The Rise of Smaller Displays
Apple is a design company selling tools capable of improving people’s lives. Approximately 80% of those tools include a display. Apple is shipping about 300 million displays per year, from iPhones and iPads to Macs and Apple Watches. With Apple running as fast it can towards AR glasses, the number of displays that the company ships will only increase over the next five to ten years. While the pandemic is pushing people to embrace larger displays like iPads and Macs, the momentum found with smaller displays is still flying under the radar.
Display Spectrum
Back in 2017, I published the following chart that tracks Apple device unit sales by display size. The exercise involved breaking out iPhone, iPad, and Mac unit sales by model - something that Apple has never done itself but which the company provided enough clues for me to do on my own and have confidence in the estimates.
Exhibit 1: Apple Device Sales Mix by Display Size (2016 data)
Since Apple offers a finite number of display choices, Exhibit 2 turns the sales data from Exhibit 1 into a broader statement about preferred display size.
Exhibit 2: Apple Device Sales Mix by Display Size (2016 data - Smoothed Line)
The motivation in pursuing such an exercise was to place context around the number of large displays Apple was selling in the form of MacBooks and iMacs. Fast forward three years, and it’s time to revisit the topic. With the significant amount of change occurring in Apple’s product line since 2016, there is value in going through a similar exercise regarding display size preference with 2020 unit sales in mind. While Apple’s financial disclosures haven’t gotten better over the past four years - if anything, the disclosures have gotten worse - I am still confident in my ability to derive unit sales estimates for all of Apple’s products.
Exhibit 3: Apple Device Sales Mix by Display Size (2020 data)
Exhibit 4: Apple Device Sales Mix by Display Size (2016 data - Smoothed Line)
(All of my granular estimates and modeling that went into Exhibits 3 and 4 is available to Above Avalon members in the daily update published on December 7th found here.)
As seen in Exhibits 3 and 4, there is bifurcation in Apple display size popularity. The most in-demand displays fall into two (broad) categories:
Displays large enough for consuming lots of video and other forms of content that can still be comfortably held in a hand or stored in a pocket.
Displays small enough to be worn on the body (Apple Watch) and products lacking a display altogether (AirPods).
It hasn’t been difficult to miss Apple’s gradual move to larger iPhone displays over the years. The 6.7-inch iPhone 12 Pro Max is getting close to the maximum size for an iPhone display, at least when thinking about the current form factor. Such a reality has undoubtedly played a role in some smartphone manufacturers betting heavily on foldable displays for smartphones. Such a bet boils down to believing consumers will want larger smartphone screens to the point of being OK with tradeoffs in terms of device thickness and weight. Move beyond the iPhone and display popularity plummets as the iPad and Mac sell at a fraction of the pace. There are small sales peaks found at 10.2 inches, the size of the lowest-cost iPad, and 13.3 inches, the size of the MacBook Air and entry-level MacBook Pro.
With hundreds of millions of people embracing 4.7-inch to 6.7-inch displays via iPhone, the claim that consumers are embracing larger screens over time contains some validity. Many are now wondering if similar moves to larger displays will take over the iPad and Mac lines. However, focusing too much on large displays will make it easy to miss what is happening at the other end of the spectrum. The rise of wearables has given an incredible amount of momentum to small displays and devices lacking a display altogether.
Implications
There are four key implications arising from this display bifurcation observation.
Apple’s ecosystem naturally supports the idea of multi-device ownership.
As devices are given more roles and workflows to handle, there is a natural tendency for screen sizes to increase without changing the overall form factor much.
Power and value are flowing to smaller displays that are capable of making technology more personal.
Devices relying on voice as an input make more sense when paired seamlessly with devices with displays.
It is worth going over each in greater detail.
