There’s no denying that the iPhone 6s cycle has been a weak one for Apple, but ultra-bulls expect the iPhone 7 to shift things back around, even though we’ve been hearing reports that it won’t be the huge upgrade consumers have come to expect from the non-S models. Even Verizon this week said that the slowness of the iPhone 6s cycle caused a much lower upgrade rate than it usually sees. The iPhone 7 has truly become a scapegoat for all of the wireless industry’s problems, even though it hasn’t been unveiled yet.
But what if the next iPhone isn’t as great for Apple as most expect?
Surveys suggest consumers awaiting the iPhone 7
Earlier this week, Canaccord Genuity analyst T. Michael Walkley said his survey indicates that consumers are putting off upgrading their iPhones right now in anticipation of the iPhone 7, and this survey isn’t the only one with this finding. He expects iPhone sales in the U.S. to dive below the 50% mark of total smartphone sales in the June quarter, which would mark the first time this has happened since Apple unveiled the bigger iPhone 6 and its even bigger counterpart, the iPhone 6 Plus.
Walkley predicts that the company’s smartphone sales will recover with the iPhone 7.
Possible upside to average selling price
Credit Suisse analyst Kulbinder Garcha and team also expects this year’s iPhone models to turn things back around for Apple, and they expect a return to unit growth in 2017. The CS team also sees two mix shifts as positively benefiting the average selling price. One is new memory options as the iPhone 7 is expected to come in 32 GB, 128 GB and 256 GB models, compared to the current 16 GB, 64GB and 128GB models that are available in the iPhone 6s.
The other is an “upgrade within the upgrade cycle,” which basically just means that iPhone 6 users may upgrade to an iPhone 7 Plus. The CS team believes the product mix for the iPhone 6s cycle was tilted slightly toward the smaller iPhone 6s rather than the 6s Plus model.
Will the iPhone 7 fix Apple’s unit problem?
There have been many studies done which indicate that iPhone replacement cycles have elongated to two or two-and-a-half years, and since the iPhone 6 cycle two years ago was so big, it stands to reason that the iPhone 7 cycle will be huge as well. However, reports that this year’s model won’t have any significant upgrades from the 6s are concerning some analysts.
Profit Confidential reports that Verizon Chief Financial Officer Fran Shammo believes Apple will need a “dynamic change” in the iPhone 7 in order to convince consumers to upgrade. He made the comments at the MoffettNathanson investor conference this week when he also said that smartphone upgrades are especially slow right now as consumers wait to see what the iPhone 7 will offer.
Of course there are other factors when trying to determine whether even a very slight update will convince iPhone users to upgrade. Not only are many consumers on two-year cycles with their mobile carriers, many carriers are pushing monthly installment plans for phones. Consumers who began a plan two years ago and will be eligible to upgrade may do so simply because they’ve paid off their old phone and can get a new phone without raising their bill. On the other hand, they might wait if the iPhone 7 isn’t enough of an upgrade because at the very least, their monthly bill will decline because they’ve paid off the phone.
