There may be “unprecedented replacement demand” for the iPhones that Apple is planning to launch in the second half of 2017, KGI Securities analyst Ming-Chi Kuo wrote in a note to clients seen by Business Insider.
Kuo believes that Apple could ship between 90 million and 110 million iPhones in the second half of 2017.
Apple may even end up shipping more phones than the 113 million iPhones it sold in the second half of 2014, which was driven by the iPhone 6.
Kuo says that Apple’s suppliers, which sell the company components like screens, lenses, and chips, are setting “ramp-up targets” at over 120 million devices, and may be able to ramp up production to supply 150 million devices if demand is strong.
Apple is expected to launch three redesigned devices in the fall of 2017: two updates to the current iPhone 7 and iPhone 7 Plus with glass cases and wireless charging, and an all-new high-end model with a new kind of screen that promises lower power consumption and better picture quality.
All three models are expected to sell well.
- “The OLED model may trigger replacement demand among high-end users given its completely all-new-design form factor and notably superior specs in comparison to the TFT-LCD models”
- “The new 4.7″ iPhone, featuring glass casing and wireless charging, looks well positioned to tap replacement demand at the entry level.”
“In other words, ramp-up for [the second half of 2017] pull-in may exceed the previous peak for iPhone 6, and hit a historical high,” Kuo wrote.
The powder keg super cycle
The possibility that the upcoming iPhone could tap into a large base of people who are waiting to upgrade has been floated by several analysts before as a rationale for being bullish on Apple.
- Credit Suisse analysts predicted a “super cycle” in June.
- Cowen and Company analysts wrote this summer that iPhone 7 “is simply a ‘bridge’ to get to a ‘super-cycle’ for iPhone launch a year from now.”
- Cowen reiterated its bull case in October, writing that “a powder keg of a dramatically ageing installed base lurks just under the surface.”
If Apple can deliver a device that is meaningfully different than the iPhone 6, iPhone 6S, or iPhone 7, then there could be an explosion of sales worldwide. Kuo is predicting three new meaningfully different iPhone models based on factory sources.
On Tuesday, UBS analyst Steven Milunovich reiterated that long Apple investors should be optimistic about the next iPhone cycle, because Apple may not beat estimates for the next few quarters.
“The March and June quarters could have downside risk, but it might not matter if investors remain optimistic about 2018,” Milunovich wrote.
“Many investors are already looking to F18 where high retention rates and an ageing installed base could drive significant upgrades,” he wrote.