Some timely iPhone research to consider in advance of Apple’s first quarter earnings report Tuesday.
After an initial launch spike last September, U.S. sales of Apple’s latest iPhone — the iPhone 5 — declined significantly. But now, about 7 months after the device’s debut, they’ve risen slightly and flattened out, settling at a level that redefines the sales split between new iPhone and old.
According to new data shared with AllThingsD by Consumer Intelligence Research Partners (CIRP), iPhone 5 sales — which surged to account for 68 percent of all U.S. iPhone sales last October, only to slip to 50 percent during the month of December — rose 3 percentage points between January and March 2013. During that same period U.S. sales of the iPhone 4S rose 1 percent, while sales of the iPhone 4 slipped 4 percent.
So by March’s end iPhone sales broke down as follows: 53 percent iPhone 5, 33 percent iPhone 4S, and 14 percent iPhone 4. That’s a near perfect 50/50 split between legacy iPhones and the latest iPhone model — numbers that roughly jibe with the those reported by Verizon last week.
What they don’t jibe with, however, is the legacy/latest model breakdown for the last iPhone cycle. During the same point following the launch of the iPhone 4S last year, that device accounted for 73 percent of all iPhone sales. Meanwhile, the iPhone 4 accounted for 22 percent and the iPhone 3GS 5 percent. That’s a very different split, one that strongly favored Apple’s newest phone over its predecessors.
Why the shift? Given the debut of 4G LTE support with the iPhone 5, you might think that device would capture a larger portion of iPhone sales than its 3G predecessors. But that’s not the case. Why isn’t LTE driving more iPhone 5 adoption?
Here’s the thing: It IS driving adoption. Recall that Verizon alone sold two million iPhone 5 units in its recent quarter. Apple is shipping more iPhones than ever before; first quarter iPhone sales at Verizon, for example, rose 25 percent year over year and, as I note earlier, the split between new device and old was roughly 50/50. So what seems to be happening is this: not only is Apple selling more iPhones, it’s selling more of them to price-conscious consumers. It’s using legacy iPhones grow its business — successfully, too.
“We’re somewhat surprised that 4/4S sales have remained so strong, at least relative to earlier iPhone product cycles,” CIRP partner Michael Levin told AllThingsD. “There’s plenty of demand for low- and no-cost phones, which tend to flow toward basic phone owners. On average they don’t seem to jump from a cheap or free flip phone all the way to iPhone 5.”
But they will jump to an iPhone 4 or 4S for a free upgrade with two-year contract renewal, or $99. And looking at CIRP’s numbers, that’s what seems to be happening. With its legacy iPhones Apple is hitting a broader swath of the market — and it’s grabbing a larger share and introducing more people to the brand in the process. No surprise, then that CIRP found that 29 percent of iPhone buyers during the survey period upgraded from feature phones (Another 29 percent came from Android/BlackBerry/Other; And the final 42 percent came from iPhone).
An intriguing trend, given persistent rumors about a low-end iPhone. What’s it mean for iPhone ASPs (Average Selling Prices). Not all that much. Evidently, the larger storage options for iPhone 5 have been selling pretty well recently. The 64 GB model accounted for 5 percent on sales in December; It’s double that now. And that will likely help alleviate some of the ASP compression caused by rising sales of past generation iPhones.
Said Levin, “iPhone ASP should be fairly stable compared to the previous quarter. If anything, it will be slightly improved on the strength of a bit stronger share (of all iPhones) of the iPhone 5, and a bit stronger share of higher storage capacity iPhone 5 models.”