iPhone sequel unlikely to outdo the 6, 6 Plus

This analysis is by Bloomberg Intelligence analysts John Butler, Matthew Kanterman and Woo Jin Ho. It originally appeared on the Bloomberg Professional service. 

Apple iPhone 6S launch pits new features vs. tough comparisons
Apple’s annual September product-refresh event held few surprises, as many accurately predicted what the company had planned. For the iPhone, Apple introduced the new 6S and 6S Plus with a more powerful A9 processor, a new 12-megapixel rear camera, 5-megapixel selfie camera and 3D Touch. The star of the show may have been the iPad Pro, a new 12.9-inch tablet optimized for enterprise users. Apple also featured the new Apple TV with a new operating system and advanced remote control with voice control through Siri.

iPhone 6 upgrade sets up tough comparisons for next refresh
The iPhone 6 marked Apple’s first foray into large-screen smartphones, which expanded its total addressable market, particularly into emerging markets where large-screen phones are preferred. The strong growth stemming from this launch sets up difficult year-ago comparisons for Apple, which is forecast by IDC to ship 232.7 million iPhones in fiscal 2016 vs. 233.8 million in 2015. If this forecast proves accurate, it would mark the first ever year-over-year decline in iPhone shipments.

Apple’s upgrade opportunity lies in 73% of base on old iPhones
For Apple’s next iPhone refresh, the company can tap the upgrade opportunity that exists with users still on older-generation iPhones. This may help to partly offset the tough comparisons posed by the outsized success of the iPhone 6. CEO Tim Cook said that, as of fiscal 3Q, only 27% of iPhone users had upgraded to the iPhone 6, while 73% were still on older-generation devices. This, coupled with share gains from Android in the premium segment, should help Apple to drive further growth in the iPhone cycle.

Apple iPhone financing may shift balance of power with carriers
Apple’s iPhone financing program is priced competitively with similar plans offered by U.S. wireless carriers, suggesting it could shift smartphone sales away from them and lower equipment revenue. Consumer loyalties probably lie more with smartphone vendors or brands than the carriers. This could mean consumers will be more inclined to finance through Apple. If this proves to be the case, equipment revenue, which has been a source of carrier growth, could be affected.

Android switching app may be biggest announcement from Apple
Apple has unveiled a new app to make it easier for Android users to switch to iOS, transferring all data and files from one device to another. Apple has three sources of iPhone growth to exploit, including upgrades among its user base, feature phone upgrades and share gains from Android. The sale of new iPhones to existing users who are due for an upgrade is a good, though finite opportunity. Though also finite, market share gains represent a larger, long-term source of expansion.

iPhone outlook bodes well for analog device’s consumer recovery
Analog Devices’ strong fiscal 3Q consumer results, which grew more than 150% from a year ago to $207 million, appear to support its inclusion in the next iteration of the iPhone, dubbed the 6s. IDC expects 105 million iPhone units to ship in calendar 2H, and Analog’s strong growth implies that Apple would expand its use of Force Touch into the phones. IDC doesn’t break out the iPhone mix in its forecast. But Analog’s near-term growth in consumer should be sustained or enhanced, as the iPhone mix shifts to the 6s.

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