The prevailing narrative surrounding the new iPhone XR is that it’s a disappointment. A second class device that will never live up to the iPhone XS.
Despite short launch day lines, we think that narrative is pure fiction. iPhone XR ≠ iPhone 5c.
We’ll take some of the blame here. We’ve focused on demand-side indicators, including online lead times and our regular launch day line counts and surveys. But the reviews share a common thread: 1) the iPhone XR is a premium phone that is 2) a better value than the iPhone XS.
The reviews help separate some of the iPhone XR’s second-class perception, which is driven more by its price and the sleek iPhone XS ads (compared to the colorful iPhone XR ads) than actual use. The early adopter phenomenon is also an important factor here. Apple’s most loyal user base will buy the newest, largest, most expensive models without even seeing the devices. The average consumer will make a more rational buying decision, which is where the iPhone XR wins.
We expect the iPhone XR to be the most popular iPhone in 2019, as consumers begin to see the phone in the wild and recognize its value.
We are modeling for iPhone unit growth in FY19 of 3% y/y, slightly ahead of the Street’s 1%. And at a $750 entry point, the iPhone XR should lift iPhone ASPs. With the premium combination of the XR, XS, and XS Max, we continue to believe there is ASP upside, modeling for an iPhone ASP of $791 in FY19 vs. the Street at $770. While the entry point for the XR is below our $791 estimate, we believe the weighted ASP for the XR will be $796. This assumes the following XR capacity mix: 64GB at 42%, 128GB at 40%, and 256GB at 18%. Our limited surveys (20) are representative of this mix.
Short Lines at Apple Stores
Our typical launch day line counts reveal much shorter lines for iPhone XR. We see three reasons:
- The iPhone XS drew the early, line-waiting adopters. Our data shows there is less excitement for the XR amongst early adopters.
- Online orders continue to take away from launch day demand at Apple stores.
- Short lead times for iPhone XR (now averaging less than 2 weeks) don’t incentivize people to wait in line to get a phone earlier.
Most XR Buyers Upgrading from Older Phones
Based on the limited survey data we collected, most XR buyers are upgrading from older devices than we saw with XS/XS Max buyers. Today, no line waiters were upgrading from an 8 or X (1 year old), vs 71% of XS/XS Max buyers.
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.