The Most Important iPhone Ever

Just recently, the 2 billionth iPhone was sold. Unlike the 1 billionth, there was no announcement, no celebration. Partly this is because Apple stopped reporting unit shipments, but partly it’s because it’s not as interesting to talk about 2 billion as it is about 1 billion. There is a desensitizing when numbers get that big. What happens after you achieve the status of the most popular and valuable product of all time? How much more better can the world absorb?

Before we answer, let’s reflect on how it’s going. The iPhone is doing better than ever.

There are more than 1 billion iPhone users. The total number of users has been rising steadily. iPhone users make up about 26% of all smartphone users (3.8 billion is the current estimate). The share of users in the US is about 60% (or soon will be.) The share in UK is close to 50%. All these share numbers are higher than ever. Over 14% of US and 10% of UK survey respondents have switched to an iPhone in the past two years. The following graph shows how churn is boosting iPhone market share in terms of users.

Source: Piplsay

There are more iPhone configurations. As the following graph shows the spread of phone price points is wider than ever. Reaching $1600, the range still starts at $399 in the US (excluding taxes.) The total range (number of lines in each year) is increasing also, now 24 mainly due to the addition of a 1TB storage option. NB: There are now two iPhone minis (12 and 13) and one SE bringing up the rear.

Carrier incentives are picking up again. There are tremendous trade-ins and incentives for financing new iPhones which is bound to create retail traffic. Also with the opening of more economies, there is likely to be a surge in shopping. Bear in mind that around 400 million users have iPhones older than 3 years. Trade-in values are as high as $1000. Which leads to…

A thriving secondary market. The used smartphone market is dominated by iPhones and this drops the floor for entry into the iPhone ecosystem to essentially $0. The following graph shows price drops across 2019 for Apple and Samsung smartphones (for various models by date of initial release).

Most importantly, the specification of the iPhone continues to push the boundaries of what consumers demand from a phone. The camera performance for the latest iPhone 13 enables a set of new behaviors beyond the selfie, the snapshot or 10 second video. Apple is putting cinematographic power in the hands of amateurs. It’s not so much about replacing professionals but enabling amateurs to look better to each other. Be sure to listen to the latest Asymetric podcast to hear from John J. Connor, accomplished film industry camera operator and cinematographer on the power of iPhone cameras.

The new cameras are for the new generation of YouTube, Instagram and TikTok influencers. Ordinary people with extraordinary tools can do extraordinary work.

The latest iPhone 13 is, in my opinion, the most important iPhone ever. It creates the perception of what a phone should be and it sets up the trajectory for demand that did not yet exist. It’s facile to think that the utility of an ok older phone is good enough. That assumes that we are satisfied with ok messaging and ok apps. With ok photos and ok video. With no wide angles, no nightmode and no macro photos. What the iPhone has shown however is that the demand for performance can be nudged up.

We did not ask for rack focus, post-production focus (!), night mode, macro photography and portrait bokeh. But once we have these features we begin, ever so slowly, to use them and then we start demanding them. Conversely it seems that what people mostly ask for—that is what the critics ask for—are extrapolations of existing features. The “faster horse” dilemma.

What makes the iPhone and perhaps Apple special is that it seems to deliver things that nobody asks for but then everybody wants while eschewing overshooting a performance dimension that a few demand but most won’t use.

The tragedy of overservice and disruption is that if you don’t shift the definition of performance eventually you run out of demand at the top of the performance curve. That opens you up to “good enough” competition from below. Instead you need to re-define the notion of performance: compete on a new basis, reset expectations. That the iPhone can find new dimensions of performance and hence demand is effectively a solution to the innovator’s dilemma.