An interesting new report from Sanford Bernstein analyst Toni Sacconaghi suggests that Apple might be on the cusp of seeing a drop in new iPhone buyers.
The news doesn't suggest a drop in the popularity of the iPhone. Rather, many people already have one, so Apple will soon be selling more devices to upgraders rather than new iPhone customers. According to Sacconaghi, the percentage of "net new iPhone customers" is set to shrink approximately 13 per cent between 2012 and 2013, dropping from 62 per cent to just around 54 per cent.
Going forward, those numbers will drop to 37 per cent in 2014 and a mere 28 per cent in 2015. Concurrently, iPhone "replacement" purchases will jump up to nearly three quarters of everything Apple's selling by 2015.
"Barring a signed contract with China Mobile (CHL) or an iPhone priced to sell to the developing world, there is a slim margin of error that Apple will attract sufficient first-time iPhone buyers going forward to meet consensus forecasts for [fiscal year 2014 and 2015]," Sacconaghi wrote, according to ZDNet.
So, what's the problem? It's not that Apple's suddenly going to go belly up with its iPhone sales; that's not the issue at stake. However, the raw figures do paint a pretty simple picture. According to Sacconaghi, around 1.25 billion people can afford a smartphone like an iPhone sans carrier subsidies; of these, around 800 million already own a smartphone.
"It is imperative that Apple look to address the lower end of the smartphone market, where we see five times the number of first-time smartphone buyers over the next two years. Even though there may be 100 million to 150 million new high-end smartphone users annually over the next two years, there will be about 500 million new low-end smartphone users annually over the next two years, or about four times the new user total addressable market," Sacconaghi wrote, according to Forbes.
The iPhone 5C was supposed to be Apple's low-cost device for emerging markets, but it ended up being a colourful replacement for the iPhone 5, and not exactly affordable.
Meanwhile, when the number of new iPhone users stagnates, the content on the iTunes Store also suffers. Once a pretty significant majority of iPhone users are up and running with their typical shopping habits, a smaller number of new iPhone users won't be able to add that much activity with their app, music, and video purchases. In other words, the iTunes Store begins to plateau; content sales start to slow down a bit.
Things could improve if Apple can officially tap into China Mobile's 700 million or so customers, but so far, there have been rumours but no official announcements.