Apteligent Data Report: WWDC 2016
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INTRODUCTION

In celebration of WWDC’16, this month’s data report focuses on the Apple ecosystem. We analyze Apple device data in China to see if sales have improved. On the heels of last month’s report highlighting Android fragmentation, we look at iOS 9 installs and find a surprising result when analyzing the adoption rate of various patches. We also compare the performance of those iOS versions against previous releases. Finally, we look at how developers are responding (or not) to the Apple Watch.

APPLE’S GROWTH IN CHINA IS FLAT

On April 26th, after 51 consecutive quarters of growth, Apple reported a decline in second quarter sales. Smartphone saturation in the US means a lot of Apple’s growth is coming from overseas. China in particular has been a large driver of Apple’s growth. Due to increased local competition from lower-cost Android manufacturers and regional macroeconomic issues, Apple’s revenue actually fell by 26% in Greater China for its fiscal Q2 (ending March) of 2016. Apple reports fiscal Q3 earnings on July 26th, and it appears growth will continue to be flat in China. Take a look at these tables below, which for the sake of clarity are listed as calendar quarters:

Table 1: Apple Device Usage in China

Table 2: Apple Device Usage in China Grouped by Device Type

Table 3: Apple Device Usage Q/Q Growth in China

Tables 1 and 2 show Apple device usage in China. As new devices are purchased, you would expect an increase in the iPhone 6.x line of devices. To illustrate that growth, look at Table 3. You see from Q4’15 (Oct 1) – Q1’16 (Jan 1) Apple saw great sales growth for the iPhone 6S and the iPhone 6S Plus, and its earnings reflected that growth. Q1 (Jan 1) – Q2 (Apr 1) may look good on the surface but compare the growth rates to the absolute usage numbers in Table 1 and you can see how the growth severely flattened vs the previous quarters.

In addition, growth in usage of older generations of devices should be questioned for two reasons (1) We’re focused on new Apple revenue, which is limited to the new iPhone 6.x line of devices (2) There was an increase in iPad usage over the holidays as well as Q1; starting in Q2 iPhone usage came back to normal levels.

We can see the growth from Q2-Q3 is actually worse than previous quarters with the exception of the iPhone SE. However, the growth is large because it started from almost zero, and if you refer back to Table 2 we’re only talking about 1% of the overall usage. Finally, keep in mind Apple needs to sell almost two SEs to make up the revenue for each iPhone 6S it doesn’t sell. See below for a view over time of iPhone usage in China:

China – iPhone Device Usage

FRAGMENTATION IN IOS GREATER THAN WE THOUGHT

One of Apple’s strengths has historically been its ability to simultaneously push an update to all of their devices, bypassing the lengthy process that Google must endure with the various Android OEMs and carriers. Starting from the first iPhone release, Apple used its leverage to force carriers to allow updates directly from Apple and prevented them, as well as the OEMs, from modifying the software / adding bloatware.

As of the 4th of July, almost 20% of iOS 9 users are not using the latest stable version, iOS 9.3.2. Below you can compare the fragmentation of iOS vs Android. Clearly iOS still has an advantage. However, the media would use this data and typically report “iOS 9 has 89% adoption!” when in fact the reality looks a little different.

iOS Usage Distribution between 07/01 and 07/06

Android Usage Distribution between 07/01 and 07/06

Now, take a look at the graph below — the shark-fin pattern shows the adoption curve for each new patch.

iOS Version Adoption

Since iOS 9.0 was released, Apple has pushed 8 updates and has a 9th currently in beta. This is all in the span of less than 10 months. Most of these updates fixed critical bugs, like the iOS 9.3.1 patch for the Safari deep-linking issue that caused app crashes when opening links. The notable exception is iOS 9.3, which we covered in a previous report. We saw the same pattern occur with the release of iOS 8. We believe many iOS users are fatigued by the frequency of updates and reports of bugs, which causes many to hold off on updates until they are absolutely certain all of the issues have been addressed by Apple.

APPLE HAS DRASTICALLY IMPROVED

iOS Performance

In the previous section, we detailed the numerous bug fixes and performance patches that Apple has released. The effort has paid off in a big way, especially when you compare iOS 8 to the latest stable iOS release, 9.3.2. Users on the latest iOS version experience 27% less crashes than on iOS 8. Another way to say it — for the 7% of users still on iOS 8, by not upgrading they are experiencing 36% more crashes. Earlier this year Apple announced they have 1 billion active devices around the world. This means about 70M devices still need to upgrade.

iOS Crash Rate

DEVELOPER INTEREST IN THE APPLE WATCH

Peaked the 2015 Holiday Season

The Apple Watch was announced September 2014 and first released April 2015 to much fanfare. We have data that illustrates the hype and excitement around the Watch, graphed by active Apple watch apps in our system. We’ve removed one axis because it contains private data, but the shape of the graph tells the entire story. Developer Interest in the Apple Watch peaked during the 2015 holiday season, and it’s been flat since the beginning of the year.

Active Apple Watch Apps

Apple has sold an estimated 12-13 million watches, a 6 billion dollar achievement, but that was largely to early adopters. The early and late majority have been waiting for Apple to fix issues around battery life and performance. There are also concerns about the Watch’s ability to differentiate beyond a fitness tracker. We should see many of those issues resolved as part of an Apple September announcement of the Apple Watch 2. It’s unclear yet if the adoption curve will change but so far developers are taking a wait-and-see approach.

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