So iPhones don't seem all that expensive now, you say?
Long-term support matters, here's how it changes things in a smartphone market in decline
It’s not as if 2022 started out on a positive note anyway — what with another COVID wave surging through many countries and the Russian invasion of Ukraine all happening during its first quarter — but it now seems that we are on the verge of an economic recession of unknown duration too. People are being laid off left and right, sales in many product categories are slowing down because of how expensive essential stuff has gotten, while consumer confidence is waning fast across the board. It’s one thing reading about all that, though, and quite another finding out it’s already happening too close for comfort. Case in point? The informal summer poll usually taken among friends, relatives and colleagues ahead of September’s Apple expected event: “So, who’s buying the new iPhone in October?”
It used to be an easy question to answer, at least within the social circle of yours truly: people who had bought last year’s model usually chose to stick to that for at least another year (and rightly so). People who used an iPhone from two years ago were often interested but, for most of them, it all depended on how much money they’d be able to get when reselling their current model. Sometimes it worked out as they hoped, sometimes not. It was only people using the same iPhone for three or more years that expressed any kind of certainty about getting the latest iPhone. Apple does not publicly share data on this matter, but all this does sound like the average three-year upgrade cycle the company has been talking to investors about for a while now.
This year, though? Of the dozen or so people asked, just one is buying a new iPhone 14 model in the autumn. Yes, that is correct. Less than 10% of the immediate social circle yours truly finds himself in is interested in getting a new iPhone in 2022. But here’s the interesting part: is it because of the current market climate? Well, obviously, but that’s not the only reason and it does not apply to every case (there are still people lucky enough to afford most of what they’d like to own). Is it because the new iPhone’s hardware will either not be impressively upgraded or not upgraded at all, depending on the model? Well… maybe, but most of the people asked didn’t even know about that, to be honest.
No. The real reason was casually hidden amidst the words of a simple answer. When asked if they plan on getting a new iPhone in the autumn, most friends, relatives or colleagues responded with something along the lines of “No man, I think I’ll upgrade to iOS 16 and stick with my iPhone for one more year”.
This deserves a closer look because it drives a few points home. One: all the people who went for that answer were certain that their iPhone will be getting the iOS 16 upgrade (they were right… even though it’s highly doubtful that most of them had checked whether their current model actually supports it or not). Two: the same people seem to think that the software upgrade is almost as important as the hardware upgrade would be and that they’d happily settle for that (which is pretty amazing in terms of how we nerds perceive product cycles). Three: every one of those people seems to recognize the value that the free upgrade to a new operating system brings to their not-new-anymore iPhone. They’d like to be able to get the new one, sure, but it’s OK if they can’t… because they’ll get a new iOS.
The ratio of one prospective new iPhone buyer out of twelve is not exactly what Apple would happily settle for, of course, but that’s hardly the point, which is this: the other eleven or so consumers feel that their current iPhone is good enough to serve them for another year if they upgrade to iOS 16. Would they feel the same if they weren’t able to do so? Maybe not. Would they be out buying a new iPhone because of iOS 16 alone? Most probably not. Would they hate being left behind on a previous iOS version? Most probably yes. Do they know that they’ll not be getting all of iOS 16’s new features, depending on their current iPhone? Some do, some do not. But they all clearly deem iOS 16 more than a bonus for owning an iPhone — which is more than what anyone could ever say for any version of Android.
Yours truly has, like many others in the past, accused Apple of overcharging for its iPhone models and striving to maintain its fat profit margins — margins other smartphone manufacturers can only dream of — by any means necessary. Comparing the bill of materials of each iPhone to its retail price every year makes for an almost infuriating reading. In a market about to enter a recession period, though, the long-term iOS support feels different: Apple giving hundreds of millions of consumers not able to get a new iPhone in 2022 the option to stick to their current one and still get a number of new benefits from a major free software upgrade is something that Android users simply can’t take for granted. No wonder iPhone users rarely ever leave the Apple ecosystem for Android, despite a number of advantages offered by the latter: it’s this kind of support that inspires that kind of loyalty.
According to CounterPoint’s recent reports, not only did the smartphone market in Europe drop by 12% year over year during the last quarter, but sales in the smartphone market globally fell below 100 million units in May — only the second time this has happened in a decade. The situation is not expected to get much better throughout 2022 in most of the world and Apple will surely be affected, as will all smartphone manufacturers.
The difference between the Cupertino giant and the rest of them, though? When the smartphone market eventually bounces back, hundreds of millions of iPhone users will have realized that their handset of choice was expensive because it included 5 years of major software upgrades and updates, allowing them to go through that rough patch without having to buy a new smartphone. If that does not inspire the next wave of a billion loyal iPhone owners, then nothing will.