When Apple (NASDAQ:AAPL) first introduced AirPods in late 2016, no one -- including Apple -- could have predicted how popular they would become. At the time of their debut, users lamented the loss of the headphone jack on the iPhone 7, and many said the AirPods were too expensive at $159.
In typical Apple fashion, however, the devices gained steam and soon became the category leaders -- much like the Apple Watch before them. Early this year, Apple refreshed the brand, introducing the second-generation AirPods, which added hands-free operation of the "Hey Siri" feature.
Apple introduced AirPods Pro last month, adding features like active noise cancellation and multiple ear tips to ensure a snug fit. And demand for the product has soared even higher. Unfortunately, because of surging demand, Apple may not be able to fill all the orders for the holiday shopping season.
The company isn't sitting idly by and is trying to boost output to meet the unexpectedly high demand. It has enlisted extra manufacturers in China to double production, according to the Nikkei Asian Review. The publication cited multiple supply chain sources in reporting that Apple has doubled its order to "at least" 2 million units per month in order to meet demand.
AirPods shipments are already expected to double year over year to more than 60 million units in 2019, according to Bloomberg. Part of the growth is directly attributable to the recently released AirPods Pro, which are experiencing "much more than expected demand," according to the report.
Driving future growth
AirPods are already one of Apple's hottest products, part of the company's fast-growing wearables category. During its fiscal fourth quarter (which ended Sept. 28), wearables -- which includes AirPods, the Apple Watch, and Beats products -- generated record sales "in each and every market we track," according to CEO Tim Cook, who said they produced "well over 50% growth."
Don't take Cook's word for it. The second-generation AirPods helped Apple command a 45% market share in the third quarter, according to Counterpoint Research. The overall market is expected to reach 120 million units in 2019, with the tech giant grabbing more than half of all sales. Additionally, given the recent momentum and holiday sales for Singles' Day in China, as well as Black Friday and the December holidays, fourth-quarter growth is expected to climb even higher.
GF Securities analyst Jeff Pu thinks that's just the beginning. "In the future, [wireless earbuds] could well sell at the level of the iPhone with some 200 million units a year," he said. If Apple were to sell that many AirPods, that would be worth about $32 billion in revenue per year at the lowest price point. With soaring demand for the AirPods Pro and charging cases adding to the tally, that number will likely be significantly higher.
Good news and bad news
A quick check of Apple's website shows that orders for AirPods Pro (which retail at $249) that are completed Wednesday won't be arriving until Dec. 31. And those delivery delays are getting longer by the day. Customers will have better luck getting the AirPods with charging case for $159 or AirPods with a wireless charging case at $199, both of which will arrive by Dec. 3 if ordered today, the website says.
While the limited supply and surging demand might result in a speed bump for holiday sales, the outsize consumer interest for AirPods Pro (and wearables in general) make them another in a long line of products and services driving Apple's future growth.