Smartphone upgrades slowing as Apple is rumored to be prepping low-cost iPhone
Evidence continues to mount that the market for high-end smartphones in the U.S. may have reached a saturation point, meaning that a mid-range iPhone offering from Apple could be the best way for the Cupertino company to ensure future growth.
The latest and greatest smartphone models aren't spurring as many consumers to upgrade as they have in the past, according to analysts at UBS AG. Last year saw 68 million people upgrading their phones in the U.S., down more than nine percent from the year previous.
This trend could prove troubling for both smartphone manufacturers and wireless carriers. The carriers could find themselves on the hook for billions due to sales agreements with manufacturers and the need to continue having customers re-up their contracts. Phone upgrades typically go along with service upgrades, and the carriers continually try to herd customers into higher-cost arrangements in order to grow revenue.
Apple and Samsung, the two largest smartphone manufacturers, have been seeing the effects of smartphone saturation as well. Samsung's most recent flagship model, the Galaxy S4, received solid reviews but was generally regarded as an iterative, evolutionary device and not a true game changer. That same charge was leveled at Apple's iPhone 5 by some critics around the time of its release.
For Samsung, the lack of a wow factor translated into slower-than-expected sales for the Galaxy S4, which in turn led to a stock slide as investors began to fear slowing growth. That turn of events, again, mimicked Apple's own story since August of last year.
Apple, too, has seen the effects of high-end smartphone saturation. In the March quarter, the average sales price for an iPhone fell to $600, lower than some analysts' projections of $625. At Verizon, the largest carrier in the United States, Apple's newest model, the iPhone 5, made up about half of all iPhone sales for that quarter. Older models like the iPhone 4S and the iPhone 4 - both of which are offered at discounted price points - made up the rest of that carrier's iPhone sales.
Slowing growth in the high-end segment could spur Apple on to develop and release a mid-tier model of its bestselling smartphone. Rumors abound that the iPhone maker is working on a less premium build of its best-known device, with a polycarbonate-backed model hitting shelves as early as this fall. Some reports hold that Apple will not make a play for the low-end segment, as the "cheaper" iPhone is said to not be cheap at all.
Others hold that the high-end smartphone slowdown will simply open the door for other devices to come to the fore. Chief among these would be the smart watch segment, an area Apple is widely expected to enter in the next year or so. That segment, according to recent reports, could grow by a factor of ten over the next year as major hardware manufacturers look to capitalize on a burgeoning wearable technology trend.
The latest and greatest smartphone models aren't spurring as many consumers to upgrade as they have in the past, according to analysts at UBS AG. Last year saw 68 million people upgrading their phones in the U.S., down more than nine percent from the year previous.
This trend could prove troubling for both smartphone manufacturers and wireless carriers. The carriers could find themselves on the hook for billions due to sales agreements with manufacturers and the need to continue having customers re-up their contracts. Phone upgrades typically go along with service upgrades, and the carriers continually try to herd customers into higher-cost arrangements in order to grow revenue.
Apple and Samsung, the two largest smartphone manufacturers, have been seeing the effects of smartphone saturation as well. Samsung's most recent flagship model, the Galaxy S4, received solid reviews but was generally regarded as an iterative, evolutionary device and not a true game changer. That same charge was leveled at Apple's iPhone 5 by some critics around the time of its release.
For Samsung, the lack of a wow factor translated into slower-than-expected sales for the Galaxy S4, which in turn led to a stock slide as investors began to fear slowing growth. That turn of events, again, mimicked Apple's own story since August of last year.
Apple, too, has seen the effects of high-end smartphone saturation. In the March quarter, the average sales price for an iPhone fell to $600, lower than some analysts' projections of $625. At Verizon, the largest carrier in the United States, Apple's newest model, the iPhone 5, made up about half of all iPhone sales for that quarter. Older models like the iPhone 4S and the iPhone 4 - both of which are offered at discounted price points - made up the rest of that carrier's iPhone sales.
Slowing growth in the high-end segment could spur Apple on to develop and release a mid-tier model of its bestselling smartphone. Rumors abound that the iPhone maker is working on a less premium build of its best-known device, with a polycarbonate-backed model hitting shelves as early as this fall. Some reports hold that Apple will not make a play for the low-end segment, as the "cheaper" iPhone is said to not be cheap at all.
Others hold that the high-end smartphone slowdown will simply open the door for other devices to come to the fore. Chief among these would be the smart watch segment, an area Apple is widely expected to enter in the next year or so. That segment, according to recent reports, could grow by a factor of ten over the next year as major hardware manufacturers look to capitalize on a burgeoning wearable technology trend.
