Refurbished, high-end iPhones are suffocating the growth of cheap new Androids

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in iPhone
The fastest growing segment in global smartphones isn't Google's vision for super-cheap, simple Android phones. Instead, according to new market data, it's refurbished high-quality phones that carry a desirable brand but can be sold at a more affordable price, a segment where Apple is "leading by a significant margin."




A report by Counterpoint Research noted that "the global market for refurbished smartphones grew 13 percent year over year in 2017, reaching close to 140 million units," and contrasted this against the larger market for new smartphones, which grew by barely 3 percent during the year, or just 33.8 million units.

Apple's unit sales of new iPhones last year were flat; in the December quarter, the number sold actually slipped slightly (-1 percent), although much less than the 5 percent drop suffered by the industry at large. However, despite shipping fewer boxes, Apple actually earned 13 percent higher revenues by selling more higher-tier products, including "super premium" iPhone 8 and iPhone X models priced starting at $699 and $999, respectively.

Among Android licensees, the retracting volume of unit sales was financially disastrous because most manufacturers were already making very little to nothing selling low-end and middle-tier phones. As sales become harder to sustain, competition among poorly-differentiated, commodity Androids gets increasingly cutthroat.

This has already forced over one hundred discount phone makers out of business in China, after pushing many PC makers such as HP out of the handset business. Analysts expect a further Battle Royale to occur among commodity Android smartphone makers this year.

While cheap commodity phone makers fight over scraps, the strength of Apple's premium devices is allowing them to return to the market to compete again in a second wave, following a trend that occurred among luxury carmakers selling their certified pre-owned vehicles directly in competition with new, entry-level economy cars.

Refurbished iPhones

"The Surprising Growth of Used Smartphones"

Counterpoint's report on the refurbished phone business highlighted that "only 25 percent of all pre-owned phones are sold back into the market," and added that "of these, only some are refurbished.""The mid low-end market for new smartphones is being cannibalized by refurbished high-end phones, mostly Apple iPhones"

However, those refurbished models are having a big impact on the market. Counterpoint Research Director Tom Kang stated, "with 13 percent growth, refurbished smartphones are now close to 10 percent of the total global smartphone market."

The extended lifespan and resale cycle of existing iPhones is commonly cited as a potential threat to Apple's future sales growth. However, Kang pointed out that "the low growth of the new smartphone market in 2017 can be partially attributed to the growth of the refurb market. The slowdown in innovation has made two-year-old flagship smartphones comparable in design and features with the most recent mid-range phones.

"Therefore, the mid low-end market for new smartphones is being cannibalized by refurbished high-end phones, mostly Apple iPhones and, to a lesser extent, Samsung Galaxy smartphones."

One factor that gives Apple an advantage in selling refurbished iPhones to users who might not be able to afford a brand new one, and would otherwise likely buy a lower-priced Android, is the fact that it supports its hardware with iOS updates for four or five years, rather than less than a year or two as is common among Android makers--even including Google itself.

New iPhones also ship with fast processors and a modern, efficient iOS. Androids, particularly low-priced models, are sold with underperforming chips and often ship with old versions of an OS that is already bad at managing memory and CPU tasks.


Android's resale potential is hurt by its poor performance even when brand new

Faster segment growth than India, and "Apple leads by a significant margin"

Counterpoint stated that Apple and Samsung's dominance "is more obvious in the refurb market than in the new smartphone market," noting that the two companies account for "close to three-fourths of the refurbished smartphone market [by unit volume], with Apple leading by a significant margin." "It's a surprise to many that the fastest growing smartphone market in 2017 was not India or any other emerging market, but the refurb market"

By revenue, "the dominance grows further, as the two smartphone giants control more than 80 percent of the revenue in the refurbished smartphone market."

The firm's Research Director Peter Richardson stated, "it's a surprise to many that the fastest growing smartphone market in 2017 was not India or any other emerging market, but the refurb market. With refurb smartphones in play we think the market for new devices will slow further in 2018."

Richardson added, "regions seeing the highest volume include the US and Europe, while the fastest growing markets for refurbs include Africa, SE Asia and India. All have been seeing initiatives from the major operators (e.g. Verizon, Vodafone etc.), OEMs (e.g. Apple) and major distributors (e.g. Brightstar) who are adding full life-cycle services.

