Apple's iPhone: Can it hit 45 million units by end of 2009?

Apple's iPhone: Can it hit 45 million units by end of 2009?

Summary: While most Wall Street types have come down from their aggressive targets for iPhone units, one analyst, Gene Munster at Piper Jaffray, is sticking to his guns. Munster is predicting that Apple will ship 45 million iPhone units in calendar 2009.


While most Wall Street types have come down from their aggressive targets for iPhone units, one analyst, Gene Munster at Piper Jaffray, is sticking to his guns. Munster is predicting that Apple will ship 45 million iPhone units in calendar 2009.

In a research note Monday, Munster said he realizes the 45 million iPhone target is aggressive, but he's maintaining his estimate based on the following:

  • Apple will introduce a 3G iPhone in the next three to six months with new features.
  • Apple will launch a family of iPhones with two to three separate models by Jan. 2009. These will bet lower priced at $200 to $300.
  • An international rollout that will double Apple's market. The big rollout will be in China.

Apple has said it is comfortable with its goal of shipping 10 million iPhones. Where will those extra 35 million units come from?

Munster said he expects Apple to launch the iPhone in Japan this year. He then makes a bet that Apple will alter its exclusivity terms in China and ink a deal with China Mobile by mid-2009. China Mobile has more than 370 million subscribers.

Does it add up to 45 million iPhone units? Perhaps, but a lot of things have to go right.

Munster's theory that lower priced iPhones will drive volume is a no brainer. Munster writes:

Just as the company slowly diversified the iPod lineup and entered lower price points with every new version of the iPod, in this way, an analysis of initial iPod growth can serve as an initial basis for iPhone forecasts. However, data from the first 3 quarters of iPhone sales indicates that the iPhone's unit growth curve is significantly steeper than that of the iPod.

Here's a look at Munster's estimates of the iPhone ramp vs. iPod:


The rub: It's unclear how quickly Apple (BTL posts, all resources, Apple Core blog) will roll out this family of iPhones. If there's a delay or Apple doesn't think it's such a bright idea to drop average selling prices from $489 in 2007 to $314 by 2009 (Munster's estimates) then this all-in-the-family effect may not play out as quickly.

International rollout will be critical, but China will put the iPhone over the top. Munster has big plans for international growth, but is clearly counting on a deal in China to make his iPhone targets reality. He writes:

We believe the continued international rollout of the iPhone will effectively double the addressable market every year for the next two years. The iPhone is currently available in 6 countries and it is offered exclusively through 6 carriers in those countries with a total subscriber base of 153m. With a total of 3.7m units sold through Dec-07, the iPhone's penetration into this addressable market is about 3%. Apple has reiterated its goal to launch the iPhone in Asia in CY08, which we believe will be limited to Japan. Several other countries that may see iPhone launches in CY08 include Canada, Italy, Mexico, and Australia.

Couple that international rollout with lower prices and perhaps the units begin to flow quickly. However, China is everything and will require Apple to alter its model. Munster writes:

In China, however, the market dynamics complicate Apple's business model of exclusivity and we believe the company will likely need to alter its terms in order to launch the iPhone with a Chinese carrier like China Mobile (over 370m subs) by mid-CY09. We have spoken with people close to China Mobile and our conversations lead us to believe that Chinese carriers are unlikely to sign a revenue sharing agreement with Apple. This is due in part because of the 70% market share enjoyed by China Mobile. The bottom line is that the mobile phone market is less competitive in China than it is in the US and Europe. As a result, it appears China Mobile is unwilling to pay the monthly revenue sharing of ~$15/month that we believe other exclusive iPhone carriers are currently paying Apple. That said, the number of unlocked iPhones in operation is a sign of international demand. The mobile market in China is an ideal market for the iPhone's international expansion, especially with a 3G version. In time, we believe Apple will alter its strategy of signing exclusive revenue sharing agreements with its partners in Asia, which will enable the company to sell the iPhone in China by mid-CY09.

The rub: Munster's is betting on Apple to alter its business model just for China. He is also betting that a deal in China can be completed in enough time to move the needle in calendar 2009. Apple COO Tim Cook has noted that the company isn't wedded to anyone model, but how fast will this shift occur. Will Apple ditch revenue sharing to push iPhone through multiple carriers?

This chart tells the tale:


Will those stars line up for the iPhone?

Topics: Mobility, Apple, Hardware, iPhone, China

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  • Gene Munster...

    ...has been the biggest Apple cheerleader on Wall Street. His estimates are always more optimistic than the rest of the pack. But his batting average has been pretty good, so who knows.....? 45M is lotsa phones!
    • And that's the key

      and something any decent journalist would have researched.
      How successful have his past Apple predictions been?
      • his track record hasn't been bad

        but he's had a bull market behind him--especially for Apple. This call is a bit of out there and feels like a stretch, but you never know. It's not like he's been persistently off base--like a few folks that have panned apple from 13 til now.

        Institutional Investor has called Munster a home run hitter for previous calls. He's swinging for the fences on this one too.
        Larry Dignan
  • Multiple versions

    I can't see Apple sticking with only
    one basic design with the iPhone.
    Just as they introduced different
    iPods I believe that they will go
    with multiple iPhones and the
    wider price range will boost sales.

    After considering the iPod's
    historic growth I believe that Apple
    will enjoy some significant growth
    over the next 2 - 3 years. They
    know they have hit their target on
    feature sets and aren't going to sit
    • I think you are correct....

      They won't sit still. Like the iPod they will have different
      models and with each model they will continue to upgrade
      and tweak. Keeping it fresh. I expect a "shuffle" version of
      the iPhone sooner or later probably a Nano version first

      Pagan jim
      James Quinn
    • Yes, but

      45 million? That's a LOT of phones. Even with a lower priced
      model, how many of those 370 million Chinese subscribers
      will be able to afford one? How much lower priced are we
      talking for an iPhone Nano?

      I have no doubt that Apple is going to sell a lot of phones
      worldwide, but 45 million in 2009 is just crazy talk.
      Marcos El Malo
  • I got a free iPhone...

    Why buy one when you can get one for free?

    just go here
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