Barclays: Next iPhone unlikely to drive 'super upgrade cycle'

Photo credit: Flickr user Aaron Yoo

Barclays is the latest outfit to throw a little cold water on the upcoming launch of the iPhone.

Apple is widely expected to unveil the next version of its handset during yet another highly anticipated media event next week. But analysts generally believe the iPhone 7 – or whatever the device will be called – is unlikely to offer any groundbreaking features or radical new design.

Instead, according to the conventional wisdom, Apple will likely keep its powder dry and save any major changes for next year, which will mark the iPhone’s tenth birthday.


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“At this juncture, we find it difficult to quantify the device’s impact given limited visibility on a number of factors (i.e. form factor, new features, etc.),” Barclays analysts wrote in a note to investors. “That being said, our colleague Mark Moskowitz has consistently noted that he doesn’t expect the ‘super’ upgrade cycle to occur until calendar year 2017 with iPhone 8. Mark believes the iPhone 7 will not introduce enough form factor changes to drive an iPhone 6-like upgrade cycle.”

Like its rivals, Apple is increasingly challenged in a worldwide smartphone market in growth is plateauing and upgrade cycles have lengthened significantly. Apple has reportedly opted to take three years to introduce major changes to its iPhone, extending the refreshment cycle by a year. And a recent study from Recon Analytics indicates the move toward EIPs has increased the handset upgrade cycle to 28 months, nearly doubling the 15 months seen under subsidized plans.

The iPhone 6 and 6 Plus came to market in September 2014 sporting some notable changes from previous versions. The devices included models with larger 4.7-inch and 5.5-inch screens, faster processors, upgraded cameras and NFC, among other things. Apple saw a record 4 million preorders of the phones in their first 24 hours of availability, and more than 10 million of the devices were sold in their first three days.

“Under a scenario whereby upgrade rates are equivalent to those experienced in 4Q14, we could see 2016 EPS (earnings per share) impacted negatively by up to five cents on average while 2016 BITDA margins could be impacted by up to (roughly) 120 basis points,” Barclays wrote. “However, given that we don’t expect a ‘super upgrade cycle’ to occur in 2016, we would anticipate the impact of the expected iPhone 7 launch to be more moderate.”

Related articles:
Evercore: Extended upgrade cycles, slowing subscriber growth likely plagued carriers in 2Q
The next iPhone said to offer only modest modifications
Survey: Less than 10% of U.S. iPhone owners very likely to upgrade this year without a redesigned model


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