If you want to get an idea of just how huge Apple’s iPhone 6 is going to be globally, then the latest investor note from Citi Research analyst Jim Suva is a must-read. It provides more evidence that the iPhone 6 is fundamentally different from previous iPhones, because of the way it is going to rearrange market share for mobile handsets.
Previously, Apple was content to take about 15% of the global phone market for iPhone, and Android took the rest — generally about 80%. The theory was that Apple doesn’t want more market share than that, because the 15% it owned was made of the most profitable customers and that going downmarket might dilute its profitability.
But the iPhone 6 is different.
It is now the No.1 phone in both the US and China, and is powering its way to that spot in other markets too. It looks as if the iPhone 6 is going to grab much more market share than it normally does. That poses huge problems for Google’s Android system, which is losing a lot of customers to Apple.
Now, Apple normally sells a lot of phones right after a launch. But those sales tend to die off a few months later as the Apple customer base is fully penetrated.
This time around, according to Citi, that has not happened. In fact, Apple’s current customers are NOT the main buyers of iPhone 6. Rather, everyone else is. Citi says:
- Only 20% of the existing iPhone user base has upgraded to iPhone 6 and 6 Plus.
- About 50% of iPhone 6 / 6 Plus customers are first-time iPhone users who switched from other brands, mostly Android.
Here’s a chart:
That is hugely significant because it suggests that current iPhone users have yet to step in and actually buy a new iPhone 6. Apple customers have a high likelihood of buying a new iPhone if they already have one. About 12% of the iPhone customer base gets a new iPhone each quarter.
So the sales cycle for iPhone 6 is going to be much bigger than previous cycles once current iPhone users have upgraded.
That will shift market share in Apple’s favour, and again pose a difficult question to Google: If most people in a given market — the US and China most obviously — end up with iPhones, then is there still room left for Android?
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