4Q22 iPhone Installed Base, iPhone Installed Base Growth Trajectory (Daily Update)
Hello everyone. Welcome to a new week. Let's jump right in.
4Q22 iPhone Installed Base
Last week, we went over my estimates for the Apple Watch installed base as of the end of September. Today, we will discuss the iPhone installed base. It’s been a year since we examined the issue.
Before we go any further, it is important to go over definitions. Unlike the Apple Watch installed base, Apple has provided an iPhone installed base figure from time to time. Apple defines the iPhone installed base as the number of iPhones in the wild. My definition is slightly different - the number of people using an iPhone. This includes both consumers who bought a new iPhone from Apple or a third-party retailer as well people using pre-owned or hand-me-down iPhones. If you use an iPhone, regardless of where it came from, you are part of the iPhone installed base.
Apple’s installed base definition will lead to a slightly higher iPhone total versus my definition. For today’s discussion, the difference won't change any observations or outcomes. There aren't many people using more than one iPhone.
The methodology used to derive my iPhone installed base estimate is similar to the one used for the Apple Watch installed base. Accordingly, we won’t spend time going over the steps. The iPhone business is broken into user cohorts/buckets distinguished by the year (2007 to 2022) they purchased their first new iPhone from Apple or a third-party retailer.
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Measuring Apple Watch’s Sales Potential, Apple Contemplating Apple TV Ad Play, ByteDance Planning Spotify Battle (Daily Update)
Hello everyone. We will kick off today's update with one follow-up to yesterday's Apple Watch discussion.
Measuring Apple Watch’s Sales Potential
Yesterday, we talked about Apple Watch sales and adoption trends up to the end of September 2022.
As for looking forward, there is no near-term ceiling as to the percent of iPhone users who will embrace Apple Watch. The Apple Watch ushered in a paradigm shift in computing, even if consensus still isn't willing to acknowledge the shift. Since wearables are capable of making technology more personal, there will be a natural evolution involving consumers gradually finding spots in their lives for wearables.
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4Q22 Apple Watch Installed Base, Apple Watch Adoption Figures (Daily Update)
Hello everyone. Happy Wednesday.
One quick follow-up to yesterday’s update regarding the Pixel 7 and 7 Pro.
When it comes to assessing Google’s odds of finding traction with the Pixel 7 and 7 Pro, the following screenshot of AT&T's website highlights a big obstacle:
AT&T's bet on Apple is nothing new. Instead, the mobile carriers have been placing even bigger bets on iPhone and Apple in recent years. The logic is straightforward. Consumers want iPhones and carriers don't want customers to look elsewhere for the best iPhone deals. The lack of carrier support/promotion leaves Google appealing to die-hard Android users who have become disenchanted with Samsung hardware. At least in the U.S., that's not a huge market.
4Q22 Apple Watch Installed Base
It's been a year since we went over my estimates for the Apple Watch installed base. Given different definitions of user bases and installed bases, my definition of the Apple Watch installed base is the number of people wearing an Apple Watch on any given day.
Unlike the iPad and Mac, we don’t have to worry about shared settings where one Apple Watch is shared among a number of people. We also don’t have to be concerned with the very small number of people who wear or use multiple Apple Watches.
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Thoughts on Google’s Pixel Event, Google Finally Takes Smartwatches Seriously, Google vs. Amazon Battle (Above Avalon Daily)
Hello everyone.
In today’s update, we will go over my impressions of Google’s big hardware event for fall 2022. Let’s jump right in.
Thoughts on Google’s Pixel Event
At least based on what was said on stage at its Made by Google 2022 event (video available here), Google corrected some of its big hardware mistakes and messaging from the past few years.
Google now publicly recognizes the force smartwatches truly represent.
The major themes of screens and device ecosystems were recognized.
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Tim Cook Gives Another AR Tease, Apple Talks Dynamic Island, Peloton CEO Asks for Six More Months (Daily Update)
Hello everyone.
Google held its Pixel hardware event today. We will talk about the event next week. Let’s jump right in.
