The Potential of the iPhone
March 09, 2013
Inspired by Benedict Evans piece on the cheap Apple phones potential for Apple’s bottom line here, I want to do some thought experiments myself. So, lets do some calculations! I’ll start off with some numbers, make some assumptions and end with how many iPhones (or phones made by Apple), for how much revenue and profit, Apple could sell by Q4 of 2017.
First, lets say that Apple extends their iPhone product line with two devices that have recently been in the rumor news; The iPhone+ (5inch high end iPhone) and the iPhone Nano (200-300$ high-low end iPhone). I won’t make any predictions what these might entail spec-wise in this post, I’ll just say they’ll exist and they’ll be popular.
For this I’ll declare the iPhone+ ASP to be 640 USD with a margin of 50% and the iPhone Nano with an ASP of 220 USD and a margin of 35%.
Now some numbers we know currently, I won’t cite them, cause I’m lazy, but they are probably somewhere close to right, do your own research, dammit.
In Q4 of 2012
- 450 million phones were sold worldwide, this number is expected to rise to 600m by 2017
- Apple sold 47.8 million iPhones in Q4
- Samsung sold perhaps a generous 30 million Galaxy S3 + S2 + S1 + Galaxy Note 2 + 1 at an ASP of maybe 500 USD some other companies also sold some high end 4.5+ inch phones...probably
- The calculations and assumptions
1. The standard iPhone
Lets assume it just grows with the market, in that case Apple would sell 63.7 million standard iPhones. At the same ASP that would be 40. 8 billion USD revenue, with margin of 50% that’s 20.4 billion USD absolute margin.
2. The iPhone+
Like I said Samsung probably sold around 30 million of these. Maybe there were another 10 million sold altogether by other manufacturers. These 40 million, again, would grow to 53 million. Here’ll I make a contentious claim, I think Apple can get 50% of that market by competing with 4.5+ inch phones, and sell 26.5 million units. Standard iPhone ASP puts that at 17 billion USD, same percentage gives us a gross margin of 8.5 billion USD
3. The iPhone Nano
As for the rest; After we’ve taken out the high-high end of 117 million phones, we are left with 483 million other phones, most of them probably some sort of smartphone. If Apple can extend the strategy it already followed with the iPod it could perhaps grab 15% of that market, which gives us 72.5 million iPhone Nanos. With the ASP and margin as previously discussed that would generate revenue of 16 billion USD and the margin would be 5.6 billion USD.
Coming back to the title of this piece, I believe that the potential of Apple’s iPhone line alone could be 162.7 million units sold which creates 73.8 billion in revenue and 34.5 billion (which is more than the revenue that Apple currently makes with the iPhone actually) in gross margin. ASP in that case would be around 450 and the percentage margin 46.7%
If this were to come true, it would mean Apple multiplies its revenue from the iPhone by 2.41 times from 30.6 billion to 73.8 billion and its gross margin by 2.25 from 15.3 to 34.5 billion. It would also have 27.1% market share up from 10.6% currently. Quite a lot of potential for just one of their product lines.
Now we play the waiting game.
If you’d like to tell me how wrong or right you think I am, why not drop me a line on twitter @mhoffbauer