Apple in 2016: a year in review and what we can expect from Apple in 2017
Apple, the iPhone and services company
60% of Apple's revenues come from the iPhone
Apple remains 'the iPhone company' in 2016 with some 60% of its revenues coming from the hit phone, but the prominence of the iPhone within Apple has actually declined slightly: last year, it made up 63% and in some quarters up to 69% of Apple's total revenue.In fact, it would be more correct to say that Apple in 2016 is a bit more of an iPhone and services company. The 'service' category has been growing steadily and is now the second largest within Apple, generating as much as 14% of the company's revenue in the past two quarters. Interestingly, Apple now makes more money from services (including its profitable App Store and Apple Music) than it does from Macs or iPads.
Services now make up 15% of Apple earnings
Speaking of Apple's iPads, in 2016 the volume of unit sales continued falling. Apple now sells less than 10 million iPads a quarter, 50% less than what it used to sell in the past couple of years. At the same time, the average price of an iPad sold has grown slightly thanks to the more expensive iPad Pros.Apple Watch unit sales remain a mystery, but since the watch is counted towards Apple's Others category, we can definitely see that there are no huge spikes in its popularity.
All new Apple products in 2016
Looking back at the year for Apple, we can see that it launched 7 important new products throughout the year, as well as a new version of its operating systems. Here is a chronological look at what were Apple's new offers in 2016:
Financials
Apple continues making the most profit in the smartphone industry, but in 2016 for the first time we saw its unit sales decline. Everyone knew that Apple's fantastic growth cannot continue forever, but with a surprise and sharp drop in sales in China and lots of yet unrealized potential in India, we saw the iPhone sales slide a bit from their record-breaking levels last year. It was a small decline, but one that signaled saturating developed markets and difficulties selling iPhones in developed countries, where less expensive Android phones lured in middle-class buyers.
The Apple stock ride was not a smooth ascend in 2016: in fact, it all started with some turbulence in the beginning of the year, leading to a significant decline in the stock value in April. Prices sank to nearly $90 in late April and early May, which prompted a significant share buy-back and soon after the stock was back on a slow, but steady rebound. In the last quarter of the year, Apple stock stabilized around $115 and remains at those levels until now.
Apple stock fluctuations in 2016
Needless to say, the financial health of Apple is as brilliant as ever at the moment of this writing. The company trades at a price to earnings ratio of 14, one of the lowest in the tech sector. Market capitalization is around $620 billion, making Apple the most valuable tech company at the world, a title it has been holding on to in the past couple of years. Right now, Apple has 6 out of the 10 most profitable quarters among all companies of all industries ever, and it is on track to score another quarter in the top 5 this Holiday season.
Apple vs the European Union, and the Ireland gamble
EU Competition Chief Margrethe Vestager
While legal proceedings and the final decision around the bill will likely take years, we already know what the accusations are: the EU claims that Apple avoided paying taxes by forging a barely legal agreement with the Irish Government, leading to it paying an absurdly low amount of tax. Ireland has an already low, 12.5% corporate tax - a rate that the European Commission does not dispute - but Apple paid less than that: in fact, the company often paid less than 1% in taxes.
But how is small Ireland able to amass so much of Apple profits to warrant a $13.9 billion tax bill? Interestingly, Apple is channeling all its European revenues via Ireland, and since this applies for multiple years, it works out to such a gigantic sum.
Apple has fought back, claiming that it abided by Irish law and that the European Comission's demands are overblown and far-fetched. We are still to hear a lot about this story in 2017 and it is certain to appear not only in economic and tech news, but will likely interfere in political discussions and the increasingly chilly relations between Europe and the United States.
Apple and the iPhone in 2017: expectations
2017 will mark the 10th anniversary of the iPhone launch, which has become the most important product for Apple.
With the futuristic all-screen devices that we are already seeing in 2016, all expectations are that Apple will bring the long-awaited redesign to the iPhone series. An all-screen iPhone with much less of that annoying bezel is in the cards for 2017, according to rumors persisting from the summer of 2016, but Apple has to secure enough components and that might prove difficult.
With tens of millions if iPhones sold each quarter, Apple is allegedly struggling to secure enough OLED displays that will allow it to bring the kind of radical design revolution people expect from the new iPhone.
But there is more to Apple than the iPhone in 2017. The company is also working on a few secret and not-so-secretive projects. Here is the list:
Apple Secret Projects
Apple is looking into AR glasses and reassessing its independent car project
The first project that Apple is working is allegedly for digital glasses. The project is in exploration phase and Apple is yet to decide whether it will result in any actual device for consumers. So far, Apple is said to be testing a pair of smart glasses that connect wirelessly to iPhones and show images and more information to the viewer. The glasses may also use augmented reality. All of that is expected to materialize in a product in 2018 at earliest, but that's if Apple does not kill the product before that.Next, the once large Project Titan, Apple's plan to build an autonomous car by 2020 was scaled back significantly this year. The reason? It seems that there was a lot of disagreement within executive ranks what the product should bring: a car, an automated driving system for other cars, or something else. With a number of executives departing from the team, Apple has scaled back hiring and has let go many of the key engineers that used to work on this. The project is not dead yet: long-term Apple veteran Bob Mansfield was brought back from retirement to lead the effort and he seems to have narrowed down the focus to developing an autonomous driving system. The deadline for that effort is late next year. The system will have to prove its feasibility and we're yet to see whether it will live.
There are also Apple iPad plans that are not exactly a secret: analysts say Apple is planning a new version of the iPad Pro with a 10.5-inch display in 2017. The version will come with an improved Apple Pencil, that could allow users to add annotations in many apps including Mail, Safari and iMessage. It's also rumored to have a faster display technology that will make it possible to zoom smoother.
What do you expect from Apple in 2017? And what do you think about the company's performance in 2016? Let us know in the comments right below.
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