Every time a new Apple (NASDAQ: AAPL) iPhone gets released, it seems like everyone who has chosen iOS over Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL)Android immediately orders one.
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In reality, however, not every consumer trades in his or her phone just because a new model comes out. They may want to, but leasing cycles, payment plans, and other factors influence whether people swap out their iPhone or Android phone after a new model is released.
On the Apple side, consumers are actually holding onto their phones slightly longer, while with Android, the replacement cycle has been steady for the past three years, according to data from Consumer Intelligence Research Partners (CIRP).
"Our earlier analysis of iPhone age indicates that the average age of an upgraded iPhone increased by more than three months over three years, while the age of upgraded Android phones increased by less than one month," said CIRP founder Josh Lowitz.
People are holding onto their iPhones longer according to a new study. Image source: Apple.
Why are iPhone users waiting longer?
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It's important to note that there are some key differences between iPhone and Android phones. The most notable is that only Apple makes iPhones and the company has stuck to a rigorous upgrade cycle for the past few years. It releases a new model every year around September, but only issues a major refresh every other year.
In the Android world, there are dozens of manufacturers making phones. That makes it possible that an Android user might be tempted to switch due to new features on a more regular basis (or maybe just because having the latest thing is cool).
"We identified two potential reasons why iPhone upgrade timing has slowed: more incremental changes in features, and phone financing plans," said Lowitz "Only the latter of these factors, phone financing, would apply similarly to Android phone upgrade timing. Other factors, including the ability to switch between manufacturers and remain within the Android operating system, the variety of features offered by different manufacturers, and the price competition that comes with multiple options, appear to lead to earlier upgrades."
What does this mean for manufacturers?
For Apple, a company that makes roughly 56% profit from its phone line, longer upgrade waits directly hit the bottom line. In recent years, the feature and appearance upgrades from model to model have been small enough that an increasing percentage of users are waiting. That has been especially true during the "s" years when the company simply upgrades its existing phone rather than introduce a new one.
In the Android world, faster upgrade cycles create opportunity, but the competition between brands is intense.
Among the various Android brands, loyalty varies greatly," said CIRP co-founder Mike Levin. "Since the June 2013 quarter, Samsung leads in loyalty, with 77% of Samsung (NASDAQOTH: SSNLF) consumers activating another Samsung phone. Loyalty trails significantly for other leading Android handset brands, ranging from 39% for LG to 25% for HTC."
For Apple, it's not time to worry too much, but a slowing replacement cycle is a concern. The challenge, now that even low-end Android phones offer some pretty fancy features, is making a new phone with features people are willing to spend more money to have. That's a very high bar that may not be met by a new color, faster processor, or the other bells and whistles offered on the iPhone 7.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Kline owns shares of Apple. He is waiting on his new iPhone 7 Plus and gets a new phone every year. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.