Buy iPhone 11 or wait for 5G? Apple's potential upgrade cycle remains a mystery

Apple's iPhone 11 trio may garner interest, but it's unclear whether tech buyers will part with their money. It may not matter as long as Apple keeps you in the installed base.
Written by Larry Dignan, Contributor

About a third of Apple's 900 million active iPhones are likely to be upgraded in the next 12 to 18 months, according to Wedbush Securities. The big question is whether Apple customers buy the iPhone 11 or wait for a 5G device in 2020. 

And that question is a big one as Apple holds its iPhone launch event and innovation showcase. At the event, it is widely expected that Apple will unveil three new iPhones including a Pro version that will have triple cameras. What is likely missing is a 5G iPhone.

In other words, expectations for Apple's new iPhones are pretty low. It's a gap year for smartphones and 5G is a big reason why. Whether it's Samsung, Apple or any other smartphone maker, tech buyers are likely to hold out for compatibility with the latest network. In addition, high prices for premium devices are stretching out the upgrade cycle.

Meanwhile, it's telling that there are as many leaks about the 2020 iPhone as the devices that will be unveiled Sept. 10.

So is anyone going to buy the new iPhones? Sure. The actual numbers, however, remain a mystery. Wedbush analyst Daniel Ives said in a research note:

With roughly 1/3 of the company's 900 million active iPhones globally currently in a "window of an upgrade opportunity" over the next 12 to 18 months Cook & Co. recognize this will be a crucial product cycle on the horizon that we believe could translate into roughly 180 million iPhone units sold in FY20. Based on our recent Asia checks, we believe Apple's supply chain is planning on 75 million units for the initial iPhone 11 launch period, which is a slight uptick vs. its prior iPhone cycle last fall. We note there is capacity in the supply chain to bring this launch period unit range production up to 80 million iPhones depending on the level of pent up demand/ pre-order activity starting in mid September.

Ives added that there may be 60 million to 70 million Chinese consumers due for an upgrade. The catch here is that China consumers may opt for Huawei devices or switch away from Apple.

Prices range from $749 to $999 to $1,099 for the base iPhone to iPhone 11 Pro to iPhone 11 Pro Max.

Whether CEO Tim Cook gets the upgrade cycle he wants will depend on a few variables. These moving parts include:

  • How long consumers can hold out. Smartphones are being stretched out for about 30 months before being upgraded. In fact, if your device isn't broken chances are you're going to keep it. Higher price points also encourage consumers to wait a bit longer. There's always a better phone coming and the logic behind waiting is stronger now than ever.
  • Smartphone fatigue. I've been testing the Samsung Note 10 and other midrange devices. The common thread is that I get bored. There's just not a lot of new there.
  • Camera improvements aren't the upgrade excuse they used to be. Apple will get on the triple camera lines bandwagon for its iPhone Pro 11 and editing featured are rumored to be strong. The issue: Camera upgrades have reached the point of diminishing returns.
  • It's quite possible that the iPhones are upstaged by Apple's other products such as Air Pods and Apple Watch.

In the end, any consternation about Apple's latest iPhone upgrade cycle is likely to be misplaced. As long as Apple holds its installed base and sells services, the company will be fine assuming customers stay on the platform.

We'll leave you with Cook's comments on Apple's July earnings conference call for a bit of installed base perspective.

Installed base is a function of upgrades and the time between those. It's a function of the number of switchers coming into the iOS, macOS and so forth. It's a function of the robustness of the secondary market, which we think overwhelmingly hits incremental customer. And it's a function still in the emerging markets and somewhat developed markets, to a lesser degree, of people new that -- they're buying their first smartphone. There are still quite a few people in the world in that category.

And the reason that the installed base doesn't correlate to the 90-day clock is that what's happening underneath the numbers is switchers are still a very key piece of what's going on. The secondary market is very key, and we're doing programs, et cetera, to try to increase that because we think we'd wind up hitting a customer that we don't hit in another way. And the upgrades, where people are holding on to their device a bit longer than they were, they're staying in the ecosystem. And then you have the people in the new category as well. And so that's sort of the equation.

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