This weekend, Loup Ventures purchased two new iPhones (Xs and Max) and an Apple Watch. We found it impressively easy to move data, settings, and passwords to the new devices.

• The migration uses a combination of iOS, iCloud, and App Store. This is a subtle example of Apple as a Service. The ease of the migration will promote more frequent upgrades over time.
• One of the phones purchased was part of the iPhone Upgrade Program. From start to finish the process was frictionless. This includes the buying (preapproval for upgrade loan), shipping (delivered on launch day), unboxing, and returning the traded in phone. 
• Investors who think of Apple as a device company are missing the point. Just like McDonald’s isn’t a restaurant chain, it’s a manufacturing company, Apple isn’t a consumer electronics company, it’s a service company.

Max Mix Should Be Positive for FY19 iPhone ASP

We believe the mix of Xs Max will exceed the historical mix of Plus sizes. We anticipate more people upgrading from the iPhone X will spring for the Xs Max, even if they have never owned a Plus model in the past, due to the similarity of the X and Xs. Our Sept 21 launch survey measured 70% adoption of Max compared to a five year launch day average of 54% for the Plus size.

The Hidden Costs of Upgrading

One frustrating aspect of upgrading any phone are hidden fees. Consumers may still pay the ~$50/mo for a new phone but should be prepared for extra fees. While AT&T charges $30 to activate any new device (iPhone and Android), we were charged an additional $49 by Apple to upgrade a month early. This translates to $79 in additional one-time charges on next month’s statement. We expect most consumers will grudgingly pay the up-charges.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.