‘Peak smartphone’ is why Tim Cook is so hot for switchers

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Apple CEO Tim Cook gladly welcomes Android users to make the switch.
Apple CEO Tim Cook gladly welcomes Android users to make the switch.
Photo: Roberto Baldwin/The Next Web (2014)

Apple convinced us we couldn’t live without a smartphone. Now many of us have a smartphone in hand and Apple may be facing the curse side of the blessing — finding new customers for the iPhone.

Credit Suisse recently issued a report to investors that further fuels speculation that iPhone sales will dip for the first time since Apple introduced it in 2007. The upshot: Smartphone ownership is approaching 100 percent. We’re nearing “peak smartphone.”

Business Insider, which obtained the report and broke the news Wednesday, said 2015 will close with the first-ever drop in smartphone buyers. Future smartphone sales will be based on upgrades or new phones for existing customers.

Quarter-by-quarter sales jumps have made the iPhone Apple’s top source of revenue. But until Cupertino comes up with the next big thing — will it be the Apple Watch or some sort of car? — slumping iPhone sales could hurt Apple’s growth, some say.

“That fact helps explain why (Apple CEO Tim) Cook has become obsessed with ‘Android switchers’ – people who already own smartphones but change them for iPhones – on his recent earnings calls,” Business Insider’s Jim Edwards wrote. “And it also helps explain why Apple’s big new marketing push is to persuade customers to sign up for pay-as-you-go plans that will upgrade their phones to the new iPhone model every year.

“Apple is running out of new people to sell phones to, and the quality of the iPhone is so good that users don’t need to upgrade them every year – they last a long time.”

While the iPhone 6s offers impressive new or upgraded features, like more megapixels in the camera, 4K video and Live Photos, iPhone 6 users may be content to wait for an iPhone 7.

Business Insider earlier this year reported Wall Street predictions of an iPhone sales slump. Apple’s chip supplier indicated its revenues were in decline because of weaker demand in its mobile business. Credit Suisse also reported Apple is cutting its orders of the iPhone 6s.

But not every analyst is quick to predict a halt in iPhone sales growth.

Horace Dediu of Asymco told Cult of Mac it will be a while before everyone has a smartphone. He also said sales will remain high thanks to Android users switching to Apple. Dediu believes there are plenty of non-smartphone users up for grabs

“There aren’t 7 billion smartphone users in the world,” Dediu said. “Apple has been converting non-users and Android users quite successfully. Many surveys and Apple’s own management have cited conversion rates as high as 25 percent. That’s quite remarkable for a product that is at least twice as expensive as the alternatives.”

Credit Suisse did predict earlier that rumors of Apple coming out with a smaller, cheaper iPhone early next year could help boost sales.

Dediu believes all the hand-wringing now by investors sounds similar to fears of market saturation investors had in 2012, when Apple shares dropped by 40 percent.

“We can easily observe the behavior of Apple’s products in a saturated market,” Dediu said. “The PC market grew continuously from 1974 to 2010. Since well before 2010, Mac shipments have grown pretty consistently. Apple’s business is to make products that appeal to people who have purchased something else (as well as those who have not yet purchased anything in that category).”

So as Cook keeps one eye on the future, he may be able to watch with the other as the non-believers cross over.

Source: Business Insider