Tim Cook Gives Another AR Tease
Last week, Cook and a number of Apple executives toured some of Apple’s European operations. Cook also did some interviews.
Here’s Bright (via translate):
“Cook has called augmented reality (AR) the biggest technological promise for the future for years. With AR, virtual objects are shown over the real world, for example via the camera of a smartphone or through smart glasses. Cook told students [at the University of Naples Federico II] that soon we will look back on a life without AR as we are now looking back on a life without a smartphone, or without the internet. ‘It won't be that long,’ Cook said.
In conversation with Bright, he went into more detail about this. ‘AR apps are already in the App Store, but the possibilities will go much, much further,’ Cook told Bright. ‘I think AR is a profound technology that will affect everything. Imagine suddenly being able to teach with AR and demonstrate things that way. Or medically, and so on. Like I said, we are really going to look back and think about how we once lived without AR.’"
Looking over the past six years of Cook’s comments about AR (The Verge complied every public comment Cook has made about AR up to 2021 here), there has been a clear shift in Cook’s tone.
Back in 2016 and 2017, Cook talked about how it will take a while to see AR technology hit mainstream.
Beginning in late 2018, Cook started to say things like we will “wonder how we ever lived without [AR].”
In 2020 and 2021, Cook went further to say AR was the next big thing.
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Growing Fallout Surrounding Google Stadia Shutdown, Revisiting the Alphabet Structure, YouTube Testing 4K as Premium Feature (Daily Update)
Hello everyone. Yesterday's update regarding Google pulling the plug on Stadia led me to pursue a few additional points when it came to Google and Alphabet. Let's jump right in.
Growing Fallout Surrounding Google Stadia Shutdown
Over at TechCrunch, here’s Devin Coldewey:
“There’s a lot of chatter right now about the ‘surprise’ shutdown of Stadia, Google’s game-streaming service. While it’s true that rivals like Geforce Now and Xbox Cloud Gaming presented entrenched competition and that Google knows next to nothing about gaming, the main trouble — as with most of its products these days — is that no one trusted them to keep it alive longer than a year or two.
It really is that simple: No one trusts Google. It has exhibited such poor understanding of what people want, need and will pay for that at this point, people are wary of investing in even its more popular products…
And here’s where it was really doomed. Because while people will happily drop a couple bucks here and there for a Google service, no one is going to pay hundreds for something they have a sneaking feeling is going to be completely worthless in short order.
Google’s legacy of killing products is infamous. Its twists and turns on priorities, branding, standards and everything else have made it clear to everyone that they cannot be trusted with anything beyond their core services, and they even like to screw those up now and then.”
Coldewey concluded by saying Google has permanently destroyed the trust of stakeholders (developers / game studios / media / creators / consumers etc.) that would be needed to get new products off the ground.
Coldewey raised a number of good points. He was not alone in sharing such feelings either. Various tech publications ran similar opinion pieces regarding Google trust issues. While there is nothing wrong with killing or ending a bad product or business, if a company becomes a habitual product killer, customer trust will suffer. A very good argument can be made that Amazon is suffering from a similar dynamic especially when it comes to devices. In both cases, we have companies conducting too much R&D out in public.
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Foxconn Hints at Robust iPhone Demand, Google Pulls Plug on Stadia, Zillow Adopts Apple Maps Look Around (Daily Update)
Hello everyone.
One quick clarification regarding yesterday’s story about Tesla deliveries.
I wrote: "More attention will be placed on the year-over-year growth in [Tesla] deliveries. If that figure continues to slow, the number of demand questions will rise."
One of those questions would include whether or not the slowdown in Tesla deliveries is tied to production headwinds. This is why it will be important to monitor how Tesla is performing in terms of build rates at existing factories and building new production facilities around the world.
Today’s update will focus on three news stories that jumped out at me. Lete’s jump right in.
Foxconn Hints at Robust iPhone Demand
Here’s Reuters:
“Taiwan's Foxconn, the world's largest contract electronics maker, said on Tuesday it was "cautiously optimistic" about its fourth-quarter revenue outlook after reporting record-breaking September sales.
