12 months ago I asked How many iOS devices will be produced in the next 12 months?
Based on the analysis of Capital Expenditures (as forecast by Apple in their annual 10K report) I concluded “iOS unit shipments should be between 250 million and 285 million.”
The answer turned out to be 247 million. Including Apple TV the total would probably be around 251 million.
Since last year, I adjusted my model by observing corresponding iOS unit shipments for the calendar year corresponding to each fiscal year. Since the calendar year is offset by one quarter (FQ1 = CQ4) looking at calendar year means looking forward one quarter post-spending. I believe this is more accurate as spending generally happens in advance of production.
The resulting pattern is shown below:
In October 2013, at the end of its last fiscal quarter, Apple stated:
The Company’s capital expenditures were $7.0 billion during 2013, consisting of $499 million for retail store facilities and $6.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure. The Company’s actual cash payments for capital expenditures during 2013 were $8.2 billion.
The Company anticipates utilizing approximately $11.0 billion for capital expenditures during 2014, including approximately $550 million for retail store facilities and approximately $10.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.
These 10K (fiscal year annual) forecast figures for capital expenditures are shown in the following graph. Note that they also include the fiscal years from 2006 to 2012. Note also that the graph includes the actual expenditures (in green).
From 2006 through 2013 the sum of the forecasts was $23.445 billion while the sum of the expenditures were $24.662 billion. With the exception of a carry-forward in 2012, the forecasts are broadly in-line with expenditures, with about 5% more spent than forecast.
This pattern of accuracy in spending makes a $10.5 billion expenditure during the current fiscal year believable. In other words, taking the forecast at face value, and given that three quarters of the fiscal year have already passed, what does it imply for the current and last quarter? The following graph shows what Q3 spending should be relative to previous quarters (and 2011, 2012 and 2013).
iOS unit sales crossed over 700 million units last month. That is a significant milestone but the total number of units in use is likely to be lower. My estimate based on device replacement assumptions is that about 500 million are still in use.
The estimated break-down of units sold and in use by device type is shown below:
Apple’s capital expenditures for product tooling, manufacturing process equipment, corporate facilities and infrastructure has followed very closely their production of iOS devices. The pattern is shown in the graph below.
Note that although reported expenditures did not match forecasts for 2012 and 2013, the differences nearly cancel each other. The company’s forecast for fiscal 2014 is shown as well.
The orange line shows iOS unit production with the scale on the right-side axis. Note the correlation with forecasts on CapEx. The relationship can be seen more clearly in the following scatter plot.
I added the 2014 Forecast ($10.5 billion from the latest 10-K filing). If the relationship holds into next year then the iOS unit shipments should be between 250 million and 285 million..
One of the most startling announcements during the WWDC 2013 was iOS in the car. The mockup that was shown seems to indicate the use of the car’s in-dash display as an “external monitor” for an iOS device while control would come from inputs using Siri.
The technical details were not released so it’s hard to know the protocol used to accommodate this interface. However it seems that it will be generic enough that a number of launch brands signed up for the launch. The list includes Honda, Mercedes-Benz, Nissan, Ferrari, Chevy, Infiniti, Kia, Hyundai, Volvo, Acura, Opel and Jaguar.
Is this a significant opportunity?
Before we get excited, it’s important to note that this will likely take a very long time. It won’t even begin until 2014 and the number of new models may trickle into showrooms quite slowly. Consider that the time it took for automakers to universally support external audio input (mostly the trivial line-in) was about a decade.
To also curb our enthusiasm we need to realize that the car industry does not produce many units. In 2012 there were over 60 million cars produced (with the following regional mix:)
In contrast, 60 million is about the number of phones sold every two weeks. In 2013 there will be more iPads sold than cars.
In particular the companies mentioned had the following production figures in 2011:
The comScore mobiLens survey for the US ending February 2013 shows continuing rapid expansion of smartphone usage in the US. Even though the 50% penetration threshold was passed seven months earlier, the rate of new smartphone users was second highest ever recorded with over 1 million new-to-smartphones users every week during February.
Overall penetration increased to 57% with nearly 2% of the population switching in one month. Using the average growth rate for the last six periods, the US could see 80% penetration in another 19 months or by Q3/Q4 2014.
With the iPad mini launch imminent, it’s time to think about the expanding iOS portfolio. We don’t know how much the “mini” will cost or what variants will be available but I took some rumors as a basis to form a hypothesis.
The idea is that there will be 24 variants which have three dimensions:
- 2 colors
- 4 capacities
- 3 radio chipsets
The starting point would be $250 for an 8 Gb WiFi only model and increases of $100 for each doubling of capacity and $130 for the addition of cellular chipsets.
The results would slot into an increasingly broad price spectrum. I included all the models of iPod touch, iPhone and iPad that we already have available and built the following graph.
During the iPhone 5 launch event, Apple announced 435 million iTunes accounts (with credit card numbers) with one click shopping.
The account total is updated occasionally by Apple and the history of these updates is shown below:
Measuring the growth in accounts shows steady acceleration.
At this year’s WWDC Apple offered an update on Game Center accounts. The data we have so far is shown in the following graph.
Before being acquired, another network, OpenFeint, announced 180 million iOS accounts in October 2011. Another figure to consider is the 40 million subscribers to Xbox Live (out of 66 million Xbox users). This subscriber base is paying for a service (about $1 billion per year) so it’s not the same as the free Game Center model.
Rather than being a revenue source, Game Center is designed to engage users and to capture usage information. It also lets us gauge gaming “consumption” on iOS devices. That itself allows us to contemplate it as a gaming platform vis-à-vis alternate platforms.
To consider the figure as a proxy of penetration and engagement, the graphic below shows cumulative sales of gaming devices.
In the 2011 Annual Report(10K) published October 26th Apple states:
The Company anticipates utilizing approximately $8.0 billion for capital expenditures during 2012, including approximately $900 million for retail store facilities and approximately $7.1 billion for product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.
The history of these expenditures is shown below (the blue bars are statements from 10K reports including the one above shown as the right-most bar): Three 10Q reports so far this fiscal year have given us updates on asset values and the change in these values are shown as the right-most yellow bar. The asset value change suggests $3.9 billion has been spent so far of the $7.1 billion budgeted. Thus we can estimate that about $3.2 billion remains to be spent in the fourth fiscal quarter (thus bringing the yellow bar to parity with the blue bar in the chart above–a parity that was achieved or exceeded for five out of the last six years).
Assuming $200 million of the fourth fiscal quarter budget will be for land and buildings results in an estimated $3 billion remaining for product tooling and manufacturing process equipment and data centers.
The history of spending for various cost centers is shown below.