Kantar: Apple’s iPhone replacement opportunity is far from over

“Nearly one-third of both US and urban Chinese iPhone users still own models that are at least two years old,” Carolina Milanesi reports for Kantar Worldpanel.

“The iPhone 6 and the iPhone 6 Plus have so far combined to make up 24% of all iPhones in use in both the US and China, Apple’s two most important markets. These numbers only confirm how strong the demand for these two products has been. When we look at how their predecessors fared, though, we see that the iPhone 5s and 5c performed in a similarly robust way in the US, but not in China. In the US, the iPhone 5s and 5c reached 29% market share over the same period of time in 2014. But in China, the strong market preference for larger-screen devices is made clear by the fact that the iPhone 5s and iPhone 5c together reached just 12% of the installed base over the same time period,” Milanesi reports. “Because of the strong demand for the iPhone 6 and 6 Plus, several industry and financial observers have painted a somewhat gloomy picture for Apple’s opportunity in 2016. Once we dig into the numbers, however, the future looks far less bleak. Let’s take a look at these two most critical markets for Apple –the US and China – in more detail.”

US

“The average US smartphone user keeps their device for about 22 months before replacing it with a newer model,” Milanesi reports. “The longest replacement cycles belong to Blackberry (32 months), while the shortest belong to Nokia/Microsoft Lumia (16 months). Apple’s average replacement cycle is 25 months.”

“Since September 2014, 32% of US iPhone owners have replaced their devices. Among those users, 47% replaced their phones with an iPhone 6, and 16% with a 6 Plus,” Milanesi reports. “In comparing the similar period one year ago, from September 2013 to July 2014, we see that only 22% of iPhone users upgraded their devices. Of those who did, 44% upgraded to the 5s, and 17% to the 5c.”

Apple's 4.7-inch iPhone 6 and 5.5-inch iPhone 6 Plus
Apple’s 4.7-inch iPhone 6 and 5.5-inch iPhone 6 Plus

 
Milanesi reports, “This data suggests Apple has ample opportunity for upgrades in 4Q15 and 2016. As in the previous year, upgrades will come not only from the new iPhone models, but from the current iPhone 6 and 6 Plus, which should experience the drop in price we have seen in previous years for retiring flagship devices. In the US, 32% of iPhone 5s sales were generated after the launch of the iPhone 6 and, in the three months ending in July 2015, the iPhone 5s was still the fourth best-selling smartphone in the US.”

Urban China

“The average lifespan of a smartphone in urban China is a little shorter than in the US, about 20 months,” Milanesi reports. “The longest replacement cycles belong to Nokia (39 months) and the shortest to Xiaomi (12 months). Apple’s average replacement cycle in urban China is 19 months.”

“Since September 2014, 18% of iPhone owners in urban China upgraded their devices. Among all the iPhone upgrades, 29% switched to the iPhone 6, and 24% to iPhone 6 Plus,” Milanesi reports. “If we compare these numbers to the period of September 2013 to July 2014, we see that only 12% of users upgraded their iPhones. Of those who did, 32% acquired an iPhone 5s, and 5% acquired an iPhone 5c.”

“As mentioned above, it is evident that screen size has far greater influence on smartphone purchasing decisions in China than in the US. We expect the success of the iPhone 6 and 6 Plus to not only continue, but to accelerate as prices drop. For reference, it is interesting to note that 36% of total iPhone 5s sales in urban China were made after September 2014,” Milanesi reports. “With 31% of existing US iPhone users and 32% of urban Chinese users acquiring their devices more than 24 months ago, Apple’s iPhone replacement opportunity is certainly in no immediate danger.”

Source: Kantar Worldpanel

MacDailyNews Take: This thing is just getting started!

7 Comments

  1. Funny, all the anal-cysts think Apple is toast with no more future sales prospects nor market share inroads to be had. They wouldn’t be lying like scheming dirty dogs about such a thing, now would they? Or as Analyst Chicken Little might say “The sky is falling – oh wait…” “The sky is falling – oh wait…” “The sky is falling – oh wait…” “The sky is falling – oh wait…” “The sky is falling – oh wait…” ad infinitum.

    1. We already know what investors believe and that’s why Apple share price is crap. With Apple, it’s easier to convince investors that there’s little future in iPhone growth. They’re not going to believe what Tim Cook says. There has to be some flaw in Apple’s business model based on the fact that Apple has low institutional ownership compared to its peers. It wouldn’t make any sense otherwise. Just one look at Google’s, Amazon’s, or Microsoft’s institutional ownership percentage says there’s something wrong with Apple as an investment. Lack of confidence in products or management would seem to be the cause, otherwise, Apple wouldn’t be constantly seen as a doomed company.

      It’s obvious Apple is seen as a higher risk than most companies or the institutions would be piling in and Apple would have ownership in the high 70% range. Even a sick little company like Hewlett-Packard has 70% institutional ownership. Not going to happen with Apple. 61% or so is as high as it goes. Apple has surely messed up somewhere with its business but where I can’t tell. I only surmise if the big investors see the sky is falling for Apple, there must be something behind it. Right or wrong?

      1. You make some very common sense observations. Perception means a lot when selling a product. Apple has no one fronting their products as they have had in the past. They need someone. Steve Jobs is no option but Tim Cook and his associates are just not the answer. They may be running the company perfectly, and I believe they are very close, but they are not the face of Apple. And Apple needs someone desperately. Along with better ads. Their ads are boring for the most part. I think your take on the situation with AAPL is spot on. Great company. Great products. Poor representation as seen by the public. And it has been obvious for sometime now. Great companies can see their shortcomings and weaknesses and fix them. Apple has not done this. And it shows.

  2. I threw the average out of whack, that’s for sure. I skipped the 5s (I wasn’t due) and the 6 (I was eligible). So, I’ll be approaching 36 months with my iPhone 5 before I upgrade in the next month or so. I used to upgrade every two years and give my wife my old one, but I didn’t feel the need this time around.

    I think part of the problem is that the iPhone – even the older models – keep working really well as they age. I’ve had a few issues with mine, but other than those minor issues, I didn’t feel like I HAD to upgrade, and to be honest, still don’t. I just want to.

  3. I got the 5S in Oct. 2013 and will be getting the new one – whatever it’s called – as soon as I can. Planning on getting it unlocked and leaning towards the biggest one. See what Wednesday brings.

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