Two ways of looking at the iPhone’s lengthening replacement cycle.
At Apple’s iPhone product announcement in September, Lisa Jackson—former EPA administrator, now an Apple VP—said that the company needed to “design products to last as long as possible.”
Toni Sacconaghi, Bernstein: If Apple succeeds and consumers hold on to their devices for longer, it could materially lower iPhone unit sales each year, undermining company revenues and profits. Our analysis suggests that iPhone units could fall by 6% per year for three years if average replacement cycles extend 6 months… Moreover, a longer replacement cycle could have a modest negative secondary effect of reducing the number (and attractiveness) of used iPhones available for sale in the second-hand market, impacting the growth rate of Apple’s total installed base (and possibly Services revenues).
Horace Dediu, Asymco: Last Longer. So why would Apple want to do this? What is the logic of this durability focus as a business model? It may be good for the environment but is it good for the bottom line? … The important call to make is that Apple is making a bet that sustainability is a growth business. Fundamentally, Apple is betting on having customers not selling them products. The purpose of Apple as a firm is to create and preserve customers and to create and preserve products. This is fundamental and not fully recognized.
Sacconaghi’s take on Dediu’s take:
I suppose one can imagine a scenario where replacement cycle elongation happens slowly, customer satisfaction leads to reduced churn, and Android users choose to switch to the Apple’s ecosystem, offsetting declines in replacement sales. That said, we note that Apple’s customer satisfaction is already extremely high, and believe that switching across ecosystems (Android to iOS and vice versa) today is relatively low. In a nutshell, we are not sure that loyalty math ultimately trumps the risk of material replacement cycle elongation.
Dediu’s take on Sacconaghi’s take:
Q: Does Apple REALLY want you to keep your phone for longer?
A: No. Apple wants you to give your phone to someone else.