Like other global manufacturers, the Taiwanese company, a major Apple Inc supplier, could be vulnerable to slowing consumer tech demand as the global economy faces the possibility of recession and inflation soars, especially in Europe and the United States.
But the company said in a statement it was ‘cautiously optimistic’ about the outlook for the final three months of 2022, and maintained its full-year guidance of growth given in August, from previous guidance of flattish revenue.
‘However, the dynamics of inflation, the pandemic, and the supply chain still need to be closely monitored,’ it said.
Formally known as Hon Hai Precision Industry Co Ltd, the company said revenue for September and the third quarter grew 40.39% and 24.4% on the year, respectively, both hitting record highs and beating its own expectations.”
Caution is always needed when reading too much into what any one company from Apple’s supply chain and assembly apparatus has to say. With that said,
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Nike 1Q23 Earnings, Tesla 3Q22 Vehicle Deliveries, Wall Street's Apple Anxiety (Daily Update)
Hello everyone. Welcome to a new week. Today's update will kick off with operating results from two consumer-oriented companies (Nike and Tesla). We will then bring Apple into the discussion when going over broader observations and takeaways.
Nike 1Q23 Earnings
Here’s the WSJ:
“Nike Inc. has said it didn’t have enough inventory to meet consumer demand for the past two years. Now, it has too much—and the sneaker giant needs to step up discounts to clear out items.
The company on Thursday said inventories rose 44% to $9.7 billion in the latest quarter, and higher discounts and freight costs squeezed profit margins. Executives said they would mark down more goods, especially apparel, heading into the holidays.
Shares of Nike tumbled about 10% in late trading following its quarterly report.
The results are the latest sign of how rapidly retailers and manufacturers of everything from fertilizer to furniture have found themselves with a surplus of goods, after two years where they scrambled to have enough to sell during the pandemic.
‘We are taking decisive action to clear excess inventory,’ Nike finance chief Matthew Friend said during a call Thursday to discuss the latest results."
Anecdotally, my most recent Nike purchase, which included some summer apparel, arrived faster than any previous Nike order. It would appear that whichever regional hub my items shipped from had plenty of inventory with the shipping company also having the required capacity as well.
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The Big Themes from Amazon’s Hardware Event, Apple Pushes Back Against TSMC Price Hike, Thursday Q&A (Daily Update)
Happy Thursday.
We will start today’s update with Amazon, then turn to Apple’s supply chain, and conclude with a new installment of Thursday Q&A.
Let’s jump right in.
The Big Themes from Amazon’s Hardware Event
In a plain vanilla tech presentation with a style reminiscent of something from the late 2010s, Amazon announced a number of new and updated devices. The presentation is available here (via YouTube).
Ambient Intelligence was the central marketing theme used to connect everything together. This is hardly a new theme. Instead, we have heard versions of it from Amazon and Google for years.
Amazon pointed to three key product attributes of its “Ambient Intelligence” product strategy:
Intuitive
Proactive
Personalized
We will revisit this point shortly.
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Another Questionable Bloomberg Report on iPhone Demand, What’s Going On With Bloomberg?, Impact on AAPL (Daily Update)
Hello everyone. Today’s update will be dedicated to discussing Bloomberg's new report on iPhone 14 demand.
Another Questionable Bloomberg Report on iPhone Demand
Over at Bloomberg, here are Debby Wu and Takashi Mochizuki:
“Apple Inc. is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, according to people familiar with the matter.
The Cupertino, California-based electronics maker has told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as 6 million units in the second half of this year, said the people, asking not to be named as the plans are not public. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple’s original forecast this summer, the people said.
Demand for higher-priced iPhone 14 Pro models is stronger than for the entry-level versions, according to some of the people. In at least one case, an Apple supplier is shifting production capacity from lower-priced iPhones to premium models, they added."
It’s shocking how similar this Bloomberg report is to one that the publication pushed out 10 months ago.
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John Mayer vs. Apple Watch Ultra, Apple Watch Ultra’s Appeal, Apple and Oprah End TV+ Deal (Daily Update)
Hello everyone. We will start today’s update in Apple Watch land. Let’s jump right in.
