iPhone growth “a matter of when, not if,” says UBS

Justina Crabtree; special to

Apple is on course to enjoy a 5 percent bump in its iPhone sales for 2017, followed by a strong gain of close to 20 percent in 2018, according to a UBS report released Wednesday.

The report anticipates that iPhone sales in 2017 will be 222 million, up from its earlier forecast of 207 million. Additionally, its 2018 sales prediction has ballooned to 264 million from a previous 240 million, equaling an 18 percent rise. The figures acknowledge iPhone upgrade growth offsetting a fall in new users.

Li Muzi | Xinhua | Getty Images

UBS reasons that a large existing consumer base and high retention rates mean inevitable growth for Apple. "The question of iPhone growth is a matter of when, not if," UBS asserts in its report.

But Apple has a number of rivals aiming to take a slice of its business. Samsung Wednesday launched the Note 7, a premium smartphone released just ahead of Apple's iPhone 7 expected launch next month.

Daniel Gleeson, senior analyst in consumer technology at Ovum, told CNBC via email: "There are signs that some of Apple's fans may be starting to tire of the brand," citing a drop in iPhone and iPad shipments, as well as the less successful Apple Watch.

"If the new iPhone fails to excite consumers, the door opens for Samsung's very unique devices to steal significant market share from Apple."

But, Apple continues to report momentum in poaching Android users, signifying the strength of its brand.

Over 200 million iPhone users are yet to upgrade to a handset with a larger screen, say UBS, indicating that this could be a key consumer base for growth.

However, Gleeson said that this group is "not a viable target for conversion," as "large screen smartphones are prevalent enough now for this group to have easily obtained one, so it's likely the smaller form factor is a key feature for this group."

Samsung launches the Galaxy Note 7
Samsung launches the Galaxy Note 7

UBS' global handset survey, released in May this year, suggests that iPhone 7 demand is "in between that of the stellar 6 and the disappointing 6S."

According to the bank's findings, the percentage of survey respondents intending to buy the iPhone 7 compared to the 6S is up three points in the U.S. and a point in China.

UBS also believes that Apple "is in the midst of a longer-term extension of the [iPhone] upgrade cycle as the average person moves from being a two-year to a three or four-year upgrader."

According to the report, this is chiefly due to new carrier plans in the U.S., less differentiation between iPhones, and higher quality devices meaning that frequent upgrades are unnecessary.

New customers to Apple are mostly smartphone model switchers, alongside some first-time buyers. UBS suggest that with Apple's upgrade sales lightening, 45 percent of unit sales this year could comprise of new customers, though this group is estimated to have declined by 4 percent in comparison to 2015.

Is Apple's iPhone threatened by disruption like many of its hardware company counterparts? "Probably not," say UBS, "admittedly making Apple an exception to the rule of 'good enough' technology undercutting leaders."

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