"The industry uses data analysis to predict future resale values of devices, which means consumers can be given a guaranteed buy-back value at various points during their ownership. This helps consumers to manage the high cost of the latest flagship smartphones - or at least to obtain a useful contribution to partially offset the cost of their next phone."
tmay
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Comments

  • Reply 1 of 68
    entropysentropys Posts: 924member
    Seeing as android makers regularly discount, why get a refurb?
    muthuk_vanalingamBubbaTwo
  • Reply 2 of 68
    entropys said:
    Seeing as android makers regularly discount, why get a refurb?
    Seems to me that D.E.D. already answered that question.

    -MAS 
    chabigairnerdjbdragonmacseekermagman1979watto_cobra
  • Reply 3 of 68
    adm1adm1 Posts: 715member
    It's a booming market alright, the only drawback I've seen is a reduction in resale prices of 2nd hand iPhones. When the 8 was released, the 6S model was trading privately for around £200 - people are still asking for this today. Just checking MusicMagpie for example; I can buy a refurbished 6S 16GB for just £129 with 12months warranty.

    Edit* - it's actually just £124 with cashback offer and a refurbished iPhone SE 16gb (with 12month warranty again) is just £94 on the same offer. madness
    edited March 14
  • Reply 4 of 68
    NatkoNatko Posts: 1unconfirmed, member
    Few days before successor announcement, I sold my Galaxy S8 for financial reasons, and bought 128GB iPhone 7. If someone told me I would be this satisfied and happy, I probably wouldn’t belive it!😉 But it is running great! I was using iPhones up until the SE before making a switch. Glad to be back and bezels seem overrated now, I don’t see them at all after Galaxy belive it or not!😊
    Bottom line, not suprised by this news.😉
    willcropointAirunJaeairnerdtmayjbdragonjahblademagman1979watto_cobrakudu
  • Reply 5 of 68
    brakkenbrakken Posts: 654member
    Once again, Dilger hits the nail on the head. Apple has long been 'recommended' to move into the lower markets, long before it even began selling iPhone. Apple only works on profitability, and it seems to me that refurbs are Apple's way of moving mid-teir. Selling last year's model for a small discount was the best way to move downward, but to also keep the customer base growing. But Apple's most significant business solution to a saturated market, I reckon, is the huge investments Apple's made in Services. Whereever or whenever what ever model iPhone is bought, the App Store, iTunes etc etc all provide a revenue stream back into Apple. Apple has done fantastically well to not only plan all this out, but to execute the plan extremely well. I can not see any competitor arising for Apple within the next ten years.
    airnerdtmayjbdragonlkrupppatchythepiratemagman1979watto_cobraradarthekatbaconstanggregg thurman
  • Reply 6 of 68
    GG1GG1 Posts: 153member
    I don't upgrade my iPhones too often, but when I do, I either sell or give away my old ones to people new to iPhones (there is one less Android owner and one less Blackberry owner out there).

    Apple may disappoint analysts with very slightly less sales volume year-on-year (negligible, IMO), but the pool of perfectly usable second-hand iPhones in-use must be growing substantially, posing a big threat to new Android sales. This article is spot-on.
    airnerdracerhomie3jahbladewatto_cobragregg thurman
  • Reply 7 of 68
    This is why you buy into the Apple ecosystem, new products retain their value over the long term. I was astonished at the prices on eBay when I sold my beat up, 3 year old iPhone 5s for $300. That was exactly what I paid for an original 2 year subsidized contract on my 5s, hey free iPhone for the last 2 years! This is the Apple advantage, lower Total Cost of Ownership. These previous-generation Apple products still outperform many new Android products. That's why the market for used iPhones is so hot. 
    AirunJaeairnerdtmayjbdragonracerhomie3jahblademagman1979watto_cobra
  • Reply 8 of 68
    LatkoLatko Posts: 75member
    So great for Craigslist. And indirectly, to flatten Apple's supercycle ( which was a fairly ludicrous idea anyway...)
  • Reply 9 of 68
    airnerdairnerd Posts: 486member
    entropys said:
    Seeing as android makers regularly discount, why get a refurb?
    IMO, because the refurbished Apple phone will still be supported and will work for many years to come.  Android may decide to just stop supporting that device.  
    Martin57racerhomie3jahblademagman1979watto_cobrabaconstang
  • Reply 10 of 68
    airnerdairnerd Posts: 486member
    GG1 said:
    I don't upgrade my iPhones too often, but when I do, I either sell or give away my old ones to people new to iPhones (there is one less Android owner and one less Blackberry owner out there).

