22 percent of iPhone owners intend to upgrade to new model in 2018, survey suggests
A new survey from Loup Ventures finds Apple iPhone users are falling into a predictable upgrade cycle, with 22 percent of current owners planning to purchase a next-generation version of the handset this year.
According to analyst Gene Munster, survey responses suggest Apple's iPhone business is trending toward lower growth, but higher predictability.
In its survey of 511 people, Loup Ventures found 226 iPhone owners, of which 22 percent are looking to upgrade to a new iPhone model expected for release this fall. The numbers compare to 23 percent last year, when Apple was widely rumored to launch iPhone X, and 15 percent two years ago with iPhone 7.
In addition to the 22 percent who intend to buy Apple's latest iPhone model, another 20 percent expect to upgrade to an iPhone 8 or iPhone X within the next year, bringing the total share of potential upgraders up to 42 percent.
Reviewing data over the past two years, Munster concludes iPhone growth will soon settle into a predictable pattern, rising between 1 to 5 percent annually.
"We expect investors will increasingly view the iPhone hardware business as a subscription business, given the upgrade patterns are becoming more predictable," Munster writes. "This is also consistent with current Street expectations of 4 percent iPhone unit growth in FY18 and 2 percent in FY19."
That said, the survey "did not capture" recent rumors of a jumbo-sized "iPhone X Plus," which is anticipated to launch alongside a revamped iPhone X and a lower priced LCD variant. Rumblings of the 6.5-inch OLED iPhone first surfaced last September, with more recent reports claiming the device will pack an edge-to-edge screen, TrueDepth camera system, "A12" processor and potentially dual SIM slots into a chassis similar in size to an iPhone 8 Plus.
Munster notes screen size bumps generally equate to an uptick in intent to buy, though "iPhone X Plus" rumors have yet to make mainstream news. While a so-called iPhone "supercycle" is not out of the question, for now the firm is sticking with a conservative outlook of 3 percent iPhone growth for fiscal 2019, down from 7 percent in 2018.
According to analyst Gene Munster, survey responses suggest Apple's iPhone business is trending toward lower growth, but higher predictability.
In its survey of 511 people, Loup Ventures found 226 iPhone owners, of which 22 percent are looking to upgrade to a new iPhone model expected for release this fall. The numbers compare to 23 percent last year, when Apple was widely rumored to launch iPhone X, and 15 percent two years ago with iPhone 7.
In addition to the 22 percent who intend to buy Apple's latest iPhone model, another 20 percent expect to upgrade to an iPhone 8 or iPhone X within the next year, bringing the total share of potential upgraders up to 42 percent.
Reviewing data over the past two years, Munster concludes iPhone growth will soon settle into a predictable pattern, rising between 1 to 5 percent annually.
"We expect investors will increasingly view the iPhone hardware business as a subscription business, given the upgrade patterns are becoming more predictable," Munster writes. "This is also consistent with current Street expectations of 4 percent iPhone unit growth in FY18 and 2 percent in FY19."
That said, the survey "did not capture" recent rumors of a jumbo-sized "iPhone X Plus," which is anticipated to launch alongside a revamped iPhone X and a lower priced LCD variant. Rumblings of the 6.5-inch OLED iPhone first surfaced last September, with more recent reports claiming the device will pack an edge-to-edge screen, TrueDepth camera system, "A12" processor and potentially dual SIM slots into a chassis similar in size to an iPhone 8 Plus.
Munster notes screen size bumps generally equate to an uptick in intent to buy, though "iPhone X Plus" rumors have yet to make mainstream news. While a so-called iPhone "supercycle" is not out of the question, for now the firm is sticking with a conservative outlook of 3 percent iPhone growth for fiscal 2019, down from 7 percent in 2018.
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Here's p.1 excerpt of similarly bullish Bank of America Merrill Lynch report by Wamsi Mohan, who kept his $220 price target (italicized emphasis added):
"Apple expanded the breadth of its iPhone product line last September when it decided to retain the iPhone 6S/6S Plus along with the iPhone 7, lowering price of each model by $100. Market share data indicates that Apple’s global smartphone share grew to 19.3% in C4Q17, vs. 17.8% in C4Q16, and 14.4% in C1Q17. As Fig 1 shows, Apple’s decision to keep two prior generations of phones (vs. one prior as in previous cycles) and to lower prices gave consumers more choice of higher capability phones at lower price bands. iPhone’s share grew significantly in 2H17 in both the $500-599 and $600+ price bands. While Apple’s share had declined in all price bands in the premium (>US$300) category in C1Q-2Q, in our opinion, the lower average sell price (ASP) of the iPhones 6S/6S Plus and 7/7 Plus helped regain share, along with launch of the new phones X/8/8+. Apple had 64% share of the premium segment in C4Q and while we see potential for further share gain in the lower price bands, the rich feature set of the high end iPhones could be causing consumers to self-select into the higher price bands (Fig 2). Reiterate Buy.
Should Apple lower prices for new iPhones in 2018?
We expect three new iPhones to be announced in the fall of 2018: larger 6.5” OLED, 5.8” OLED successor of iPhone X, and a third phone with LCD screen. We expect Apple to maintain or raise price for “iPhone X Plus” by $50 ($1149-$1199) but drop the price for “iPhone XS” by up to $100 to further broaden the spectrum of ASPs within the premium segment. Apple also has room to gain share in the $300-499 range (Fig 4) and a stronger line-up in those bands (possibly with an SE refresh) could help. While one can argue that availability of “good enough” iPhones at lower price points can cannibalize sales of high end phones, purchasing behavior has driven continued strength at the high end of the portfolio which is driving share growth in the $600+ category (Fig 7).
iOS gains revenue share lead on iPhone ASP growth
In C4Q17 (Fig 10), Apple iOS had higher global rev share compared to Android (51% vs. 49%). This is remarkable since a lot more units of Android phones are sold compared to iPhones (in C4Q17 77.3mn iPhones, vs. 323.3mn Android phones). The reason is the significant growth in blended iPhone ASP (Fig 11). "
edit: BAML report is dated 02MAR2018
My 32 gig AT&T iPhone 4, after having that for over 4 years, I ended up selling it to T-Mobile for $202. What a deal considering I would have only gotten $50 for it selling it to someone at work. So that's my plan. But until I see this new iPhone XI, I don't know for sure 100%. maybe I hold out and go 5 years?!?! I'd have to be really disappointed with the new iPhone to not upgrade after 4 years.
The current average iPhone age is just under 4 years from what I read recently, and the user base is still growing.
The reason so many people did not upgrade to the iPhone X is that it is too small. it essentially was the size of the iPhone 6 when many prefer the size of the iPhone 6 PLUS.
Assuming a random sample, which this does not claim to be, we can be 95% sure that 15%-29% of iPhone users plan to upgrade to a newly released model i.e., 22% plus or minus 7%.
If dropping the Floppy Drive, the CD/ DVD Drive, FireWire, the 30 Pin Connector, etc., are any indication, then tough luck for the people who do not want to move away from TouchID.
The fact is that, if Apple feel FaceID is the way forward, they are going to stick to it.
Apple has pretty much settled into 225 million iPhones sold per year which is right around 25% of the total iPhone user base. Unless the LCD model has absolutely outstanding sales rivaling the supercycle of the iPhone 6, it would appear that 25% annual upgrades is going to be the norm with many of the older devices either getting sold or passed down to children/relatives.