tablet.
PASSPORT 28
RECOMMENDATIONS

Filling the gaps

 Aside from diversifying its hardware line-up, Apple Inc needs to address two major shortfalls in its current
strategy to stay competitive in the long run. While Apple Inc has been successful in the consumer market, it
risks becoming complacent in the current business model and leave room for competing platforms by
leaving two key areas unaddressed:
iOS: Focus on security Move into in-home
 While the company’s success in the consumer  On the consumer side of the market, the iOS
market has driven revenues since the launch of the ecosystem is missing a key component: in-home
iPhone, its sub-standard security credentials have content delivery. The company has released Apple
largely kept it out of securing major enterprise and TV, but without support for 1080p video and a
government contracts. limited content library the set-top box is far behind
 BlackBerry-branded products are certified for competitors like Boxee and Roku.
transmission of sensitive data by regulatory  The lack of a compelling in-home content delivery
agencies of most major governments and NGOs system leaves room for Google Inc’s Android 4.0 to
like NATO. Apple Inc largely ceded the enterprise enter the market and create a unified experience
and government market to Research in Motion Ltd, with a single platform running on smartphones, set-
as it focused on the consumer market, but rapid top boxes, internet-enabled TVs and tablets.
comodisation of smartphones will continue
squeezing hardware margins making enterprise-
orientated products and services increasingly
attractive.

© Euromonitor International CONSUMER ELECTRONICS: APPLE INC PASSPORT 29

REPORT DEFINITIONS

Definitions

 Historic value data are given in US$ year-on-year exchange rates, unless otherwise stated.
 Forecast value data are given in real (constant), US$ terms using fixed 2009 exchange rates, unless
otherwise stated.
 Historic volume data are given in '000 units, unless otherwise stated.
 Profile coverage:
 Portable Computers
 Laptops: Personal computers (PCs) meant for mobile use and must incorporate an external power
source, usually a rechargeable battery pack.
 Other Portable Computers: includes mobile internet-enabled devices that do not fit the definitions for
laptops and netbooks capable of multimedia playback and running software applications.
 Portable Consumer Electronics
 Portable Media Players: portable players that support digital audio, video playback, text and images.
Portable Media Players includes: E-Book, Portable MP3 Players, Portable Multimedia Players, Other
Portable Media Players.
 Smartphones: a device capable of voice communication over a cellular network that fulfills all three of
the below criteria:
 Has an identifiable operating system (e.g., Android, BlackBerry OS, iOS, Symbian, Windows).
 Allows installation of software applications.
 Has a screen size of <5”.

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