    Apple may disappoint analysts with very slightly less sales volume year-on-year (negligible, IMO), but the pool of perfectly usable second-hand iPhones in-use must be growing substantially, posing a big threat to new Android sales. This article is spot-on.
    If Apple would only allow me to buy actual Apple hardware for my phones I could keep them going even longer.  I don't have the time or desire to make the 45 minute trek to the Southlake TX store only to stand in line to hand over my phone for them to spend however long it takes.  That can take up an entire Saturday.  Whereas I could replace my own screen with a legit one or pay a local authorized dealer (none in my town) for a quicker service.  So instead I bought an aftermarket that is polarized wrong and scratches if the sun hits it wrong.  I would feel bad even giving this one away when it is time to upgrade because the screen fits so poorly and looks so bad.  
    watto_cobra
  • Reply 11 of 68
    avon b7avon b7 Posts: 1,997member
    In absolute terms:

    2017 total smartphone unit  sales: 1550 million

    2017 total refurbished smartphone unit sales: 140 million

    Am I reading the numbers right?
    BubbaTwo
  • Reply 12 of 68
    deminsddeminsd Posts: 22member
    The article seems (as usual) extremely biased against Android and for Apple.  Since you can buy $50 Android phones, of course performance issues will be higher than a $600 iPhone. I'm pretty sure if there was a $199 iPhone, it would suck, performance wise, on iOS 11 also.

    And, $50 savings on an iPhone refurb?  I'll take NEW for that extra $50, thank you.  Who would buy a refurb just to save $50?
    BubbaTwo
  • Reply 13 of 68
    GG1 said:
    I don't upgrade my iPhones too often, but when I do, I either sell or give away my old ones to people new to iPhones (there is one less Android owner and one less Blackberry owner out there).

    Apple may disappoint analysts with very slightly less sales volume year-on-year (negligible, IMO), but the pool of perfectly usable second-hand iPhones in-use must be growing substantially, posing a big threat to new Android sales. This article is spot-on.
    This is an often overlooked point. iPhones function longer, stay in active use longer (don’t end up collecting dust in a drawer), have higher resale value, and trickle down to more price sensitive consumers or those who see little value in technology (think grandma).

    My wife and I upgrade every year or two and always give away our iPhones. We used to give them away to family, however all of them now either have a functioning iPhone from us or are now upgrading to newer iPhones on their own accord. The vast majority of these iPhones replaced their junk Android phone they first got sold on from their carrier. Now we have run out of family so we have started giving them away to close friends. Not sure what to do when we runout of friends. Once these out live their use as smartphones (too old or battery no longer holds a charge) they almost always end up repurposed in a dock as a music player or other such scenario where they are always plugged in. This represents a lot of people being indoctrinated into the Apple ecosystem even if this would not have been their choice due to: cost concerns, ignorance of the experience differential, believing technology to be too difficult to use. I think once the smartphone market stops growing Apples going to be just fine, Android not so much.
    edited March 14 tmayracerhomie3watto_cobrabaconstanggregg thurman
  • Reply 14 of 68
    tmaytmay Posts: 2,489member
    GG1 said:
    I don't upgrade my iPhones too often, but when I do, I either sell or give away my old ones to people new to iPhones (there is one less Android owner and one less Blackberry owner out there).

    Apple may disappoint analysts with very slightly less sales volume year-on-year (negligible, IMO), but the pool of perfectly usable second-hand iPhones in-use must be growing substantially, posing a big threat to new Android sales. This article is spot-on.
    With Apple providing a low cost battery replacement for a limited time to various models, we should expect to see an increase to average iPhone life in the next year, likely beyond 4 years, adding to the new, used and refurbished iPhones in the market.

    Apple's iPhone user base appears to have gained a growth spurt that will lead to sustained sales in this mature market. Yet more revenue and profit share for you, Apple!
    watto_cobra
  • Reply 15 of 68
    wood1208wood1208 Posts: 1,356member
    Refurbished iPhones have created sweet spot for many,many individuals and families, who want to switch to iPhone but can't afford or needs instant phone replacement because the current iPhone somehow not functioning but not eligible yet to upgrade..But,but with Carrier's BOGO deal, I would buy new iPhones because unfortunately used/refurbished iPhones retain there value so the cost of buying new iPhones on BOGO is lower than refurbished iPhones. Though, refurbished iPhones help expand Apple's eco-system but doesn't add to earning bottom line that much becaue those used/refurbished iPhones are circulating within user base. Though indirect benefit is once you are in Apple's echo-system, either you will stay and someday buy new products or if you leave than will return back in future.
    edited March 14
  • Reply 16 of 68
    deminsd said:
    The article seems (as usual) extremely biased against Android and for Apple.  Since you can buy $50 Android phones, of course performance issues will be higher than a $600 iPhone. I'm pretty sure if there was a $199 iPhone, it would suck, performance wise, on iOS 11 also.