John Mayer vs. Apple Watch Ultra
John Mayer is known by most as a musician. However, in the mechanical watch world, he is considered a trendsetter / influencer.
“Anyone who follows John Mayer on Instagram is accustomed to seeing watches on his feed. Typically, they are very nice, very exclusive watches: Rolex ‘Rainbow’ Daytonas, the new Audemars Piguet Royal Oak with gems set in a design that mimics an equalizer, one of Patek Philippe’s impossible-to-find sport watches. But he shared an unexpected message on Wednesday.
‘Did Apple just make….a tactical watch?’ he wrote. ‘Been wearing the Apple Watch Ultra for a week…’—build that suspense, John!—‘and it’s great.’ This news probably registered as a sizable earthquake in Geneva. Because Mayer is not just any well-heeled and avid collector, he is likely the watch world’s most prominent tastemaker. When he wears a green-and-gold Rolex Daytona, the value shoots up in price and is now known as ‘the John Mayer.’ Spotting a certain Royal Oak on his wrist can inspire dealers to go out and snap up a couple dozen of that exact piece. Certainly, Mayer’s co-sign won’t have that sort of effect on the Apple Watch, which is already bought up in higher quantities than what the entire Swiss watch industry is moving combined. But given the Apple Watch’s unique place in the watch universe—worn by nearly everyone, but nobody’s idea of collector bait—Mayer’s endorsement is a huge deal."
To be exact, Apple is on track to sell three times as many watches as the Swiss will export in 2022 (my estimate).
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Central Banks Rush to Raise Rates, Stronger Dollar’s Impact on Apple, Apple Music to Sponsor Super Bowl Halftime Show (Daily Update)
Hello everyone. Welcome to a new week.
Let's jump right in with a story that jumped out at me over the weekend.
Central Banks Rush to Raise Rates
Here’s the WSJ:
“Central banks around the world moved Thursday to combat the effects of a soaring dollar and rising inflation, joining the Federal Reserve in risking a recession to rein in climbing prices.
In a flurry of central-bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as ‘Super Thursday.’
The Bank of England raised its key interest rate for the seventh consecutive time on Thursday. Before the news came out, the British pound briefly touched its lowest point in 37 years against the dollar before recovering some of its losses to reach $1.13.
Even some countries that didn’t move rates—the Bank of Japan left its policy rate at its previous low level—took other action to ease the growing inflation pressure.
Japan said Thursday it intervened in currency markets to sell dollars and buy yen, the first such intervention in 24 years, to slow the recent fall in the Japanese currency. The yen fell to 145.87 to the dollar, its weakest level since 1998, before the intervention. It then surged to hit 141 yen, though still far off the 115 yen mark at which the dollar was trading earlier this year.”
More aggressive central banks would be a positive for Apple from the perspective of currency swings. Of course, if higher rates lead to slower economic growth around the world, Apple is exposed. However, Apple's competitors are more vulnerable to weaker sales due to slowing economic growth.
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Disney CEO Talks ESPN’s Future, Apple’s Sports Play, Apple Watch Ultra Reviews (Daily Update)
Hello everyone. Let's begin today's update in the live sports world.
Disney CEO Talks ESPN’s Future
Last week, Disney CEO Bob Chapek, who recently had his CEO contact extended by three years, sat down with CNBC’s David Faber to talk about ESPN and where live sports goes from here.
Here’s Chapek:
“We're hard at work in our offices, both on the east coast and the west coast, figuring out how we make it more friction-free sports environment for our viewers. And obviously, some of these things take the cooperation of a lot of the people in the ecosystem, whether they be the leagues, other broadcast partners, but we foresee a world where ESPN, even more than ever, is the pinnacle of all your broadcast needs and we’re excited to continue working on that and at some point, when we’re all fully backed, we’ll come back.”
Chapek referred to four broad working areas as to where Disney is focusing ESPN's energy:
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Peloton Launches Peloton Row, What Peloton Should Do With Peloton Row, Spotify Launches Audiobooks (Daily Update)
Hello everyone.
