Apple's (NASDAQ: AAPL) AirPods line of wireless earbuds have been an unqualified success.
The company has been selling the current generation of AirPods since their December 2016 rollout alongside the iPhone 7 and 7 Plus -- devices that did away with the traditional 3.5mm headphone jack.
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Now, according to analyst Ming-Chi Kuo with TF International Securities, by way of MacRumors, Apple is planning to update the product line next year as well as in 2020.
Let's take a closer look at Kuo's comments.
Wireless charging case in 2019, redesigned models in 2020
In the first quarter of 2019, Kuo says, Apple is set to introduce an "upgraded model" of its AirPods "with wireless charging support." That model, the analyst claims, will "benefit shipments."
Then, in the first quarter of 2020, Kuo asserts the company will launch an "all-new design model" of the AirPods, which he believes will "boost replacement demand to launch" in the first quarter of 2020.
The idea is that while the refreshed model that's set to come out in the first quarter of 2019 should improve the AirPods product line's value proposition to customers not yet on the bandwagon, such a model isn't likely to get too many current-generation AirPods owners to ditch their old models.
However, if Apple introduces a radically redesigned model in early 2020 as Kuo claims, such a product would not only serve to attract new users but could also get current owners to upgrade, hence Kuo's comment about how that product could serve to "boost replacement demand."
A lot of room to grow
"Kuo notes that fewer than 5% of iPhone users currently own AirPods," MacRumors wrote, "and with over 1 billion iPhone users worldwide, there are 'great potential growth opportunities' for the accessory," particularly as Apple introduces newer, better versions of the AirPods in the coming years.
And, if Apple does its job correctly, that installed base of iPhone users could grow in the years ahead. Indeed, during Apple's Nov. 1 earnings conference call, CFO Luca Maestri told investors that the "installed base of all our major product categories is at an all-time high and has been growing over the last several quarters."
That comment came in the context of the growth opportunities for the company's services business, but it also applies to the opportunity to sell accessories such as AirPods that work best with Apple's products.
Putting some numbers to that potential expansion, Kuo wrote that he sees "dramatic growth" in AirPods, from a range of 26 million to 28 million units in 2018, presumably in reference to the calendar year, to a range of 100 million to 110 million units in 2021.
If he's right, then this product category is set to enjoy astronomical growth and produce a noticeable impact on Apple's wearables, home, and accessories segment, which generated about $17.4 billion in revenue during the company's fiscal 2018. A doubling from, say, 27 million units shipped in calendar 2018 to 52.5 million units in 2019 (using the midpoints of Kuo's range estimates), would mean an incremental $4 billion in revenue to Apple, assuming an AirPods selling price of $159.
If AirPods shipments grow at anywhere close to the rate Kuo predicts, the financial impact would be quite impressive.
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