Every other year, for nearly a decade now, Apple has released a redesigned, updated version of its iPhone smartphone. But it’s been reported that its next new phone, the iPhone 7, will look pretty much identical to the iPhone 6 and 6S. According to some sources, Apple will then skip making an “S” model in 2017, and go straight to releasing an iPhone 8 that will be a complete overhaul stylistically and technologically.
If these rumors are true, many ardent Apple fans that queue up year after year to get the company’s latest mobiles on launch day may find themselves a little disappointed this year. Apple has established a cycle that many iPhone owners have fallen into over the last decade, of getting a new phone, and a new cell contract with that phone, every two years, with some people jumping on each new number model, and others waiting until the kinks have been worked out a year later on the “S” models. But over the last few years, cellphone companies—especially in the US—have started offering new types of contracts that allow customers to pick up a new phone every year and keep a rolling two-year contract with their cell provider. Apple also offers its own iPhone upgrade program, where customers can essentially lease a phone off of Apple for a monthly fee and upgrade to a new model each year.
It’s not entirely clear why Apple is potentially changing its upgrade cycle, but one theory seems the most plausible: There simply isn’t anything left to innovate on in the short term. As Nikkei put it in May when reports first surfaced that Apple might switch its cycle: “The move is largely due to smartphone functions having little room left for major enhancements.” So Apple appears to be making a series of minor upgrades in 2016, and go with what Apple reporter Mark Gurman called on a recent podcast a “total reset” in 2017.
Will Apple’s decision to not release a redesigned iPhone in 2016 affect how often its customers upgrade their devices? The overwhelming majority of Apple’s revenue comes from iPhone sales—which saw their first quarter-over-quarter drop in April—and any shift in the company’s sales strategy could have a dramatic impact on its revenue over the next few years.
Quartz recently polled 525 US iPhone owners using SurveyMonkey Audience (methodology details are below)—and discovered that many likely wouldn’t upgrade to a new phone this year if Apple doesn’t release a redesigned iPhone. Under the current upgrade cycle, the average customer is upgrading their phone every two years, which means in a six-year period, they buy three new phones. If they switched to upgrading every three years, they would only buy two new phones in that same period. That could badly hurt Apple’s earnings.
About 25% of respondents said they’re either extremely or very interested in upgrading to each new iPhone redesign.
But only about 10% said they were extremely or very likely to upgrade to a new iPhone this year if Apple doesn’t redesign the phone.
And the majority of respondents—70%—said they were either extremely, very or somewhat likely to changing their upgrade habits to match Apple’s if the company starts refreshing the iPhone every three years instead of two.
What can Apple do in the meantime to shore up its revenue, if it’s holding out for a bigger release in 2017? Apple has tried to smooth out the issue with its iPhone upgrade program. But estimates suggest that relatively few people have signed up for the offering, so Apple might have to look to other sources to cover the gap.
Apple’s growing services business—which comes from sales of movies, apps, and games on iTunes and the App Store, along with AppleCare insurance, ApplePay fees, and other intangibles—may also help. Services is now the company’s second-largest business unit, and engaging content on its stores help keep people locked into the Apple ecosystem with small purchases. However, while services are indeed growing—they now account for about $6 billion per quarter of Apple’s revenue—they’re still far, far less than what the company makes on iPhone sales: Last quarter Apple raked in over $32 billion in iPhone sales.
But perhaps people will just realize that they need a new phone. Some analysts believe that roughly 60% of iPhone owners are currently using phones older than the iPhone 6, meaning there’s a lot of potential for customers to upgrade this year out of necessity, even if the next iPhone itself is underwhelming.
Some details on the methodology behind our poll data: The survey of 525 iPhone-owning adults was conducted June 21 – July 5, 2016 using SurveyMonkey Audience, a proprietary online panel. Respondents for this survey were selected to mirror the age and sex proportions of adults according to the U.S. Census.