Market

At 60% ownership, is the U.S. smartphone market saturated?

July 18, 2013: 8:05 AM ET

Technically no, but the dynamics of the market are shifting in interesting ways.

Click to enlarge.

Click to enlarge.

FORTUNE -- On Wednesday, Asymco's Horace Dediu posted the chart at right in response to a statement by UBS analyst John Hodulik  -- reflecting conventional wisdom on Wall Street -- that "everybody has got a smartphone."

Using comScore data, Dediu was able to show

  • That 40% of U.S. mobile customers still use feature phones and represent an untapped market
  • That except for BlackBerry, churn between smart platforms is still negligible; it's the non-smartphone makers who are shedding customers
  • That even at 60% penetration, the rate of smartphone adoption is not slowing in any perceptible way.

Moreover, since the rest of the world's mobile users own fewer than half as many smartphones per capita, Dediu concludes that, as he puts it, "4 billion people are about to switch."

That's what Dediu had to say.

But the story doesn't stop there. As often happens on Dediu's Asymco blog, his well-informed (and enviably well-behaved) readers picked up the ball and ran with it.

I recommend the entire thread, but if you have time for only one comment, scroll down to the long post by "Chaka10." Using data from a proprietary survey conducted by Consumer Intelligence Research Partners, he (or she) was able to tease out how many iPhone customers in each of the past 12 quarters were first-time smartphone buyers, how many were switching from another smartphone platform, and how many were loyal Apple (AAPL) customers coming back to buy another iPhone.

Chaka10 worked out what he called a "replacement demand ratio" and showed that it follows an observable pattern, peaking consistently -- and strikingly -- two years after the launch of a new iPhone.

The conclusion he reaches that is most relevant to Apple investors is that current Wall Street estimates for iPhone sales last quarter significantly underestimate the total, because they underestimate the impact of replacement demand.

He unpacks Wall Street's unit sales estimates -- which ranged in Fortune's survey from 23 million to 30 million -- to show that they imply a replacement ratio of 69% to 88%. In contrast, Chakra10's analysis --which allows for the replacement of a lot of iPhones that are two or more years old --  implies a year-over-year growth in replacement sales of 243%

In other words, Wall Street, having bought into the "everybody has got a smartphone"  meme, may be seriously underestimating how many iPhones Apple actually sold in Q3 2013.

We'll find out if he's right next Tuesday.

Asymco link: "Everybody has got a smartphone."

  • The iPhone has room to grow

    Apple's most popular product is not for sale to half the world's 6 billion mobile users

    FORTUNE -- The next time someone tells you that the market for Apple's (AAPL) iPhone is saturated, think of the chart at right posted Wednesday by Asymco's Horace Dediu.

    At last count, he writes, the iPhone was being sold by only 30% of the world's 816 mobile phone operators. Some of those carriers are bigger than MORE

    - Nov 22, 2012 8:15 AM ET
  • Apple soars $38.05, its second highest one-day dollar gain

    Been down so long it looks like up to Apple shareholders

    FORTUNE -- After one of the longest bear markets in its roller-coaster history, Apple (AAPL) rebounded Monday, closing at $565.73, up $38.05 (7.21%) for the day, while pulling the NASDAQ (+2.21%) and S&P 500 (+1.99%) up along with it.

    It was Apple's second best day since 1984 in terms of dollar gains, second only to April 25, 2012, when the stock rose MORE

    - Nov 19, 2012 4:31 PM ET
  • With partners like Verizon, who needs adversaries?

    Verizon is said to be building a rival Android market that will supplant Google's own.

    You'd think that Verizon (VZ) putting Microsoft's (MSFT) rival search and mapping engines on Google's phone OS is the worst thing they'd do to Google this week.  According to "Android and Me" you might be wrong.  The blog says that Verizon is planning its own alternative app store, one that is curated like Apple's (AAPL) iOS MORE

    - Sep 14, 2010 10:46 AM ET
  • Android Market purchases soon billable to more carriers?

    Changes to the developer agreement may signal a new means of paying for apps in Google's mobile OS.

    On Friday, Internet legend Tim Bray announced on the Android developer blog big changes to the Android Market Developer Distribution Agreement (DDA):

    Please note that we have updated the Android Market Developer Distribution Agreement (DDA). This is in preparation for some work we're doing on introducing new payment options, which we think developers will like.

    In MORE

    - Jul 25, 2010 11:47 AM ET
  • Speed Texting on Android: ThickButtons

    ThickButtons is another way to increase your texting speed and accuracy on Android.

    I wrote earlier today about Swype, a new way of texting.  Swype's method of sliding instead of tapping is pretty effective but requires a radically new way of thinking.

    If you want something a lot easier (both to install and use) have a look at ThickButtons.  The idea is that it anticipates what combinations of letters you are likely to use and makes MORE

    - Jun 16, 2010 10:16 PM ET
  • Android Market hits 50,000 apps

    Launched in October 2008, the Android Market now has 50,000 apps to choose from in its application marketplace.

    While not nearly as quick as the iPhone to 50,000 apps, which Apple achieved within a year, the Android Market is proving to be the alternative market for mobile apps.  The Android Market was announced on August 28, 2008 and was made available to users two months later.  This weekend, it passed the MORE

    - Apr 26, 2010 12:21 PM ET
    Posted in: , , ,
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.