    And, $50 savings on an iPhone refurb?  I'll take NEW for that extra $50, thank you.  Who would buy a refurb just to save $50?
    Spoken like a person who never ponied up the cash for an iPhone (educated guess). Yes you can get a new Android for $50, but your getting very subpar experience even if it is running a two year old paired down OS, so the hardware is capable of running it. Working in such an environment causes many adverse effects and unintended consequences (is a consequence really unintended if those designing and selling it know in advance and simply don’t care?). These effects are numerous and also don’t lend to a succinct explanation so I’ll spare you, however I would use this, albeit not perfect, anology. Would you rather have a new Kia/Chevy or a year old Mercedes/Toyota.
    Martin57watto_cobra
  • Reply 17 of 68
    deminsd said:
    The article seems (as usual) extremely biased against Android and for Apple.  Since you can buy $50 Android phones, of course performance issues will be higher than a $600 iPhone. I'm pretty sure if there was a $199 iPhone, it would suck, performance wise, on iOS 11 also.

    And, $50 savings on an iPhone refurb?  I'll take NEW for that extra $50, thank you.  Who would buy a refurb just to save $50?
    Dude .
    I still have an iPhone 4 .It is from 2010.
    it still feels faster than a lot of cheap Android phones from today.Good products remain good. Even $700 Galaxys slow down terribly after 2-3 years.The actual culprit is Android.
    edited March 14 jahbladewatto_cobrabaconstang
  • Reply 18 of 68
    steven n.steven n. Posts: 993member
    deminsd said:
    The article seems (as usual) extremely biased against Android and for Apple.  Since you can buy $50 Android phones, of course performance issues will be higher than a $600 iPhone. I'm pretty sure if there was a $199 iPhone, it would suck, performance wise, on iOS 11 also.

    And, $50 savings on an iPhone refurb?  I'll take NEW for that extra $50, thank you.  Who would buy a refurb just to save $50?
    Because you can get a good used iPhone from many places other than Apple? As usual, it seems some posters are unable to actually use the internet and think. For example, these are from Glyde:

    iPhone 7: $332
    iPhone 6S: $179
    iPhone 5S: $81

    All of these will run better, work better, and be supported longer than a $300 Android.
    racerhomie3watto_cobrabaconstang
  • Reply 19 of 68
    Yes .
    Daniel is spot on.
    I got my iPhone 2G in 2009 this way.I was in love. All Androids ,including high end ones felt like trash from then. Then I got the 3G in 2011. The build quality felt worse. Then I got the 4 ,in 2014 .Then was the 6 Plus in 2016. Then finally in December 2017 , I finally got a new 32GB iPhone SE.Then I got the AirPods. I have been really satisfied over the years.
    edited March 14 radarthekatwatto_cobra
  • Reply 20 of 68
    deminsd said:
    The article seems (as usual) extremely biased against Android and for Apple.  Since you can buy $50 Android phones, of course performance issues will be higher than a $600 iPhone. I'm pretty sure if there was a $199 iPhone, it would suck, performance wise, on iOS 11 also.

    And, $50 savings on an iPhone refurb?  I'll take NEW for that extra $50, thank you.  Who would buy a refurb just to save $50?
    Spoken like a person who never ponied up the cash for an iPhone (educated guess). Yes you can get a new Android for $50, but your getting very subpar experience even if it is running a two year old paired down OS, so the hardware is capable of running it. Working in such an environment causes many adverse effects and unintended consequences (is a consequence really unintended if those designing and selling it know in advance and simply don’t care?). These effects are numerous and also don’t lend to a succinct explanation so I’ll spare you, however I would use this, albeit not perfect, anology. Would you rather have a new Kia/Chevy or a year old Mercedes/Toyota.
    Most Kia/Chevy users would probably prefer a Mercedes/Lexus.  However, most Kia/Chevy users can't afford a Mercedes/Lexus and/or they view their car as transportation first and foremost and don't see it as part of their identity nor feel paying the premium price for premium features justifies the purchase.

    Same goes for Smartphones...

    Oh and most Kia/Chevy drivers don't read high end automotive magazines/blogs just as MOST smartphone owners never read a tech blog.

    It would be interesting to read the responses if DED wrote this for an Android blog or a General tech blog versus an Apple blog!
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