Apple Inc. Before iPhone 6S Launch: Where Will Demand Go Next?

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Apple has scheduled its biggest event ever for 1 p.m. Eastern today, suggesting some major surprises, although it’s hard to imagine that the company could possibly top the rumors that have been going around. The company also faces a tall order in topping last year’s iPhone sales, as the iPhone 6 and iPhone 6 Plus brought its first larger-screened iPhones, and this year’s iPhone 6S and iPhone 6S Plus will likely have smaller improvements, which is typical of S models.

Big screen smartphones: the final frontier

If demand for Samsung’s smartphones has taught us anything, it’s that it appears phone makers have reached the final frontier in terms of upgrades. After adding a bigger display, there haven’t been many further improvements, and Apple finally caught up to other smartphone makers with the larger display last year.

As a result, some think the iPhone 6S and iPhone 6S Plus will be Apple’s last hurrah and that next year will mark a meaningful decline in demand. However, others remain confident that demand for the iPhone will continue rising steadily.

iPhone 6S to kick off farewell tour?

The folks at Argus Insights wrote a blog post with a bold headline: “iPhone: The Farewell Tour?” However, JPMorgan analysts issued a collection of charts suggesting that demand for the iPhone will continue to rise steadily.

One of the big problems Apple and all smartphone makers is saturation in major markets. Because of the lack of significant upgrades each year, consumers are choosing to keep their “good enough” phones. Argus Insights CEO John Feland said earlier this year that Apple probably has only one good iPhone cycle left—unless, of course, the company can surprise consumers with some kind of major innovation.

iPhone 6S the last model to spur upgrades?

The iPhone 6S and iPhone 6S Plus are expected to come with a new Force Touch display, which could be enough to convince consumers to upgrade, but beyond that, it’s expected that Apple will just have the basic annual upgrades like camera improvements, a better processor, etc. Argus Insights put together a graph showing the history of iPhone demand since April 2014.

As you can see, demand rose as retailers cleared out their inventory of the iPhone 5S, and then it shot upward around the release of the iPhone 6 and iPhone 6 Plus. Then it fell again over the summer as fans anticipated the release of the iPhone 6S and iPhone 6S Plus.


Why might the iPhone 6S cycle still be big despite the lack of compelling upgrades?

So why has Argus come to the conclusion that iPhone users may buy this year yet? They suggest that iPhone 5S and 5C users are ready for an upgrade if they were unable to upgrade last year. Also they believe those who did not buy the Galaxy Note 5 because of the so-called “Pengazi” issues, as could Android users who were still locked into their contracts when the iPhone 6 and iPhone 6 Plus came out last year.

As a result, the firm believes that Apple will again enjoy a strong iPhone cycle one more time this year, although it probably won’t be as big as last year.

iPhone upgrades by the numbers

JPMorgan put out some graphs ahead of today’s even to give investors a picture of where Apple’s iPhone sales might go next. First they show what they call “natural adopters” compared to the company’s total installed base:


They don’t explain what they mean by “natural adopters,” however. Next is a graph showing upgrades as a percentage of the iPhone base, which they shoe rising steadily through the end of next year:


Where JPMorgan differs from Argus

Interestingly, the JPMorgan team appears to think Apple has a big opportunity for upgrades through at least the third quarter of 2017. At that time, they think upgrades to phones with larger screens may be tapped out, which would remove one reason consumers may have for upgrading over the next couple of years if they don’t have a phone with a big screen.


Interestingly, they think there will still be a lot of iPhones with smaller screens in use through the end of next year. This seems to suggest that either iPhone users will keep their iPhone 5S or that Apple will release an updated C model.


There have been rumors that there will be an iPhone 6C this year along with the iPhone 6S and 6S Plus. We will find out if these rumors are true in just a couple of hours.

Apple to keep dominating in high-end smartphones

Apple has been holding a large share of the $400+ smartphone market for several years and is expected to continue doing so. While this is good, demand for high-end smartphones dropped significantly in 2012 and has yet to recover fully.


And here’s a look at three possible cases for Apple’s share of the high-end smartphone market over the next couple of years:


Apple and Samsung have been battling less expensive Chinese-made smartphones, which are beginning to catch up to the high-end models in terms of some specs, although there is still room to grow.

We will be live blogging today’s big event, so check back here around 1 p.m. Eastern for full coverage.

Most graphs are courtesy JPMorgan, except where noted.

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