Comments
Apple does!
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as major hardware manufacturers look to capitalize on a burgeoning wearable technology trend
Huh? What wearable technology trend? I see NO one wearing tech, aside from iPods and standard wristwatches. Lovely that the analysts are now forecasting on phantom trends.
Google Glass, you say? Right... it's the next Segway scooter. Both users love 'em.
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it's the next Segway scooter. Both users love 'em.
Awww. C'mon. I rode one. Segways are really cool.
Hopefully some, but not exactly.
Apple currently has low-cost offerings....the problem is people are not dumb enough to not realize that these offerings are either last year's phone, or older.
Where Apple has the opportunity to WIN is by offering a NEW iPhone (not just last years model, or worse 2 years ago's) that comes it at the same price points, or even slightly cheaper.
As it is reported over and over again, these categories (the $0/w 2 year and $99w/ 2 year) are VERY successful for Apple. During some months of the year, they actually outsell the flagship model.
So what that means is, if Apple can make an iPhone as good as those phones, but NEW, and enter those price points...they have a big opportunity to dominate that market segment.
Apple cannot expect the flagship iPhone to be the best selling iPhone for 12 months. The market has changed. Too many other "New" phones come out during that 12 month period, and whether they are good or not...many of them are "New" and many of them are "Free" with a new 2 year.
Even though an almost 3 year old iPhone 4 may still be better than other "Free" smartphones, it makes little difference to the average buyer...who would rather have something new than something that came out in 2010.
People are dumb enough to not realize that a less expensive mobile phone ($300 off-contract, for example) are likely not nearly as capable as iPhone 4S ($549 off-contract).
Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.
- Albert Einstein
I don't see the point of a low cost iPhone; I wouldn't want to have a customer that can't afford products and services.
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…a mid-range iPhone offering from Apple could be the best way for the Cupertino company to ensure future growth.
Apple’s most important concern for the future should definitely be growth. They are not nearly big enough, nor do they make enough money.
How to differentiate between these new models? Wait the mid range will use last year's components, the low end will use two year old components and the high end will use current components.
Also the 5 is still #1.
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Originally Posted by NormM
According to today's post at Asymco.com this is BS. Dediu says that smartphone penetration is about 60% in the US (lower elsewhere) and the rate of switching to smartphones in the US is accelerating. It's currently about 583,000 per week, up from a 41 week average of 572,000.
there was a peak in early 2012 as well of people buying smartphones
point is there are less new potential customers in the US than current owners. A LOT less since not everyone without a smartphone will buy one. and most of them will go low end
http://www.asymco.com/2013/07/17/everybody-has-got-a-smartphone/
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Originally Posted by PBRSTREETG
I don't see the point of a low cost iPhone; I wouldn't want to have a customer that can't afford products and services.
I would buy a $300-ish iphone for my 12,14 yr old kids. It's important for me to be off contract. No way in hell am I giving them a $600 phone each. As far as apple is concerned, that's 2 more numbers in their system, buying occasional music and apps. As presents (xmas/bday) my kids mostly ask for music, I'd say they spend a couple hundred bucks each a year on music. Then there's the ripple effect, next they want iPads and iMacs etc.
This is a huge market potential for Apple IMO.
i read it, but every device sold in the past disagrees with his assessment
phase 1 is the early adopters willing to spend $$$. high profits
phase 2 is the mass market. lots of money but lowered margins.
phase 3 is past the 50% market saturation. the last to adopt almost always goes for the cheapest option. partly because the cheapest option by this time is more than good enough for most customers. and any smart company will have identified the high profit buyers by this time and found ways to sell to them. see how AT&T and other carriers are offering programs to upgrade every year or twice a year.
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Originally Posted by PBRSTREETG
I don't see the point of a low cost iPhone; I wouldn't want to have a customer that can't afford products and services.
What with the $1000 apps
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Originally Posted by jungmark
How to differentiate between these new models? Wait the mid range will use last year's components, the low end will use two year old components and the high end will use current components.
Also the 5 is still #1.
You guys crack me up. You invent strawmen to argue against. A cheaper phone doesnt have to have last years or the year before's cpu - it could just have a cheaper, lower clocked CPU, a cheaper GPU, etc. Like in the PC world.
One important detail in the older iPhone discussion is that they run the latest iOS6, although th H/W is missing for some features.
Even if they only ran iOS5 I doubt it would change the sales results much. The average consumer [unfortunately] just doesn't think to that level of detail before plopping down their money.Well even if they launch their new iPhone this fall I still think that Apple will do great in sales no matter what.