Apple CEO Tim Cook’s recent comments about slowing iPhone upgrade rates depressing sales got some backing from a new survey of customers.
People who own an iPhone are waiting three months longer to upgrade to a new phone than they did three years ago, according to surveys done by Consumer Intelligence Research Partners, or CIRP. That’s consistent with what Cook said in April after Apple reported its first-ever year-over-year decline in iPhone sales.
The Apple (AAPL) upgrade rate had actually accelerated in 2014 and 2015, when the iPhone 6 line was released, but then fell back significantly, CIRP reported. In the middle of 2013, only one-third of all iPhones were more than two years old, but as the rate of upgrades has slowed, the figure rose to 49% by the end of the first quarter of this year.
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Smartphone owners used to get their phones for a lot less than the phones actually cost but mobile carriers have been phasing out subsidies as quickly as they can the past few years. Instead, customers pay the full cost of the phone, usually spilt into monthly installment payments.
That sparked a debate. Would the end of the subsidies—and the promise of a new phone every two years—prompt customers to upgrade less frequently? Or would new promotional plans from Apple and the carriers allowing for upgrades after just one year prompt even quicker upgrades?
Now the answer is becoming clearer and it spells bad news for Apple and other phone manufacturers.
“Today, phone financing plans effectively reward customers who have paid for their phone in full,” Josh Lowitz, partner at CIRP, said in a statement. “This motivator appears to outweigh the impact of any early upgrade options that carriers offer with the new financing plans, and the increased availability of trade-in programs and used phone purchase websites.”
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Cook admitted in April that the current iPhone 6S line had proven less popular among prior owners than the 6, which was the first iPhone with a screen larger than 4 inches.
“From an upgrade perspective, during the first half of this year the upgrade rate for the iPhone 6s cycle has been slightly higher than what we experienced in the iPhone 5s cycle two years ago, but it is lower than the accelerated upgrade rate that we saw with iPhone 6, which as you know was a big contributor to our phenomenal revenue growth a year ago,” Cook said.
The next question for Apple is whether new features on the next version of the iPhone will be compelling enough to attract more upgrades once again.