iPhone Launch Takeaway: Xs Max Demand Exceeds Historical Plus Demand

By Gene Munster and Will Thompson of Loup Ventures

We surveyed 50 customers outside of 5 U.S. Apple stores [Saturday] morning. Notably, there were 406 people in line at New York’s 5th Avenue store, compared to 821 for the iPhone X and 293 for the iPhone 8.

• Interest in the Xs Max exceeded historical demand for Plus versions, with 70% of survey respondents buying an Xs Max vs. an average of 54% for Plus versions.
• This gives us confidence in our $791 ASP estimate for FY19, compared to the Street at $765.
• 71% of respondents were replacing phones that were only one year old (iPhone X and 8).

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Lines for iPhone Xs and Xs Max Were Short, As Expected

This year’s iPhone Xs/Xs Max launch line at Apple’s flagship 5th Avenue store in New York was 406 people vs last year’s two separate launches which saw 821 for the iPhone X and 293 for the iPhone 8. Overall, this line count is in line with our expectations for two reasons:

1. Consumers are increasingly pre-ordering devices online to avoid long lines on launch day.
2. We expect iPhone Xr, which debuts on October 23, to account for 38% of iPhones sold in the next year, compared to 21% for the Xs and Xs Max combined (9% Xs, 12% Xs Max).

Today’s Observations Increase Our Confidence in Higher ASPs

Customers are more interested in the Xs Max this year than they have been interested in Plus-sized phones in the past. Our confidence in our overall iPhone ASP of $791 for FY19 increased today, given 70% of customers we surveyed were buying the Xs Max. We were expecting 55%, which is consistent with a 54% average uptake of the Plus models from iPhone 6, 6s, 7, and 8. This $791 ASP estimate compares to Street consensus of $765, which is up from $757 before the Sept. 12 iPhone announcement event.

We’re Slightly More Optimistic Than the Street for FY19 Unit Growth

These shorter lines don’t change our expectation that iPhone unit growth for this next cycle will be 3% versus the Street at 0%. Our optimism is based on our belief that increases in display sizes pull in upgrades from out years. This would be positive for FY19 unit growth and potentially negative for FY20 growth. That said, what’s most important is that the iPhone is moving toward longer-term stability and should normalize to a range of 0-5% growth.

More Data Points:

1. Xs Max buyers aren’t springing for the 512GB capacity. Over the last five cycles, the highest capacity has represented an average of 37% of buyers. This year, we observed only 3% of buyers interested in the highest capacity (512GB). Most Xs Max buyers are opting instead for the 256GB configuration. However, a 256GB Xs Max costs $1,249, compared to last year’s most expensive option (256GB X) at $1,149.
2. 71% of people surveyed were currently using iPhones just one year old (iPhone X and 8), which compares to an average of 43% over the past five cycles. We see this as a mixed data point. Positive: it may an indication of a shorter upgrade cycle, especially for the most loyal users. Negative: demand for the most expensive phones is coming from the most loyal iPhone users, not the average buyer.

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