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Webscale Playbook: Apple

  • ID: 5008215
  • Report
  • February 2020
  • Region: Global
  • 15 Pages
  • MTN Consulting, LLC
UP TO OFF
until Sep 30th 2021
R&D Splurge To Continue, As Further Capex Falloffs On Cards With Virus Outbreak In China

FEATURED COMPANIES

  • Alibaba
  • Alphabet
  • Amazon
  • Apple
  • Baidu
  • Facebook
  • MORE

Apple has come far since its inception in 1976. It has progressed from selling user-friendly computer systems (Macintosh, iMac) and portable media players (iPod), to become a dominant force in mobile devices, starting with the launch of the iPhone in 2007. In August 2018 it became the first-ever public company to breach the US$1 trillion mark by market capitalization. In fact, it is the ‘iPhone’, touted as the pioneer of the smartphone revolution, that has significantly helped Apple in its journey to trillion-dollar valuation. The popular device, which dethroned the likes of Nokia and Blackberry back then, continues to be Apple’s bread and butter and accounts for more than half of its overall revenues (54.7% in FY2019).

In addition, Apple launched a slew of services over the years that complements the iPhone and other devices in its portfolio. These include iCloud, Apple Music, App Store, and most recently Apple TV+ and Apple Arcade. The move has enabled Apple to create its strong ecosystem comprising hardware, software, and content – locking its users across ~1.5B active iOS devices into buying/upgrading to an Apple device again. But with the iPhone story showing cracks in the recent past, Apple is turning to its services unit as the next growth pocket – the growth-driving unit doubled its contribution to Apple’s total topline since 2015 from 9% to 18% in 2019.

There is also a possibility for Apple to enter the ‘public cloud’ market, as evidenced by past data center expansion and upcoming plans, along with its ongoing efforts in cloud infrastructure self-sufficiency under project “McQueen” that seeks to reduce reliance on other cloud providers such as Amazon and Google. With ‘services’ growing in clout as a segment coupled with a growing focus on cloud and edge computing, Apple’s network infrastructure requirements will rise again. However, macro risks such as the US-China trade clash and recent pandemic outbreak in China constrain Apple’s supply chain, impacting CAPEX investments further for the next few quarters.

Below are a few highlights from the report:

  • Apple’s R&D spending has soared mainly due to headcount addition from the acquisition of Intel’s smartphone modem business mid last year, accompanied by the surge in content costs with Apple TV+ launch late last year
  • Privacy and security remain critical for Apple as it looks to enhance connectivity by developing edge-based AI capabilities and wireless data transmission through satellite technology
  • Apple’s supply chain is under immense pressure with the recent virus outbreak in China, exposing its vulnerability and over-dependence on the Chinese market – prompting to explore new manufacturing hub sites

Format: PDF (PPT available upon request)

This report is the seventh in the publisher’s Webscale Playbook series, which analyzes the “Super 8” webscale network operators (WNOs), i.e. Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent.

The objective of this report is to assess Apple’s:

  • Latest quarterly key performance indicators including revenues, CAPEX, opex, R&D, etc.
  • Key tech-related spending priorities
  • Network vendor relationships, M&A, and partnerships across different network product categories
  • Vendor market landscape
  • Network-related strategy
Note: Product cover images may vary from those shown

FEATURED COMPANIES

  • Alibaba
  • Alphabet
  • Amazon
  • Apple
  • Baidu
  • Facebook
  • MORE
  1. Abstract
  2. Operational scale
  3. Latest earnings takeaways
  4. Revenue analysis
  5. Capex & R&D: Spend analysis
  6. Key spending priorities
  7. Key technology relationships
  8. Vendor market analysis
  9. Data center footprint
  10. Apple’s network strategy
  11. Appendix 1
  12. Appendix 2

List of Figures:

Figure 1: Apple Revenues: 3Q18 – 4Q19
Figure 2: YoY Growth Rate (CAPEX vs. OPEX): 3Q18 – 4Q19
Figure 3: Profitability Margins: 3Q18 – 4Q19
Figure 4: Revenues (Annualized & Single Quarter), & YoY Growth
Figure 5: FY2019 Revenue Split (MTN Consulting estimates*)
Figure 6: Annualized Capex and R&D, % Revenues
Figure 7: Apple’s annualized share of WNO network & IT capex (MTN Consulting estimates*)
Figure 8: Top vendors, all years: Apple
Figure 9: Contracts by product, Apple: all years

Note: Product cover images may vary from those shown
  • Alibaba
  • Alphabet
  • Amazon
  • Apple
  • Baidu
  • Facebook
  • Microsoft
  • Tencent
Note: Product cover images may vary from those shown
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