iPhone Eruption
According to a number of sources, the recently released iPhone 17 series is selling better than the iPhone 16 series in its two largest markets, China and the US. As such headlines are typically serving to garner clicks and contain little real information or data, we took things a bit further to try and flesh out what those headlines really mean.
Apple (AAPL) avoids the term MSRP (Manufacturers Suggested Retail Price) for legal liability reasons, referring to ‘retail price’, but retailers themselves often use MSRP to indicate ‘list price’ for the phones. A comparison of list prices of iPhone models for the years 2015 – 2017 is shown below:
Apple (AAPL) avoids the term MSRP (Manufacturers Suggested Retail Price) for legal liability reasons, referring to ‘retail price’, but retailers themselves often use MSRP to indicate ‘list price’ for the phones. A comparison of list prices of iPhone models for the years 2015 – 2017 is shown below:
Given that the initial price for the iPhone 17 base model is $100 cheaper than its series 16 equivalent, it is difficult to evaluate the influence other factors (features, style improvements, etc.) might be having on early iPhone 17 sales, but given that both the US and China are the iPhone’s largest markets, we also compare the US base price to the Chinese base price below:
As can be seen, the Chinese MSRP prices are higher than those in the US, giving an advantage to US buyers, but both US and Chinese buyers are also offered a number of ‘discount’ options that can reduce the price of upgrading or switching carriers to as low as zero, however almost all carrier discounts still require full payment with a 24, 30, or 36 month bill credit repayment system that also typically requires signing up for a new (usually the high-priced plans) plan. Apple and others offer trade-in discounts, in some cases regardless of the condition of the trade-in, although the values drop quickly when you trade in older models.
In China, retailers offer coupons (ostensibly for the 11/11 shopping holiday, although it is mid-October) and rebates that are specific to retailers and platforms. T-Mall (BABA) offered coupons that lowered prices of some models by ¥300 ($42.13), while offered coupons up to ¥900 ($126.38) which lowered the prices of some models below the US MSRP, and almost all offered interest free installment pay plans.
So with all of this price chicanery, did the numbers for this year pane out? On a combined basis over the first 10 days of availability the iPhone 17 series outsold the iPhone 16 series by 14%[1] y/y, with 8.8 million units sold versus 7.7 million last year. Here’s how it breaks out between the US and China, along with model growth:
[1] Source: Counterpoint
In China, retailers offer coupons (ostensibly for the 11/11 shopping holiday, although it is mid-October) and rebates that are specific to retailers and platforms. T-Mall (BABA) offered coupons that lowered prices of some models by ¥300 ($42.13), while offered coupons up to ¥900 ($126.38) which lowered the prices of some models below the US MSRP, and almost all offered interest free installment pay plans.
So with all of this price chicanery, did the numbers for this year pane out? On a combined basis over the first 10 days of availability the iPhone 17 series outsold the iPhone 16 series by 14%[1] y/y, with 8.8 million units sold versus 7.7 million last year. Here’s how it breaks out between the US and China, along with model growth:
[1] Source: Counterpoint
We estimate that Apple sells between 72 and 90 million iPhones in the 4th calendar quarter of the year (see table below). While this can be heavily weighted toward the current year’s models it also includes sales of previous year models, making current iPhone series estimates difficult and basing 4Q unit volume on a 14% y/y gain during the first 10 days does not account for the natural tapering of enthusiasm that occurs in each sales cycle. While we would like to get a longer picture as to iPhone 17 series sales, especially in the US, we estimate a 4% to 5% improvement in total iPhone shipments in the 4th calendar quarter, or 80.7 million units. Not a record, but certainly an improvement over last year, which was up 7% over the previous year’s models (iPhone 15) during the 1st 10 days of sales. Rumors have been circulating that Apple has already cut the number of iPhone 17 Air units it is having assembled and increased the number of iPhone Basic units by ~5 million. Whether that number will all appear in 4Q or be spread into 1Q or 2Q is unknown.
All in, this is certainly positive news for Apple, but we hesitate to overstate the potential given the ongoing trade battle between the US and China. Apple is certainly not hesitating to ‘kiss the ring’, making contributions to the WH Ballroom project, pledging a new $100 billion commitment to US manufacturing, and announcing plans for a new AI hardware plant in Texas. But staying on the good side of the President is a hit or miss proposition and companies can move in and out of favor quickly. And if sentiment sours further anti-American sentiment in China could flare. It seems that Apple was able to maintain the excitement needed for a replacement cycle. Now they have to keep that momentum going for the next year.
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