Roger Fingas
One of Apple's greater revenue threats is the increasing likelihood that iPhone owners will hold onto old models rather than spend ever-higher amounts on upgrades, according to a new analyst memo.
iPhones bought new are most likely to be kept for four years, if not longer, said Bernstein's Toni Sacconaghi. In Apple's fiscal 2019, it's estimated that just 16 percent of the iPhone install base will be replaced in some form, contributing to the analyst's projection of a 19 percent decline in annual sales. By comparison, the 2015 fiscal year saw approximately one third of the install base buy new hardware.
Compounding the issue is that as much as 32 percent of the iPhones in use may be second-hand models, and many of their buyers may simply stay in the used market when they need better specs.
"Current upgrade rates have slowed dramatically and may be lower than investors realize," Sacconaghi wrote in the note seen by Business Insider.
The trend in iPhone sales could slow the growth of Apple's burgeoning services business, he added. The company is doing well in terms of Apple Music and Apple News users, and is venturing into original video, but has traditionally tied services to its hardware platforms. Without more units there may be a cap on how far subscribers will expand, and second-hand buyers are believed to be less likely to spring for extra services.
Apple's services revenue will likely grow only 15 percent in FY2019, Sacconaghi concluded, versus over 20 percent in each of the prior three years.
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166 Comments
Could it be that the cellular companies no longer offer a discounted price for the phone? In the old days I could get a new iPhone every two years for $200. Now I have to pay full price. Makes me keep my iPhone longer. They had to see that coming?
I know I'm in that boat. I would have considered an upgrade at 3 years if prices were the same, but they aren't so I'm keeping my 6S+. Also with the news that 5g is around the corner in 2020, I might as well wait 5 years assuming it continues to run smooth.
4 years replacement cycle sounds unreasonable. People go at most 2 1/2 to 3 years most.
People upgrading has little impact on subscription services (music, video, iTunes storage, etc). Old hardware runs everything fine...
What it does impact is AR, where Apple is stuck in the chicken or the egg scenario. Apple wants it to be the next “big thing” but there is no “killer app” that makes upgrading attractive.
The threat is not to services but to hardware sales.
In app purchases were great for revenue growth, but the easy money is stifling innovation. The App Store is full of junk and copycats, Apple needs to push innovation apps/games to the forefront.
Apple probably needs lower the average cost per phone to keep customers from trying Android. If they don’t services revenue growth will suffer...
Not true IMHO. Again, it's the software that sells the hardware, not vice versa.
In my family we have four iPhones, many Macs, tv, iPads. Half of them are 4+ years old and we are happy with that.
We are still spending a lot in services – Music, Movies, software. And we will update our devices as soon as the availability – or the smoothness – of the services will require it.