Technology

iPhone 7 Doesn’t Need New Features To Boost Upgrades: BMO

The picture of what Apple might be planning for the iPhone 7 has just gotten a bit murkier. We’ve heard multiple reports that this year’s model won’t be much of an upgrade from the iPhone 6s, but if the newest rumor is to be believed, Apple is planning for a huge cycle. So why would the company plan for such a huge cycle if nothing exciting is in store?

Size of installed base suggests big iPhone 7 cycle

It stands to reason that a lack of exciting new features may cause many consumers to hit the pause button on upgrading, which could extend the company’s losing record for another year. However, BMO Capital Markets analysts don’t think this will be the case. They released their analysis of Apple’s installed base and conclusion in a report dated May 22.

Analyst Tim Long notes that Apple management said that as of the last quarter, the size of the iPhone installed base had climbed 80% over the last two years. He adds that as the company prepares for the iPhone 7 cycle, 26% of the installed base consists of phones that are at least two years old, which is the largest segment of the installed base. The iPhone 6 accounts for 23% of the installed base.

iPhone 7 chart

According to Long, this means that approximately 120 million iPhones are at least two years old. He concludes that the iPhone 7 will see a high replacement rate, whether or not its features are lackluster. He also said that sales of used iPhones have blossomed, and he now puts this metric at a 25% compound annual growth rate through 2019. He adds that sales of used iPhones provides added support for future sales and should help Apple’s Services revenue “grow much more rapidly.”

iPhone 7

Apple suppliers boosted by latest iPhone 7 rumor

Today shares of key Apple suppliers like Pegatron and Hon Hai received a boost after the Taiwanese newspaper Economic Daily reported that Apple told suppliers it will need between 72 million and 78 million iPhones before the end of the year. According to Barron’s, this range is far higher than what analysts have been expecting. Wall Street is reportedly looking for 65 million iPhone 7 handsets to be produced this year.

Pegatron shares climbed nearly 10% in Taipei, while Hon Hai stock increased more than 4% there. Shares of Catcher Technology also soared nearly 10%. Apple stock climbed by as much as 1.76% to $96.90 during regular trading hours on Monday.

Graphs in this article are courtesy BMO Capital Markets.