Apple Inc (NASDAQ:AAPL) announced the iPhone6 in early September and finally started shipping it on Sept 19th. The iPhone once again delivered a bumper weekend, notching up over 10 million device sales and bettering on the previous record of 9 million units held by the 5S and 5C launch weekend sales. The huge demand for the phone6 has had iPhone sales estimates for 2015 revised upwards. We estimate the revenue potential of the iPhone 6 and also the overall revenue growth potential for the iPhone family.
iPhone6: Driving Apple revenue’s higher
The iPhone is the largest contributor to Apple’s topline, contributing 53% to Apple 2013 revenue, up from 18% contribution in 2008.
The dollar sales of the iPhones have assumed gigantic proportions, coming in at 91.3 billion in 2013.
While the growth rate of the product revenues has slowed down significantly over the years, the iPhone6 will help revive growth in this product segment.
The iPhone6 will impact Apple in two major ways.
The demand for larger form factor devices and the pent up demand on account of low refreshes over the last year will drive the unit sales.
The higher pricing structure for the larger devices will help drive the revenue growth and profitability of Apple higher.
Huge demand for larger form factor devices
In an earlier post, we had covered how Apple entry into large screen devices has been perfectly timed. We identified the demand for larger screen devices and refresh cycle of iPhone 5 users as the two main catalysts of iPhone6 demand.
According to a post on Business Insider, the 4 inch models of the iPhone (iPhone 5, iPhone 5S and iPhone 5C)currently account for 60% of iPhone market share by model. The iPhone5 is the most popular device with a 27% market share followed by iPhone 5S with 25%. It is clear that iPhone customers are willing to upgrade to a higher screen model and Apple’s move to launch larger screen devices is justified.
According to a post on cnet.com,JP Morgan analyst Rod Hall estimates FY 2015 iPhone sales at 235 million units on an aggressive estimate while a more realistic 200 million units is a less bullish estimate. The FY 2014 unit sales are expected to come in at 167 million units (Based on Q4 2013 estimate of 37 million). Assuming the actual FY 2015 sales come closer to 200 million units, we estimate the revenue potential of the iPhone6.
iPhone FY 2015 sales estimates
We estimate the average selling price(ASP) of the iPhone 6 and iPhone6 plus to be around the $700, based on current contract free prices on Apple online store. We estimate iPhone 6 to account for at least 25% of FY 2015 iPhone sales of 200 million based on historic iPhone sales market share data. The percentage could be higher on account of larger upgrades from iPhone 5 users, who account for a large portion of current iPhone users.
In conclusion, total iPhone sales in FY 2015 will be driven by iPhone6 sales and also the higher ASP of the new models. We estimate iPhone revenues to come in between $124.5 to $146 billion in 2015, implying a YoY growth of 23% with the iPhone6 accounting for about 30% of iPhone product revenues in FY 2015. The iPhone6 will truly revive growth in Apple’s largest revenue segment.