The iPhone 8 launch will go up against a problem of Apple's own making

There are two ways to think about the launch of the new iPhone, expected in September:

•    It will be the biggest iPhone launch apple has ever done, eclipsing iPhone 6, as Apple has a massive installed base of users waiting to upgrade to the first truly new iPhone since 2015. Some are calling this

•    Or — conversely — it will be a distinctly "meh" launch, as iPhone users hold onto their phones for longer and longer periods, and delay replacing them until prices fall in 2018. 

The second scenario is very real for Apple, as two of its flagship products already suffer from a lack of upgrade sales:  The problem is that Apple's devices are almost too good: People don't replace their iPads because they don't need to. An old one works just as well as a new one for most users. iPad sales declined 19% last quarter as a result.

And Apple's newer Macs are fine. But I am typing this on an old Macbook built in 2012 — and it works just fine, too. I am under no pressure to get a new one. Mac sales were flat in the most recent period.

Now the same thing is happening to iPhone.

Time was, the useful life of a smartphone was about two years. That also roughly coincided with wireless subscriber contract lengths, prompting a giant wave of people to buy a new phone about once every two years. But Apple's phones are well-made, and now they last much longer.

Since iPhone 6, Apple hasn't given the iPhone a dramatic update. If you're still using an iPhone 6 you haven't missed much by not upgrading to iPhone 6s or iPhone 7.

That quality and longevity are coming back to haunt Apple, according to Citi analysts Jim Suva and Asiya Merchant. Apple's installed base of customers is getting larger, suggesting that when they upgrade sales of the new "iPhone 8" will be massive. But at the same time, replacement rates are stretching from two years to three years, lowering the percentage of existing customers that make new purchases:

So, even though the installed base of iPhone users will be 500 million people this year (up from 300 million in 2015), the number of potential upgraders will fall from 85% to 75%. Android is also getting better at holding its customers, so the percentage of new users who switch into iPhone will decline from 10% to 4% of new sales, the Citi team believes:

Shoot

Trending News

Why Amazon’s Flipkart bid is just not high enough

Selling without MRP, expiry dates to cost etailers

TCS hits $100Bn market cap: A new phase for India Inc?

Snapdeal posts Rs 4,647 crore net loss in 2016-17

Flipkart-Walmart deal: What it means for the etailer and the whole industry

NCLAT stays CCI penalty of Rs 136cr on Google in search bias case

Walmart may rope in Google parent Alphabet for the Flipkart deal

Internet shutdown cost Indian economy $3 billion from 2012-17: Study

Flipkart and Amazon plan mega summer sales in May

International sales now account for 48% of Twitter's revenues

70% of mobile phones buyers in India opt for non-cash payments

Amazon India expects groceries & household products to account for 50% of business in 5 yrs

India to come out with a E-commerce policy framework in 6 months

Online learning platform Career Anna raises Rs 3 Cr funding

Wal-Mart will offer to buy up to 86% of Flipkart

Agritech startups Sabziwala and LivLush merge their business under new entity Kamatan

Avail Finance lands $17.2M from Matrix Partners & Ola, Freecharge and Flipkart founders

RBI suggests tax sops, self-regulation to build fintech space

Swiggy hires new CEO for its Access Service, gets new CFO

Logistics company Delhivery registers 44% increase in FY17 revenues

WeWork to acquire one of the oldest social networks, Meetup

Qualcomm rejects Broadcom's $103 billion offer

EasyRewardz gets $2 million Series-A funding

'Anemic' iPhone 8 demand drags Apple shares lower

Lending platform Lenden Club gets Rs 3.5cr in Equity Investment

On festive sales, Flipkart says 65% clients from Tier-II cities