The iPhone 7 is turning out to be a more successful and popular device than most analysts could have imagined. Indeed, many analysts were of the mind that the iPhone 7 would usher in a lackluster if not disappointing upgrade cycle. As it turns out, that couldn't be further from the truth.
As we covered previously, pre-orders for Apple’s new iPhone 7 models completely blew away expectations at Sprint, T-Mobile and AT&T. What’s’ more, Apple a few days ago said that all iPhone 7 Plus models and all Jet Black iPhone 7 models were already sold out from in-store supply. In other words, if you don’t already have an existing pre-order, you may have to wait a while for an iPhone 7 Plus or a Jet Black iPhone 7.
With demand for the iPhone 7 soaring, one has to wonder how and why so many analysts managed to get everything so wrong? My personal take is that analysts became too pre-occupied with fancy new features and completely ignored two important factors: a) the iPhone 7 offers tremendous performance improvements and b) the pool of existing iPhone users in the market for an upgrade was vastly underestimated.
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To the first point, there’s no getting around the fact that the iPhone 7 essentially looks identical to the iPhone 6s and iPhone 6; but that’s no reason to dismiss the iPhone 7. Underneath the hood, the iPhone 7 is an incredibly compelling device and offers up mind-boggling improvements in performance, long-overdue improvements to battery life, and vastly superior camera technology. So while some pundits were quick to label the iPhone 7 as a boring upgrade because it didn’t introduce a funky new design aesthetic, they completely underestimated the fact that users will tolerate a familiar design if the device itself represents a huge leap forward in other respects.
As John Gruber insightfully pointed out earlier this week:
There is a large contingent of pundits who apparently would be more excited about a new iPhone that looked entirely different but had the exact same components as the iPhone 6S than they are by the actual iPhones 7, which are shaped like the 6S but have amazing new components. I don’t get that mindset at all. It’s like being a car pundit and judging the new Porsche 911 with a “meh” because it looks like the previous 911, and never even considering what it’s like to actually drivethe new car.
To the second point, most analysts did not seem to appreciate that the release of the iPhone 6 ushered in a massive refresh cycle, luring in users who for some time had been waiting for Apple to release a larger-screened iPhone. That was two years ago and now all of those iPhone 6 owners are back in the market for a new device. Also, consider this: the jump in functionality from the iPhone 6 to the iPhone 7 is far greater than the jump we saw from the iPhone 5s to the iPhone 6s. In other words, Apple’s iPhone release this year is much more alluring to users on a 2-year upgrade cycle than the iPhone 6s was last year.
It’s worth noting that at least one analyst got things right: analyst Tim Long from BMO Capital Markets. In a research note put out this past June, Long astutely pointed out that the percentage of iPhone owners with devices more than two years old was at an all-time high and was much greater than what we saw in the months leading up to the iPhone 6 and 6s release. According to Long’s estimates, 120 million iPhone users as of June 2016 were using iPhone 5s devices or even older models.
All the while, analysts also seemed to ignore that Apple told component suppliers to get ready for an iPhone production target in the 72 to 78 million range, making it the “highest production target in about two years.” Wall Street analysts, meanwhile, were initially projecting iPhone 7 production to fall in the 65 million range.
Apple said it won't be releasing iPhone 7 weekend launch sales figures this Monday, so we'll likely have to wait until the company's earnings report in October before we get a firmer read on the iPhone 7's popularity.