Our recent intent to upgrade iPhone survey suggests the following:
- 22% of current iPhone users intend to buy the newest model that is yet to be announced. This compares to 23% a year ago (iPhone X) and 15% two years ago (iPhone7).
- The iPhone business is settling into a lower growth, more predictable rhythm.
- The mix of iPhones in the next year will remain consistent with the latest model accounting for about half of new unit sales. This is in line with our model.
- This does not rule out a supercycle in FY19 given this survey was conducted before widespread rumors of a larger iPhone this fall.
Methodology. We surveyed 511 people in the US regarding their intent to upgrade to a new iPhone in the next year. Among the 226 iPhone users we surveyed, 22% of them intend to upgrade to the new iPhone to be released this fall. While we don’t have a comparative number from last year, an additional 20% intend to upgrade to either an iPhone 8 or X in the next year.
Lower growth, more predictable iPhone demand. Looking at the data over the past two years suggests annual iPhone growth will settle into a more predictable 1-5% range. The good news is a more predictable iPhone growth, albeit at a lower rate, should be a positive for AAPL’s multiple. We expect investors will increasingly view the iPhone hardware business as a subscription business, given the upgrade patterns are becoming more predictable. This is also consistent with current Street expectations of 4% iPhone unit growth in FY18 and 2% in FY19.
We’re not ruling out a supercycle in FY19. Our survey did not capture the latest rumors of an iPhone that is likely 25% bigger than the iPhone X. Typically, measurable increases in the screen size (above 10%) have a positive impact on iPhone growth. We would expect to see an uptick in intent to buy as these larger screen iPhone rumors become more mainstream. We’re taking a conservative approach to our model, and expecting 3% iPhone growth in FY19 compared to 7% in FY18. We would define a supercycle as greater than 10% annual iPhone growth.
Below is the breakdown of which iPhone current users intend to upgrade to. Of the 226 iPhone users surveyed, a total of 42% (96 people) intend to upgrade in the next year.
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