Wearables

- Apple’s Wearables Business comprising Apple Watch and Air Pods is a $30 Billion Revenue
Opportunity(est. 2021), registering a 43.88% 4-year CAGR ( $30B/ $7B)(1/n – 1)

- In fact, if Apple’s Wearables Business was to be floated as a separate entity, even conservative
estimates would value it at $237 Billion( Considering EV-to-revenue ratio of 7.9 for Apple)

- Talking about numbers, it is on track to achieve 105 million units in Wearables sale for 2021. This is
40% of total I-Phones sold in 2021

- This number is only poised to go higher and higher in the coming years, given the amazing brand
recall that Apple enjoys and the huge replacement demand it faces from existing as well as new
Apple users

- What truly sets Apple apart in this segment is its ability to invest in R&D, and to come up with new
models in a planned succession with best-in-class features, while maintaining its classic exclusivity

- It has successfully built an ecosystem of Mac-OS devices in a manner that every new purchase
paves the way for two others.
 Watch AirPods

- Labour cost has been calculated as a percentage of revenue due - Due to unavailability of component-wise data for AirPods, the
to unavailability of requisite data. cost-breakdown has been done on a functional basis.

- *The price into consideration is the launch price for the first model. - Cost structure follows the classic 30-30-30-10 breakup that is
unique to Apple.
Design and Behavioral Economics
Apple works at the intersection of design and behavioral economics to produce world-class products. The products are
considered a natural extension of oneself, which makes them quite intuitive and easy to use. Being simple yet bold, extreme
customer-centricity and attention to detail are some features that have propelled Apple towards achieving 32% market share in
Wearables segment as well. Other factors that have contributed to the success of this segment are:-

1. Time of Launch: These products were launched after Apple I-Phone had already achieved great market penetration. Thus,
Apple leveraged on its brand name .

2. Building exclusivity through integration: These products offer additional functionality if integrated with an Apple Device. This
makes a strong point for a user to stay in Apple’s Ecosystem. Moreover, Apple’s huge R&D budget ensures that it remains
ahead of its competitors in all respects.

Government Policy/ Political Perspective/ Market Backdrop

- Historically, China had been the manufacturing hub for Apple. However, off late, Apple has begun manufacturing devices in
India through Foxconn. Launch of Production-linked Incentives (PLI’s) would help in this regard.

- This may in future lead to a lower cost markup for such products with respect to taxes imposed on the import of goods.

- Talking about market conditions, pandemic has acted as a catalyst for driving the sale of wearables. With greater time being
spent at home, the focus of consumers shifted towards their Health and Entertainment. Wearables capitalized on this
opportunity.