iPhone’s Favorable Demand Indications
Estimating iPhone demand throughout the year has stages, with each building on the previous. The first stage is the pre-orders, in which we track two factors: intent-to-buy, along with iPhone delivery lead times. This week, we found positive indications on both of these fronts. Our iPhone intent-to-buy survey suggests greater interest in the latest iPhones, compared to a typical year. Additionally, we continue to see delivery lead times extend slightly, suggesting demand is outpacing production. Historically, this has been a positive signal for sales. We continue to estimate the company will sell 217m iPhone units in FY21 (compared to 187m in FY20) and iPhone revenue will grow 15% y/y (compared to 1% in FY20).
We surveyed a range of 478 to 961 people through a Twitter poll on October 16. The sample is likely skewed toward consumers that are more tech-savvy, which means our survey likely captured users who are: 1) more likely to upgrade when a new iPhone is launched, 2) care more about 5G speeds, and 3) have newer phones.
Question 1: Do you plan on upgrading your iPhone in the next six months?
About 45% of respondents said they plan to upgrade their iPhone in the next six months. As a point of reference, a typical upgrade cycle sees between 17%-22% of the iPhone base upgrading. We view the 45% intent-to-buy as encouraging for iPhone demand, given a tech-savvy cohort would likely see between 30%-40% upgrade intention.
Question 2: Is 5G a significant factor in your upgrade decision?
Although 5G has received the lion’s share of media attention, only 29% of respondents said 5G is a significant factor in their decision to upgrade. Factoring in that Twitter respondents likely care more about 5G speeds than the average consumer, we believe it is closer to 15%. In other words, over the next year, we don’t anticipate the average consumer to upgrade because of 5G, which is in line with our 5G thought framework. As a reminder, we believe mid-band 5G, which we consider consumer upgrade 5G because it will provide speeds about 7x faster than 4G, will be widely available in 2022.
Question 3: How old is your current iPhone?
33% of respondents said their iPhone was more than 3 years old. Recently, we wrote about an iPhone tailwind: a larger upgrade pool, aka, the number of iPhones that are three years or older. We estimate the current upgrade pool is about 400m out of just under 1B total installed iPhones (~40%). While this estimate is higher than what our survey indicates, we remain confident in it, as our Twitter sample likely skews toward users with newer iPhones.
Lead times extend
When iPhone 12 went on sale on Oct. 16, we shared our initial field notes on delivery lead times. We have continued to check Apple.com regularly for lead times, and have observed them extending. Reflecting on lead times is not a science, given we don’t know how many phones Apple is able to produce. That said, longer lead times have historically been an indicator of healthy demand and shorter lead times an indicator of softer demand.