Apple, Inc. (NASDAQ: AAPL) is reportedly working on a new subscription service that would boost the sales of iPhone and other Apple products.
Apple hardware subscription service would be the company’s biggest push towards automatically recurring sales, which will allow users to subscribe to any iOS device for the first time, rather than just digital services offered by the company.
The project, however, is still in development, according to the sources, who asked not to be identified because the initiative has yet to be announced.
After Bloomberg reported the news, Apple shares jumped to a session high, closing up 2.3 percent at $174.07. Despite the fact that the stock is still down 2% for the year, Apple has now posted an eight-day winning streak, the longest since November.
How Apple subscription service for hardware will work
The customer would most likely be able to subscribe to hardware using the same Apple ID, they use to buy apps and subscribe to services today, through the App Store and on the company’s website. There would also be a check-out option on both Apple’s online store and physical retail stores.
Interestingly, the new subscription program would differ from an installment program in which the monthly fee includes a portion of the principal amount borrowed as well as interest, split into 6 or 12 or 24 months. Instead, it would be a “yet-to-be-determined” monthly fee based on the device selected by the user.
Sources told Bloomberg that the company is considering allowing program participants to exchange their devices for new models when new hardware comes out in the market.
Apple’s new strategy could be a game changer
A majority of Apple’s revenue comes from the Americas, followed by Europe, China, Japan, and the rest of the Asia-Pacific region. Apple is still trying to capture a sizeable share in India which is known as the second-biggest smartphone market in the world. The company has long been criticized by Indians for its exorbitant prices for iPhones, iPads, and Mac devices. As a result, iPhone sales in India remain low when compared to Android OEMs such as Samsung, Xiaomi, Oppo, Vivo, and Realme.
It’s estimated that Apple accounts for just 4% of the Indian smartphone market despite the local production of a few models including the iPhone 12. The production of iPhones locally has a direct impact on the selling price of iPhone in India, and Apple is trying to capitalise on it as much as possible by boosting its production capacity. Few recent reports have claimed that the local production of iPhone 13 would also kick-off soon.
The longer upgrade cycle among iPhone users is slowly becoming another challenge for Apple to keep its sales growth intact.
Therefore, adopting hardware subscriptions would be a major strategy shift for the Cupertino giant that currently sells iOS devices at full cost outright, sometimes through installments or with carrier subsidies.
This new strategy could help Apple generate more revenue while also making it easier for customers to justify spending thousands of dollars on new devices, especially on iPhones. It is important to note that in fiscal 2021, Apple generated over 52.5% of its total annual revenue from iPhones.
Apple’s subscription program for devices is expected to launch by the end of 2022, but it could be delayed or canceled.
So what do you think of Apple’s new ‘buy now pay later’ strategy in order to increase sales of iPhones and other hardware devices?