Apple's Disappointing IPhone Sales Are Another Signal The Longer Upgrade Cycle Is Hurting The Business

The upgrade cycle is critical to Apple’s business. While manufacturers of Android handsets are going after new users in emerging markets with lower-priced phones, Apple has staked its growth on higher-cost premium products. This means they need to keep selling devices in developed markets, where the smartphone industry is fairly mature. Apple needs people who already have smartphones to keep buying new ones — often.

But a recent report from BI Intelligence shows that these customers are dependent on upgrades tied to contracts and carrier subsidies in order to get new Apple devices. But they ware waiting longer and longer to upgrade their phones. In the United States, the upgrade cycle remained pegged at 21.7 months for several years, according to Recon Analytics. But this year, BI Intelligence believes the upgrade cycle is likely to rise to 24 months.

Why is the upgrade cycle growing longer? In the report, we find that many smartphones are so good now that there’s often little reason to upgrade, but also — carriers are cutting back on subsidies and moving away from rigid two-year contracts and subsidies. That spells trouble for Apple in particular, since the company has relied so heavily on carrier subsidies to get its phones in consumer hands, and its overall business model is so heavily reliant on hardware sales.

But the reason industry players want a shorter upgrade cycle isn’t just about selling more phones. Here’s why else a short upgrade cycle is important:

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The report is full of charts and data that can be easily downloaded and put to use.

In full, the report explains the reasons driving a longer upgrade cycle, including:

For full access to the report on Smartphone Upgrade Trends sign up for a free trial subscription today. Subscribers also gain full access to our latest Smartphone Market Forecast.

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