AirTags could give a nice bump to Apple’s growing lineup of smaller stuff

When people think Apple, they think big ticket items like iPhones, MacBooks and iPads. But the company’s accessories line of iPhone cases, chargers and tablet keyboards is a critical part of its revenue growth strategy.

Now Airtags, its long-rumored Bluetooth tracking device, could be its next big accessory win.

Apple is expected to launch new iPads at a virtual press event on Tuesday, which kicks off at 1 p.m. ET/10 a.m. PT. An updated iPad Pro is expected to have a faster processor, 5G support, a Thunderbolt port so it can connect to more external monitors and a Mini-LED display. We could also see AirPods 3, a revamped Apple TV and a software update focused on privacy (and new emojis).

But all eyes are on the potential debut of AirTags, a Tile-like Bluetooth locator that attaches to and helps you find items such as keys, wallets, laptops or even your car. AirTags have been reportedly in the works as far back as 2019, when pictures hidden within iOS 13 suggested small, flat, circular discs with built-in chips could allow someone to locate items when connected to Apple’s Find My app. The rumored cost: $39 each.

“Apple accessories are very important from a business perspective because they tend to be high-margin products,” said Ben Stanton, senior analyst at tech market research firm Canalys. “So while accessories may not make headlines from a revenue perspective, they do have a particularly positive impact on profitability.”

AirTags are expected to include the same U1 ultra-wideband chip as the iPhone 12, which would make location tracking more accurate than competing devices from companies such as Tile, Samsung and Sony, according to MacRumors. It could also help the tiny devices support augmented reality; in iOS 13, a string of code teased AirTag users can “walk around several feet and move your ‌iPhone‌ up and down until a balloon comes into view,” indicating where an item may be hiding, MacRumors reported at the time.

The arrival of AirTags would allow the company to expand its offerings and lock users deeper into its ecosystem as it looks for more ways to take on an expected decline in its hardware revenues. The iPhone continued to dominate Apple’s revenue in the fourth quarter of 2020, accounting for 59% of sales, compared to 12% for its accessories category, which also includes wearables and its Home line. However, the accessories category amounts to more revenue than its Mac line.

Still, Apple accessories remain a massive opportunity for upselling. Because Apple no longer includes a charger and cable in iPhone boxes upon purchase, demand for these items has surged in the past year. “Apple itself has seen supply shortages of charging accessories in some parts of the world, causing many customers and retailers to lean heavily on third-party alternatives,” said Stanton, citing anecdotes he’s heard from several distributors.

In addition, the company’s smart Magic Keyboard and the Apple Pencil opens up new revenue streams as lower-cost iPad users look for more functionality.

“Although AirTags are probably going to be fairly low priced, they may help to grow revenue, and users may buy multiple tags for different scenarios, such as for a bag, bike or car keys,” said David McQueen, director at tech market advisory firm, ABI Research. “It may also spark a rise in the manufacture of accessories to house the tags, such as a key fob, keychain or wrist strap.”

While accessories for an accessory might sound like a stretch, customers who are delaying costly smartphone and tablet upgrades may be willing to spend more on lower cost items. That said, it’s possible AirTags could emerge as a category unto its own, much like AirPods.

Either way, it would be a smart time for their launch as customers are finally emerging from over a year of lockdown — ready, perhaps, to find things people invariably lose when outside the house.