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Don't doubt the power of Apple

By NexChange
Capital Markets

Apple continues to wow with continued reports of profit growth. And yet, analysts are skeptical of whether the company can keep it up. Ben Thompson of Stratechery scoffs at this, saying Apple knows exactly what they're doing. Here's part of Thompson's argument for the power of the iPhone:

Reality #1: Smartphones are the most important products in people’s lives, which means that the willingness to pay for the “best” is higher than it is for just about anything else; relatedly, the smartphone budget is likely the last to be cut in any sort of economic tightening
Reality #2: Nearly all iPhone users upgrade to new iPhones, while a significant number of Android users switch. Ergo, the more saturated the smartphone market becomes (and the more people appreciate just how important a smartphone is to their lives, per Reality #1) the better Apple does
Reality #3: Apple’s increasing monopoly on the high-end of the market is creating a virtuous cycle that ensures they will own the high-end indefinitely. From an app perspective, new and updated apps launch first on iOS, which means people who care buy iPhones, which means future new and updated apps launch first on iOS. From a component perspective, Apple is increasingly the only manufacturer that can even afford to buy the best components, and they have massive scale which ensures they get first dibs on what is new. This, of course, further solidifies Apple’s hold on the high end, which only strengthens their position with component manufacturers further. From a broader hardware perspective, Apple’s scale means their costs are lower than any potential competitors, which means their investment in new technology like 3D Touch can be commensurately higher, which again, solidifies their hold on the high end, which increases their scale even more.

Undeniably even people who don't identify as Mac users own iPhones, iPads, and other Apple products. Does Apple need to saturate the market, or can it continue growing with its existing core base?
Photo: Világos Gergő

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