Let's jump right in.
Peloton Launches Peloton Row
My approach regarding analyzing Peloton is changing.This week’s Inside Orchard essay was focused on why it’s now time to begin writing Peloton’s eulogy. We should no longer look at Peloton as a threat to Apple or Apple Fitness+.
However, there are still interesting lessons and notes to observe with Peloton. Specifically, where the hardware versus software balance is found with connected fitness in mind. Peloton believes fitness equipment and software integration are key. My stance is software is vastly more important than fitness equipment when thinking about connected fitness. Apple’s HW/SW/services mantra integration isn’t applicable to every consumer-facing product vertical.
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The iPhone 14’s Surprise Redesign, iPhone Longevity, Changing iPhone Upgrading Trends (Daily Update)
We kick things off with Neil’s thoughts on iFixit’s iPhone 14 discovery. The discussion then expands to take a broader look at how iPhone longevity impacts Apple and the iPhone installed base. We also look at what Neil sees as changing dynamics found with iPhone upgrades. The update goes over Neil’s estimate of where the iPhone upgrade cycle had been and where it is likely headed.
September 20th, 2022: The iPhone 14’s Surprise Redesign, iPhone Longevity, Changing iPhone Upgrading Trends
Hello everyone. Today’s update will have an iPhone focus. Let’s jump right in.
The iPhone 14’s Surprise Redesign
iFixit is a publication dedicated to educating people on device repair. The site is known for its device teardowns.
In recent years, iFixit has moved more into advocacy and opinion, presumably because it’s good for business. iFixit makes money by selling device parts, replacement tools, and repair kits. This means it’s in their interest to talk up what it views as device repair injustices – that’s putting it nicely as to what they have been doing.
With that said, the following post from iFixit caught my attention.
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Apple and Enhanced Reality Portals, Thoughts on Apple Watch Sales/Preorders, Apple Passes on LIV Golf (Daily Update)
Hello everyone. Welcome to a new week.
Let’s jump right into today’s update.
Apple and Enhanced Reality Portals
Last Thursday’s update regarding Apple and satellites concluded with the following:
“My suspicion continues to be that satellite connectivity is ultimately a story about device connectivity. Apple is building an ecosystem that will consist of billions of devices. Take secure, low latency connectivity and combine it with hundreds of millions of cameras sold each year and Apple will be able to build location layers and graphs that can be used to create enhanced reality portals.”
Enhanced reality portals can be thought of as playgrounds for adding context to our surroundings.
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The daily updates have become widely read and influential in the world of Apple and technology. They are unmatched in the marketplace in terms of comprehensive analysis and research on all things Apple. Members reside in 60 countries and hold a diverse range of backgrounds and occupations. They include Silicon Valley executives and investors, the largest Apple shareholders, and the leading Apple journalists in the business.
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Apple Buys Satellite Capacity, Apple and Starlink, Apple’s Satellite Ambition (Daily Update)
Hello everyone.
Happy Thursday.
One quick update regarding Dark Sky, the popular paid iOS weather app acquired by Apple in 2020.
The app will be shut down on January 1st, 2023. The following message is now posted within the app:
Apple's acquisition set off a wave of worries and angst in weather app land. Check out the daily update from April 1st, 2020 for my detailed thoughts on the acquisition.
Since then, Apple announced that it was including Dark Sky’s tech within its own weather app while making the Dark Sky API available to third-party app developers via WeatherKit. This matched my expectations for what Apple would do. Dark Sky is looking like a very intelligent acquisition at what was likely a very attractive price.
Apple Buys Satellite Capacity
“Apple Inc on Wednesday selected Globalstar Inc as its partner for a feature that would allow iPhone 14 users to send emergency messages from remote locations.
The tech giant said it was dedicating $450 million from its advanced manufacturing fund toward satellite infrastructure to support the feature. GlobalStar will receive the majority of the funding, but the iPhone maker did not specify which other players will receive the rest and in what form.
While Apple will pay for 95% of the approved capital expenditure for the new Globalstar satellites needed to support the service, Globalstar said it would still need to raise additional debt to construct and deploy the satellites.
