Millions of Android Owners are Switching to iPhone

By Sam

The iPhone 6s. Photo: Apple.

Owners of Android handsets continue to flock to Apple's iPhone.

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Apple reported a record number of Android converts last quarter: of the iPhones sold to existing smartphone owners, 30% had previously owned a handset powered by Alphabet's Android operating system. Apple's management didn't offer an exact unit figure, but it likely represents handset sales of around 10 million. Given Apple'spropensityto retain iPhone customers, continued Android conversion should be viewed favorably.

30% of existing smartphone ownersApple sold 48.04 million iPhones last quarter, up 22% on an annual basis. Apple did not disclose exactly how many of those phones were sold to Android converts, but it may have been around 20%.

As the smartphone market has matured, the number of first-time iPhone buyers has declined. In 2012, only about one-third of the iPhones Apple sold were replacements according to analysts at Sanford Bernstein, but that figure has surged in recent years. In January, Kantar Worldpanel reported that more than 80% of the iPhones Apple sold in the fall of 2014 went to existing smartphone owners.

This trend was inevitable -- as more smartphones are sold, the total number of potential new buyers will decline. Nearly two-thirds of American adults now own smartphones, according to Pew Research, up from about 35% in 2011. Even emerging markets are showing signs of saturation. According to Gartner, Chinese smartphone sales fell 4% in the second quarter.

If half of the iPhones Apple sold last quarter went to first-time smartphone buyers, then about 7.2 million iPhones were sold to Android converts. But first-time buyers likely represented a far lower percentage -- perhaps 20% or 25%. In that case, Android owners may have purchased around 10 million to 12 million iPhones.

Android's market share isn't expected to declineThat's significant, but it isn't enough to pose an existential threat to Alphabet's mobile operating system. More than 355 million smartphones were shipped last quarter, according to research firm IDC, and about 300 million of them were powered by Android. IDC expects Android's smartphone market share to remain stable over the next four years, hovering at around 81%.

But every Android owner Apple converts benefits the Cupertino tech giant's bottom line, both in the near-term and in the long-run. iPhone customers are famously loyal, and once captured, they may never return to the Android ecosystem. Consumer Intelligence Research Partners found that, in the U.S., 78% of upgrading iPhone owners chose another iPhone in the second quarter.

Unlike other smartphone vendors, Apple has always clearlyreported the number of smartphones it sells each quarter, but it has never consistently broken down the numbersold to Android owners. Apple CEO Tim Cook began discussing the concept in Apple's fourth quarter earnings call last year, and hasemphasizedit with greaterfrequency in each successive call.

Apple's iPhone 6 and iPhone 6 Plus, with their larger displays, were the first iPhones well-positionedto appeal to Android fans. The iPhone 6s and iPhone 6s Plus continue that trend.

On Apple's last earnings call, Cook stated that converting Android owners would play a key role in driving additional iPhone sales going forward. "We believe that iPhone will grow [next quarter], and we base that on what we are seeing from [an Android] switcher point of view," he said.

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Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends Gartner. 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.

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