Will Apple's iPhone 12 generate an upgrade 'supercycle'?

...Or will simply maintaining current levels of demand represent success in the current climate?

Apple, iPhone, iOS, iPhone SE, iPhone 12
Willis Lai/IDG

Apple is expected to introduce four models in its 2020 5G iPhone 12 range, equipped with three different display sizes; these may be the most significant releases since iPhone 6, one analyst claims.

The upgrade opportunity?

Wedbush analyst Daniel Ives continues to claim the installed base of iPhone users are ripe for upgrades:

“350 million of 950 million iPhones worldwide are in an upgrade opportunity. I view iPhone 12 as a once-in-a-generation opportunity in terms of the upgrade cycle,” he told CNBC.

We’ve heard analysts say stuff like this before, of course. Both positive and negative predictions tend to emerge just before iPhone launches every year, though economists and analysts are particularly keen for positive economic news this time around as the pandemic continues its bite.

The difference this year is that Apple has reconfigured the iPhone range to reach a much broader range of potential buyers, with products straddling the market, from its traditional high-end models to more affordable mid-range devices.

A strategy for its time

The success of this strategy has already seen tens of millions of customers upgrade to an iPhone SE. A recent CIRP report claimed it now accounts for 19% of U.S. smartphone sales.

“Every few years Apple comes out with a new low-priced iPhone, with up-to-date features, to sweep up the customers using the oldest iPhones,” said CIRP’s Mike Levin.

While Apple’s decision to widen the market surely predates the COVID-19 pandemic, the decision has enabled it to maintain a presence in a rapidly transforming economic reality.

Apple’s efforts to build a strong services business also supports the strategy, enhancing lifetime per-user revenue.

I wouldn’t be terribly surprised to see the company continue to offer free access to Apple TV+ content to new iPhone purchasers this year. It will, after all, hope to also convince its customers to try and buy its other services, and will be pushing hard on its Apple One subscription packages.

It doesn’t matter whether devices ship later than usual

Apple has already warned us that it will introduce its new iPhones in a slightly different way than before (later), which suggests the release may be staggered over time.

Taiwanese suppliers, for example, report that they have yet to boost production of components for next-generation iPhones, which syncs up with that notion.

When it comes to the phones, new 5G support, improved (120Hz on the Pro?) displays, enhanced photography features and insanely fast processors will certainly boost interest at the high-end.

The company is also expected to introduce new AirPods Pro, a thinner Apple Watch and the first Apple Silicon-powered MacBook at this time – all of which will spice up interest in what the company is doing.

When is a supercycle super?

When the new iPhones arrive, Apple may reduce prices on all its existing devices.

The company hasn’t said anything about this, but I've seen some speculation it may drop the price of the iPhone SE to $349 and offer up iPhone 12 devices beginning  around $699. There's no guarantee these price predictions will prove accurate, however.

So interest will be high. Will they generate a supercycle?

That’s open to question, but the true stakes are visible in a recent Gartner report, which shows that while every smartphone vendor saw unit sales shrink this year, Apple’s own have held steady:

Samsung sales fell 27.1%, Huawei declined 6.8%, Apple declined by just 0.4%, while all other makers saw decline in double figures.

In other words, even relatively flat sales could be seen as a success in this turbulent market – particularly if this leads to relative market share gains.

Waiting for launch

There have been claims the company may introduce the new models without an event, just via a press release, which seems unlikely. Leaker Jon Prosser recently claimed on Twitter the new iPhones will be announced at an October event, which seems far more likely. A video-based product introduction in late September or (more likely) early October seems probable.

What next? Looking to the future, Apple’s contract chip manufacturer, TSMC, is expected to begin mass production of 3nm chips in the second half of 2022. These will deliver yet another leap in power and performance in mobile devices, and (potentially, given the move to Apple Silicon) future Macs.

TSMC is already building a facility for manufacture of 2nm chips, but those will be way down the line. Though it is important to note that Apple already has a road map for future evolution of its important mobile device category, even while processor innovation for other mobile devices remains relatively slow.

Copyright © 2020 IDG Communications, Inc.

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