Apple’s Next Big Refresh Cycle Could Be Tied To 5G

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Next week, Apple will hold an event at the Steve Jobs Theater on their Cupertino spaceship campus and show off their newest version of the iPhone. Much has been speculated on this new iPhone that suggests the upper-end models will sport three cameras, instead of two as in past iPhones. This reportedly will allow for better wide-angled photos and include new imaging AI software that will make it the best camera in an iPhone Apple has ever created.

In the recent past, the rumor mill on products Apple will introduce at their events have been relatively accurate, but the truth is we never really know what Apple has up their sleeves until they introduce these new products at their events.

One of the more important questions I get surrounding any new iPhone release is if this will be the new iPhone that will start a new refresh cycle for Apple. When the original iPhone was introduced in 2007, dubbed the Jesus Phone, since it was so hyped and highly anticipated, many expected it to sell in huge numbers even in its first year. While the iPhone was a groundbreaking product, in its first year it only sold about 1 million units. This was partly because Apple had not rolled out any third party software yet and it only included software Apple had built into the original iPhone.

By the start of the second year the iPhone was on the market, Apple had developed its initial 3rd party software development platform and strategy, and when it launched the third generation of the iPhone, that included innovative applications from thousands of software vendors, the original burst cycle for iPhone demand began. In its third year, it sold around 20 million units and like clockwork, Apple launched new versions of an iPhone each fall with new features, faster processors, better screens, and more software.

After that third full year of the iPhone on the market, we started to see what is called a refresh cycle, as people with iPhone 1 and even iPhone 2, began to replace their iPhones with new models. Refresh cycles in those days had more to do with people’s subsidized programs with their carriers, but as their iPhone’s got older and new ones offered more power, better screens, more powerful cameras, etc, demand for new iPhones grew exponentially.

One significant refresh cycle was large. When Apple introduced an iPhone with a 4-inch screen, up from the original 3.5 inches in the first three models, we saw a huge demand for new iPhones. This larger version was introduced on September 12, 2012, in the iPhone 5. The year before, Apple introduced the first Retina display that was a big hit, but the iPhone 5 with the 4-inch screen caused a strong refresh cycle and pushed Apple’s iPhone sales for 2013 to 150.26 million units.

In fact, with every increase in screen size on new iPhones, there has been an increase in iPhone refresh cycles and these refresh cycles hit its peak in 2015 when Apple sold 231 million iPhones tied to the then new iPhone 6 Plus. To be clear, screen size was not the only factor in causing new refresh cycles. Each year Apple increases the quality of the display, uses more powerful processors, adds better cameras, etc.

The last major iPhone refresh cycle came after the introduction of the iPhone 6 Plus, which drove 52% year-over-year iPhone revenue growth in 2015.

Over the last three years, with people keeping their iPhones for longer periods, we have not seen any significant refresh cycles kick in even though each year new iPhones are better and more powerful. Indeed, in 2016 Apple sold 211.88 million iPhones, in 2017 Apple sold 216.76 million iPhones and in 2018, Apple sold 217.72 million new iPhones.

But if Apple brings a new iPhone out in 2020 that includes a 5G modem, we could see the largest refresh cycle in Apple’s history during the full year of 2021. Although 5G availability around the world is still in its early stages today, by 2021, most of the major countries in Asia and Europe should have wide 5G coverage. In the US, the carriers promise to have at least 90% of the US blanketed with 5G capabilities by the end of 2021.

There have been some articles written recently that believe the concept of refresh cycles are a thing of the past. But this viewpoint does not take into account how transformational 5G will be over the next 2-4 years. These new mobile speeds will allow for new applications and services not available on 4G today, including, AR and mixed reality, 3D-like visual content and many others that Apple and 3rdparty vendors will create to take advantage of 5G speeds.  That is why I believe that there will be at least one more strong refresh cycle over the next few years as more and more Apple customers upgrade to new iPhones that support 5G.

That does not mean that Apple will not have a strong holiday season this year though. Many financial analysts believe that what Apple will be offering in new iPhones next week will be strong enough to drive as much as 80 million units in this coming holiday quarter. While this would not be the beginning of a new refresh cycle, these models will have enough new features and functions that it will still be a big hit and be a strong product for most of 2020.

Some industry analysts and media have suggested that we could see many customers hold off buying new iPhones this year and just wait for 5G models when they start coming out to upgrade. While that may be true for some, one thing I have learned from researching iPhone sales since 2007, is that most people look at what Apple introduces each year and are more interested in what Apple can do for them now, not next year or the year after.

But there is no question in my mind that once an iPhone with 5G comes out, it will be the next Apple iPhone that drives a very large refresh cycle for at least three years going forward. Once this happens, the majority of iPhone users will want to have phones that can deliver 5G speeds and we should see Apple sell a record number of iPhones in this next 2-to-3 year refresh cycle.

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