Apple’s Peek Performance Event Delivers to the Pros and the Mainstream
Apple’s Peek Performance event had something to offer to the most tech-savvy users, creators in particular, as well as mainstream users. Underlining the move to take ownership of its own silicon development is now allowing Apple not only to take care of its highly differentiated user base but to get into new markets and opportunities to both strengthen that base and reach into new areas like the enterprise market. I will let Ben Bajarin get into the technical and business implications of the new M1 Ultra chipset, probably the event’s biggest surprise.
I will instead concentrate on how Apple is deliberately addressing the more pragmatic part of its user base with devices that open access to features, services, apps and what the ecosystem has to offer without overwhelming users or their wallets.
Let’s start with the iPhone SE. Probably the safest bet among the devices the rumor mill was expecting from the event, the iPhone SE is the iPhone model that Apple does not need to refresh every year, but what I have come to think of as the “catch-up” model. This is the iPhone that allows Apple to get the most pragmatic part of its user base to upgrade as well as the device that might be the first foot in the door to the Apple ecosystem. Many often equal the value of the iPhone SE to its compact form factor. Yet, while that might have been true to start with, the addressable market for the iPhone SE has grown to include late adopters who value a good balance between price point and features. There are also users of older iPhone models like the iPhone 6, 7 and 8 that were not considered small when they first became available, but that might make an upgrade to an iPhone 13 uncomfortable. Newer models with features like face ID might be something that takes away from the familiarity of Touch ID. With the iPhone SE, users can find familiar and future-proof technology like 5G or a vastly improved camera system that, while on a single lens, can take advantage of the latest chipset for features like portrait mode. At $429, the iPhone SE comes into the least talked about but competitive segment of the market that carriers are counting on to move users off of LTE and onto 5G. Contrary to most Android brands that opt to step down on their chipset choice in mid-range phones both for cost and battery life, Apple uses its latest chipset in the iPhone SE, the A15 Bionic, which will also future proof the phone as new software features roll out. Interestingly, by using the latest chipset, Apple does not limit what users can do when it comes to services and most apps while Android brands seem to decide there is a limit to what a user buying a mid-range phone will need. Considering almost all Android phone makers are hardware makers and not also ecosystem enablers, this makes sense. Why add cost when the result will benefit others? But for Apple, there is more monetization opportunity from these users.
The new iPad Air lineup was also expected. What we might not have anticipated; I certainly didn’t expect it was for the iPad Air to be running on an M1 chip. Apple clearly is not precious about limiting the power of the M1to the iPad Pro family, but instead is using the power of the M1 to increase the return on investment for mainstream products such as the iPad Air by driving features such as Center Stage and smoother multitasking to create more stickiness. The time is certainly right as the tablet category seems to be having a revival of its own, albeit not as strong as that experienced by the PC market. With more of our workflows now being digital, we seem to be relying on more screens, some of which we dedicate to specific tasks from video calls to content consumption or gaming. Apple has enjoyed a very healthy demand for iPads, especially at the start of the pandemic and the portfolio with a refreshed iPad Air opens up more opportunities with frontline workers and higher-ed segments where that much of functionality is needed, but the price point limits the opportunity for the iPad Pro and family.
The least expected product launched at the event was a new 5K display introduced together with the latest Mac Studio. As I was listening to the presenter list the features of the Studio Display: 27-inch, 5K, up to 600 nits of brightness, six-speaker, an A13 chip, built-in three-mic array all I could see were Dollar signs. Considering the last display Apple introduced in 2019, the Pro Display XDR was priced at $5K. I expected the Studio Display to be in the $2500-3000, and I was surprised to see a price point of $1599. But if you think about the reach that this new display could have within the current Mac installed base, you can see how critical that price point becomes. Not just because of the volume of sales per se, driving revenue for Apple, but really how this product could free other products like the newest iPad Pro family to be more than they have been thus far. For those always ready to criticize Apple for putting larger profits over volumes, it is clear that Apple knows when to favor one of the other.
This is the first time that Apple addressed the two ends of its user base during the same event going from the most pragmatic buyers of an iPhone SE to the most tech-savvy and demanding Apple users who will consider a Mac Studio. Its fast pace of development on the silicon side allows for the features to cascade down or scale-up, and its brand is able to stretch from one side to the other without feeling out of place or getting hurt. I made these points before, but it is worth doing it again. As services become a more significant part of Apple’s revenue, we will see pricing strategies that will fuel almost a co-dependent relationship between hardware and services where the line is blurred as to what is driving value to what, thus making it much harder for users to leave Apple.