In Consumer Insights

Apple is hosting a special event today, which is widely expected to be the announcement of the iPhone 7 and other new Apple hardware. While each new iPhone generation has always introduced a whole new set of features (and the occasional new form factor), the iPhone 7 is rumored to largely be a progressive iteration of the iPhone 6, with the biggest changes slated for the camera and the headphone jack (or lack thereof). Industry watchers predict that Apple is saving some of its biggest changes for 2017 – so who will jump to upgrade to the iPhone 7 this year?

The Existing iPhone Landscape

Industry data indicates that consumers are holding onto their smartphones longer, with an increasing number waiting between two and three years before upgrading to the next model. This effect is especially seen in the U.S., as more wireless carriers move away from offering subsidized handsets with a built-in 18-to-24 month upgrade cycle. Verto Analytics looked at the number of iPhone owners in the U.S. (among adults, ages 18+) to see how many people are hitting that two-to-three year sweet spot in iPhone ownership.

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First, iPhone ownership trends have remained largely consistent over the past two months. Our data shows that the bulk of existing iPhone owners as of August (47.3 million) have a version of the iPhone 6 or 6S. Even if we assume that most of these iPhone owners purchased their phones shortly after they were released, that means these iPhone 6/6S owners have owned their devices for a maximum of barely two years – putting them in a category of owners who are less likely to upgrade. Moving back one generation, to owners of the iPhone 5 line (including the 5S and the 5C), the numbers drop significantly, to 25.7 million people. While these owners are in that sweet spot of probably owning a device that is three to four years old (and therefore more likely to upgrade), it’s a significantly smaller slice of the iPhone owner population. (For reference, our data shows a scant 3.6 million iPhone 4 or 4S owners).

Will the iPhone 7 Flop?

Apple has been fighting declining device sales numbers for the past few quarters – and the next few quarters don’t look too promising either, based on our iPhone user numbers. But Cupertino may get lucky, thanks to a few other factors: the iWatch’s new OS rolls out this fall, and it’s already been lauded as a vast improvement that could boost the Apple wearable from an expensive novelty item to a must-have fitness and productivity accessory. Combined with rumors of a new iWatch, Apple may be able to pad its losses on the iPhone with a boost in wearables sales.

Secondly, Samsung’s recent Galaxy Note 7 fiasco could work in Apple’s favor, as an increased number of smartphone users may be encouraged to give the iPhone 7 a try. But if Samsung can execute a rapid and responsive recall for their faulty phones, they may be able to recover in time for the holiday season. We’ll keep our eyes on the next batch of news and earnings – and in the meantime, we’ll be tuning in to today’s Apple news.

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