Analysts with Piper Jaffray (via Apple 3.0) recently surveyed 1,500 current iPhone users who have not upgraded to Apple's (NASDAQ: AAPL) latest iPhone X flagship smartphone. The purpose of the survey was to figure out why those individuals didn't upgrade to the device.
Here were the survey results:
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|Reason||Percentage of Respondents|
|Prefer larger screen||8%|
|Current iPhone works fine||44%|
Apple's biggest problem, it seems, is the fact that 44% of the surveyed individuals are simply content with their current devices and can't be bothered to shell out the significant sum that's required to upgrade to the iPhone X. The next biggest problem, though, is that 31% of current iPhone users consider the iPhone X "too expensive."
Just 8% of users didn't upgrade because they "prefer a larger screen," and 17% didn't upgrade for other reasons.
Since Apple is rumored to be launching cheaper iPhone X-like phone with a 6.1-inch liquid crystal display (LCD), as well as a larger version of the iPhone X later this year, Piper Jaffray analysts think that "as options for the 'X-gen' iPhone expand, 'shots on the goal' for upgrading increases."
Here's why this reasoning makes a lot of sense.
A large installed base looking for something new
It's worth keeping in mind that Apple has sold devices that look substantially similar to the iPhone 6 and iPhone 6 Plus smartphones for four product generations, including the current generation.
Although Apple has, of course, delivered substantial technology and feature improvements with each new generation (anecdotally, an iPhone 6 seems rudimentary and difficult to use compared to an iPhone 8), many smartphone buyers value aesthetic and form factor changes.
The iPhone X delivered on the form factor and aesthetics in a huge way, but as the Piper Jaffray survey data indicates, the device was simply too expensive for a large part of iPhone owners. The rumored 6.1-inch LCD iPhone should deliver both significant internal-feature improvements, as well as a dramatic overhaul in aesthetics -- at a price that's accessible to a larger portion of the iPhone installed base.
It seems reasonable to think that the 6.1-inch LCD iPhone would be an attractive upgrade for a rather large portion of iPhone users -- a much more attractive one than either the iPhone 8 or the iPhone 8 Plus were, at least.
Don't forget the iPhone X Plus
Though just 8% of respondents indicated that they wanted a larger screen before upgrading, that single-digit percentage could still translate into millions of annual unit shipments of the rumored iPhone X Plus. Moreover, those devices would surely be the priciest models in Apple's lineup (and quite likely the most expensive iPhones ever sold), so bringing such devices out could help amplify Apple's iPhone average selling price and, in turn, revenue growth.
Ultimately, the iPhones that Apple released in late 2017 were solid efforts, but the portfolio clearly wasn't as strong as it could've been -- it needed a device with a new form factor at a more accessible price point, and it also needed a larger variant of the iPhone X for iPhone users who have historically purchased the company's iPhone Plus devices.
Apple's 2018 lineup seems to address both of those deficiencies, so Apple's iPhone business stands a very good chance of exhibiting significant unit shipment, revenue, and profit growth in the coming fiscal year 2019.
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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.