As Apple Inc. (AAPL - Get Report) flirts with a $900 billion market cap following a September quarter report that did nothing to dampen iPhone X enthusiasm and disclosed 24% quarterly sales growth for the company's non-iPhone businesses, it's worth taking a look at how Apple's investments in hardware and chip engineering, together with its willingness to rethink the user interfaces its hardware relies on.
The iPhone X, which from all signs will drive the strongest iPhone upgrade cycle since at least the iPhone 6 once supply improves, is a good place to start. One of the X's big selling points relative to the iPhone 7 and 8, a front-camera system (called TrueDepth) that enables the Face ID unlocking system as well as augmented reality effects such as Animojis, is the most advanced camera put on a smartphone to date. In addition to a traditional image sensor and lens, TrueDepth relies on three other modules -- an IR camera, an IR dot projector and a "flood illuminator" that provides IR light in dark settings -- to enable 3D face-mapping.
Apple's A11 Bionic system-on-chip (SoC) also helps make Face ID possible, thanks to its inclusion of a co-processor (called the Neural Engine) for handling machine learning algorithms and its storing of face data within a "secure enclave." It could be years before rival phones offer something comparable to Face ID. The A11 also has an image co-processor that contributes to the superb image quality of the photos and videos turned out by the X's front and rear cameras.
The X's other big selling point, an edge-to-edge OLED display, isn't all that innovative at first glance, as a number of Android phones also sport edge-to-edge OLEDs. But -- judging by a review from display-testing firm DisplayMate -- the iPhone X's OLED appears to deliver unmatched color accuracy and image quality.
In addition, while Android phones with edge-to-edge displays reserve space at the bottom for "softkeys," Apple chose to do away with visible controls altogether in favor of swipe gestures. It could take some iPhone X buyers a little while to get used to this, but it also means that a phone's entire display can be used to show an app's content. Not the kind of thing that consumers will solely base their phone-buying decisions on, but it does make an impression on an edge-to-edge screen.
The 14% revenue growth (to $4.8 billion) and 11% unit growth Apple's iPad business saw last quarter was fueled by healthy demand for the 10.5-inch and 12.9-inch iPad Pro models that the company launched in June. Among their key selling points: Best-in-class displays enabled by a pair of technologies called True Tone and ProMotion. True Tone automatically adjusts a display in response to an environment's lighting; ProMotion enables refresh rates of up to 120Hz., while also lowering refresh rates to improve image quality and lower power draw in response to the content an app is showing.
Apple's other major iPad Pro selling point this year has been the introduction (via iOS 11) of a slew of PC-like multitasking features, such as an app dock that can be pulled up from any app, the ability to drag and drop content between apps and the ability to quickly scan launched apps. All of that strengthens Apple's multi-year effort to pitch consumers and businesses on the iPad Pro as a notebook alternative -- it has been a tough sell to date, but the new multitasking features do strengthen Apple's hand a bit.
Mac revenue grew 25% to $7.2 billion on the back of 10% unit growth. The main driver: Strong demand for MacBook Pros sporting OLED Touch Bars. Apple's willingness to rethink its notebook user interface by adding a secondary display providing controls that can be customized and change based on which app is loaded is paying dividends. And looking further back, the company's 2014 introduction of Force Touch trackpads whose actions changed based on the amount of pressure applied provided it with another way to differentiate MacBook interfaces.
Apple's "Other Products" revenue, which covers all hardware outside of iPhones, iPads and Macs, grew 36% to $3.2 billion. Apparently the largest driver: A 50%-plus increase in Apple Watch unit sales. Though not for everyone, the Watch has established a pretty dominant smartwatch position, especially on the high-end.
The Apple S-series chip modules powering the Watch have a lot to do with its success, thanks to their ability to strike a balance between device performance, battery life and weight/bulk. So does the thoughtfulness Apple showed in developing the Digital Crown and other interface elements used to navigate 38mm and 42mm Watch displays.
And going forward, Apple's introduction of LTE-capable Watches sporting virtually the same form factors as non-LTE Watches should give the business a boost. At least provided Apple can address the connectivity issues some reviewers saw.
Strong AirPods demand also boosted Other Products revenue. Here, Apple's ability to -- with the help of its W1 audio-processing chip -- rethink the wireless audio experience has much to do with its success. In addition to featuring no cables between headphones, AirPods automatically pair with Apple devices when taken out of their charging cases; music automatically pauses when an AirPod is pulled out of an ear and resumes playing when it's put back in; background noise is filtered out when a user is speaking; and tapping an AirPod twice activates Siri.
It's an old adage that most consumers don't buy devices for their technical specs. But when those specs yield big competitive advantages in terms of what a device can do and/or how conveniently it can do it, there can be quite an impact. Apple's recent results bear this out.
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