Globalstar, which makes low-earth orbit (LEO) satellites, said it had tapped investment bank Goldman Sachs & Co and expects to complete a financing in the fourth quarter of 2022.
LEO satellites operate 36 times closer to the earth than traditional ones and hence take less time to send and receive information, leading to faster broadband service even in remote areas."
According to Globalstar, which has dozens of LEO satellites and 24 ground stations, its deal with Apple is “transformational.”
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Thoughts on iPhone 14 and 14 Pro Pre-orders, Garmin Trolls Apple, Apple Watch Ultra Battery Life (Daily Update)
Hello everyone.
One clarification regarding iPhone 14 Plus. In yesterday’s update I wrote:
“The iPhone 14 Plus finds itself in a pricing canyon. It’s the third-most expensive iPhone, after iPhone 14 and iPhone SE. However, it’s just $100 less than the 6.1-inch iPhone 14 Pro.”
That should have said "It’s the third-least expensive flagship iPhone.” The broader point is unchanged - the iPhone 14 Plus finds itself in a weird spot within the iPhone line.
With that, let’s jump right in.
Thoughts on iPhone 14 and 14 Pro Pre-orders
Here is the current delivery dates for the iPhone 14 flagships (U.S.):
iPhone 14 (Sept 20 to 21) – available Sept 16th
iPhone 14 Plus (Oct 7) – available Oct 7th
iPhone 14 Pro (Oct 13 to 20) – available Sept 16th
iPhone 14 Pro Max (Oct 20 to 27) – available Sept 16th
Apple has embraced an underpromise and overdeliver mantra when it comes to delivery estimates for online orders. Delivery dates almost always end up being pulled forward. This may explain why delivery dates aren’t dependent on iPhone finish color or storage. Apple may be simply providing an estimated delivery range for each model that it is confident it will not just meet but exceed.
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Deconstructing Apple’s “Far Out” Presentation (Part 2) - Daily Update
Hello everyone.
In today’s update, we will wrap up my Apple event review. As a recap, last Thursday we went over my initial impressions regarding event highlights. Yesterday, we talked about the Apple Watch in greater detail. We will now go over AirPods Pro, Fitness+, and iPhone.
Before we jump into today’s update, there is one additional observation from attending the Apple event that was worth sharing.
I couldn’t help but notice how Phil Schiller was walking around the product demo area for what seemed like an extended period.
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Deconstructing Apple’s “Far Out” Presentation (Part 1) - Daily Update
Hello everyone.
Welcome to a new week.
We will continue my Apple event review. Last Thursday, we went over the event highlights that jumped out at me. Our attention will now shift to more granular topics.
In today’s update, we will focus primarily on Apple Watch. In tomorrow’s update, we will talk about iPhone, AirPods, and any other remaining topics that deserve to be talked about. Instead of just going through the laundry list of announcements, we will focus will on the why behind Apple's announcements.
Prioritization
Over on Apple's Events page, the company listed the following products/features unveiled at last week’s “Far Out” event:
iPhone 14 Pro (Dynamic Island / safety features / upgraded camera)
iPhone 14 (new Plus size model and better battery life / safety features / low-light photography)
AirPods Pro (ANC and adaptive transparency / personalized spatial audio / better battery life)
Apple Watch Ultra (rugged / capable)
Apple Watch Series 8 (“future of health” = advanced cycle tracking / Crash Detection / Workout app enhancements)
Apple Watch SE ("more capability and an even lower price")
Apple Fitness+ (will be available to all iPhone users)
For iPhone, cameras and processors were not positioned as the most important new features for this year’s flagships. Instead, additional screen real estate with the new Plus model and changes to Pro screens with Dynamic Island were the two big new features. Apple positioned
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The daily updates have become widely read and influential in the world of Apple and technology. They are unmatched in the marketplace in terms of comprehensive analysis and research on all things Apple. Members reside in 60 countries and hold a diverse range of backgrounds and occupations. They include Silicon Valley executives and investors, the largest Apple shareholders, and the leading Apple journalists in the business.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.