Is The Strong Sales of iPhone 7 A Bad News For Apple?

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We are quickly approaching that time of the year when we are bombarded by a slew of high-end smartphone launches. Premier of those is the annual launch of a next generation iPhone. The upcoming launch of the successors of iPhone 7, purportedly being called iPhone 7s, iPhone 7s Plus and the mysterious “iPhone 8”, are vital for Apple Inc. (NASDAQ:AAPL) for a variety of reasons, many of which outlined in an article not too long ago. However, let’s put all the hype and the industry as well as consumer expectations from the iPhone 8 aside for a moment. A recent report from Consumer Intelligence Research Partners has some good news for Apple, and it is regarding its current generation iPhone lineup. But, there is a flip side of it as well.

Let us dive into the report and analyze what this new development may mean for Apple and the smartphone industry’s short term future.

The iPhone 7/7 Plus: The Most Popular iPhone In The US

According to estimates, there are now around 48 million iPhone 7/7 Plus models in circulation across the US. This means over 34% of the 141 million iPhones in circulation in the US belong to the latest generation. This also means that the iPhone 7 lineup has now pipped the iPhone 6s and iPhone 6s Plus as the most popular iPhone in the US. Despite this, the iPhone 6s/6s Plus models still account for 39 million, or 27.7% of iPhones in circulation. This has been coming for a while, as the iPhone 7 and iPhone 7 Plus were also the most popular smartphones in Q1 2017 across the world.

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And it’s not like legacy models of the iPhone is suffering either; the overall US iPhone install base has also risen from 124 million in June 2016 to 141 million now. This represents a YoY growth of 13.71%.

The iPhone SE has also experienced a slight gain in popularity. It has now an install base of 6% across the US. It seems that this number could yet jump higher in the future, as Apple continues to back the small form factor device. According to some reports, Apple may refresh the iPhone SE with the newer A10 chip, which is the same one used in the newer iPhone 7.

This new development coincided with Apple’s excellent fiscal Q3 2017, which saw Apple posting positive results across its products and services spectrum. This is especially significant, as this uptick came after a rather disappointing fiscal Q2, which was attributed to anticipation for the iPhone 8.

The Flip Side of the Strong iPhone 7 Sales

The fiscal Q3 2017 was good for Apple. Sales and revenues increased across the board, with booming growth in their services business. The newer generation iPhones are also selling well in key markets such as the US. Everything seems to be on the right track for Apple. However, there is one troubling issue that might not bode well for Apple’s future aspirations, especially regarding the iPhone 8.

While strong iPhone 7 sales may be good for Apple in the short term, it may actually end up harming them in the long run. There has been a lot of talk over the past few months about a so called “iPhone super-cycle”. According to many analysts, the iPhone 8 will spur a massive and unprecedented upgrade cycle. In fact, many believe that it will be the single biggest upgrade cycle in iPhone history, beating out even the revolutionary iPhone 6. However, the key to this “supercycle” is a legacy user base upgrading to the newer iPhone lineup.

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Smartphone shipments have been approaching a ceiling for the past few years. Hardware sales have been slowing down, especially in elite markets such as the US and Europe due to increasing smartphone penetration. On the other hand, Apple can not count on emerging markets to drive record breaking sales due to their limited influence in these regions. Therefore, Apple is counting on existing legacy users of older iPhones such as the iPhone 5/5s and iPhone 6 in the US and Europe to upgrade and make the iPhone 8 an unprecedented success.

Here in lies the problem; if more and more users upgrade to the iPhone 7, they are much less likely to upgrade to the iPhone 8 when it comes out. Given its sky high price tag, many existing iPhone 7 and iPhone 7 Plus may consider it unnecessary to upgrade so soon. Although the data is only talking about US sales, it remains extremely pertinent considering the importance of the US market for Apple. This would mean that the much hyped super cycle would be at risk of breaking down, something which is already being predicted by some other analysts.

Takeaways

  • The iPhone 7 and 7 Plus is now the most popular iPhone in the US. This demonstrates that even anticipation for the iPhone 8 cannot diminish the popularity of Apple’s current lineup.
  • Strong iPhone 7 sales may be bad news for Apple, as it may reduce the potential consumer base of the iPhone 8.
  • Despite its recent struggles in China, Apple’s position in the US remains strong, and will only get better in the near future.

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