When Apple finally releases its 5G version of the iPhone (which industry analysts predict will happen in late 2020), it will be a big seller, according to a new report from Wall Street research firm Jefferies.
The report throws hot water on current Wall Street estimates that predict that Apple would sell 190 million units of its first 5G iPhone during fiscal 2021.
Jefferies predicts that figure will be closer to 208 million 5G iPhones. The investment firm says the reason it's bullish on the 5G iPhone is that there is an aging installed base of iPhones that are ripe for a refresh -- around 215 million or more users are carrying around old iPhones purchased from 2015 to 2018. It also notes the industry is pushing 5G and putting a lot of marketing dollars behind it. Also, the Jefferies analysts believe that Apple will be able to drive more differentiation between its 5G iPhone and earlier versions of the device, making it more appealing to consumers.
The investment firm notes that Apple's iPhone franchise is still very strong despite the rather lackluster iPhone 11 and iPhone 11 Pro launch. "We don't see loyalty waning for Apple as the iOS platform creates incredible stickiness among consumers," the report said.
Interestingly, Jefferies also said that, worldwide, there is more demand for smartphones, which works in Apple's favor. And it also noted that Apple's expansion of its mid-range iPhone offerings would help it on the global front.
That opinion differs from some analyst firms that believe Apple's mid-range iPhones might cannibalize its high-end iPhone sales. Jefferies said that it doesn't see this as a problem; Apple is already selling older versions of its iPhones at discounted prices, so lower price points are not a new phenomenon. It also believes that consumers tend to buy the most advanced smartphone they can afford.
Cheap 5G phones unlikely
But don't expect to see a 5G iPhone priced below $700. Jefferies said that based upon its contacts in the supply chain and with modem vendors, it doesn't believe any smartphone maker will be able to make a 5G smartphone and price it lower than $700, at least in the near term. And it says that advanced components will likely push the price points well above $1,000 for high-end devices.
Jefferies does acknowledge that if trade tensions between the US government and China escalate and the US increases tariffs on Chinese-built products entering the US, Apple might suffer. It said that if a trade war continues, the tariff rate could increase toward 30%, which would negatively impact Apple's earnings. On the positive side, if the tariff situation gets resolved, it would push existing sales estimates higher.
Jefferies noted that China is an important region for Apple and accounted for about 16% of total Apple sales in fiscal 2019. That was a decrease from 18% in fiscal 2018. "Trade tensions between the US and China have created a nationalistic sentiment that has likely contributed to some of the recent pressure in China," the report said.
— Sue Marek, special to Light Reading. Follow her @suemarek.