1) Apple’s ecosystem is characterized by hundreds of millions of iPhone-only users buying additional Apple products and services. This is a result of industry-leading customer satisfaction rates and subsequently very strong brand loyalty. However, there are more fundamental themes underpinning this trend. By controlling hardware, software, and services, Apple is able to sell a range of products that seamlessly work together. These tools don’t serve as replacements for one another but rather as alternatives. This leads to consumers being able to use multiple Apple devices aimed at handling different workflows in their unique way. Such a dynamic supports the idea of multi-device ownership over time with those additional Apple devices likely containing smaller displays or no displays at all.
2) Apple has given the iPad, iPhone, and Apple Watch larger displays over time. For the iPad, the 12.9-inch / 11-inch iPad Pro and 10.9-inch iPad Air are larger than the initial 9.7-inch iPad and subsequent 7.9-inch iPad mini. The 3.5-inch display found with the first few iPhone models looks downright tiny next to iPhone 12 flagships. Even the Apple Watch was given a larger display after being sold for three years. These moves may seem to be unnoteworthy reactionary outcomes to competitors and market forces. However, the move to larger displays over time ends up being connected to the product category handling more workflows over time. iPhones have become “TVs” for hundreds of millions of people. Today’s iPad Pro flagships are geared toward content creation. Apple Watch faces are being given more complications in order to provide additional new-age app interactions to wearers.
3) The two product categories seeing the strongest unit sales momentum have either the smallest displays Apple has shipped (Apple Watch) or no displays at all (AirPods). As wearables usher in a paradigm shift in computing by altering the way we use technology, new form factors designed to be worn on or in the body for extended periods of time are playing a role in helping to make technology more personal. This leads to an observation that may not be so obvious: Smaller displays require new user inputs and interfaces that force new ways of handling existing workflows while supporting entirely new workflows. Said another way, smaller displays end up playing a vital role in lowering the barriers between technology and humans.
4) The reason stationary smart speakers were one of the biggest tech head fakes of the 2010s is that consensus incorrectly assumed the future was voice and just voice. The idea of voice as a user input being enhanced by the presence of a display was skipped over. Jump ahead a few years and the HomePod is arguably made better by having nearby displays either simply around us (iPhones) or on us (Apple Watch). Some of the magic found with AirPods involves the seamless integration with various displays, especially the Apple Watch display. Voice just isn’t an efficient medium for transferring a lot of data and context. Relying on displays for such context makes it possible for devices without displays to shine by being allowed to do what they do best - either provide superior sound (HomePod) or convenient sound (AirPods).
Bet on Smaller Displays
One takeaway from the pandemic has been that social distancing in the form of distance learning and working from home has fueled momentum for some of the largest displays in Apple’s product line. The iPad is setting multi-year highs for unit sales and revenue. The Mac registered an all-time revenue record last quarter. There are a few reasons behind this momentum that include families needing newer (and faster) machines and employers funding work-from-home upgrades.
Instead of looking at this development as the start of a new era for large displays, the momentum found with larger displays shifts focus away from the actual revolution taking place with smaller displays.
Apple is on track to sell approximately 150M devices in FY2021 that either lack a display or contain a display that is less than two inches (5 cm). We are still in the early innings of this revolution. Looking ahead at AR glasses, Apple will eventually sell devices containing two small displays for the first time. Relying on conservative adoption estimates, Apple will sell hundreds of millions of devices per year that contain either small displays or no displays at all. We are seeing the rise of smaller displays, and the secret to witnessing it is knowing where to look.
Listen to the corresponding Above Avalon podcast episode for this article here.
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Above Avalon Podcast Episode 152: Let's Talk Wearables
Apple is the undisputed leader in wearables, and they are pulling away from the competition. In Episode 152, Neil discusses how Apple’s wearables business can be thought of as a train gaining momentum. Competitors face declining odds of being able to stop the train. Additional topics include Apple’s wearables performance in 3Q19, wearables as a percent of overall Apple gadget unit sales, Apple wearables revenue, the factors behind Apple’s wearables success, and why wearables represent a paradigm shift in computing.
To listen to episode 152, go here.
The complete Above Avalon podcast episode archive is available here.