- The hype machine is gearing up for September’s Apple iPhone 16 launch
- If pricing follows last year’s model, the basic iPhone 16 will probably be around $800 and the top-end iPhone 16 Pro Max will sell for about $1,200
- Carriers and retailers will offer steep discounts, but whether it triggers a supercycle in handset upgrades is debatable
Smartphone makers would love to see a handset upgrade “supercycle” driven by artificial intelligence (AI) the second half of this year, but is that realistic?
Apple is expected to unveil its iPhone 16 lineup on September 9 and some in the wireless industry are expecting early adopters to kick off an outsized handset upgrade cycle. At its Worldwide Developers Conference (WWDC) in June, Apple unveiled a bunch of cool things that will come via Apple Intelligence.
“Given the strong consumer interest in AI capabilities, we anticipate a supercycle of upgrades when Apple launches their new devices that will support an embedded Apple Intelligence expected later this year,” said Rebekah Griffiths, vice president of Product Management and Strategy at Assurant, which collects phone trade-ins and prepares them for resale.
The past few years have not been good for handset upgrades. The average age of a mobile device turned in for a trade-in or upgrade program is now at an all-time high of 3.7 years, according to Assurant. That compares to a few years ago, when consumers were upgrading their handsets every couple years. Of course, carriers switching to longer handset installment plans – like to 36 months instead of 24 months – makes a big difference.
According to a July report by Wall Street analysts at MoffettNathanson, the AI strategy that Apple unveiled at its WWDC event in June was all about creating a new upgrade cycle.
“Betting against an upgrade cycle is betting against Apple and their ability to convince Americans that AI is for them,” wrote analyst Craig Moffett. “Samsung is making almost precisely the same bet with their newest AI-compatible Galaxy phones.”
Biju Nair, EVP and president, Global Connected Living and International at Assurant, said he thinks early adopters will be interested in the new Apple gadget, but the average consumer isn’t going to drop a big wad of cash for it.
“As much as you love AI, if spending the next $1,200 is going to become a burden, consumers would be hesitant to do that,” he said.
However, good deals by the carriers and retailers will drive customers to stores – and if they perceive they’re “saving” money on a new handset, they’re likely to pick up some accessories and other gadgetry while they’re in the store. Last year, carriers offered up to $1,000 off new iPhone 15 models with eligible trade-ins and service plans.
Upgrades: Good for carriers?
A faster upgrade cycle sounds like it would be good news for wireless carriers. After all, it’s a prime opportunity for carriers to move customers from lower-end plans to higher tier ones.
But Moffett calculates an accelerated handset upgrade cycle as a risk for operators. It means higher customer acquisition costs and higher churn. Wireless service providers also need to spend more to ensure they have enough handsets on hand to meet demand.
In short, “a higher upgrade rate would mean lower ARPU (due to increased promotional amortization), lower margins, lower earnings and lower free cash flow,” Moffett said. “It would likely accelerate share shifts, providing a tailwind to T-Mobile and cable MVNO subscriber growth but a subscriber headwind to Verizon and AT&T.”
To be sure, “the magnitude of a coming AI upgrade cycle is uncertain; the carriers themselves have expressed skepticism,” he said. “And there is some debate about whether this year or next will be the real starting gun for AI smartphones. But at least some increase seems likely, and, more importantly, it is likely to be lasting.”
But a supercycle? Not gonna happen, says analyst
Techsponential President Avi Greengart said he doesn’t expect the iPhone 16 to drive a supercycle in smartphone upgrades. “There are macroeconomic factors holding back a huge uptick in consumer purchases,” he told Fierce.
Apple’s version of AI could transform the smartphone user experience once Apple completes the rollout and if app developers enable Apple to access data and actions from within different apps. But the full impact of Apple AI is going to take time, and long-term improvements don’t drive short-term sales bursts.
That said, the ability for Siri to answer questions and act across third-party apps is incredibly powerful.
“It will take time for developers to support these capabilities, but I do expect all iPhone 16 models to have the technical ability – i.e., an enormous neural engine/NPU – to run the full Apple AI stack,” he said.
Greengart also shared some of his favorite AI-enabled features. Google’s Circle-to-Search on Google, Samsung and select other Android phones is an AI feature that is “extremely well designed,” he said.
“Samsung’s AI image editing tools can be amazing at removing unwanted people or structures from your photos. Finally, Google’s Add Me feature on the new Pixel 9 family uses AI and augmented reality (AR) to let moms and dads everywhere join the rest of the family in vacation and holiday pictures,” he concluded.
But hey, if all the new AI-enabled smartphones are too much, there’s always the Barbie flip phone that Human Mobile Devices (HMD) just unveiled with toy maker Mattel. It’s a nostalgic “dumb phone” that provides basic calling and texting without the advanced features of smartphones, promising a digital detox from social media, if you will. The U.S. version, priced at $129, works on AT&T, T-Mobile and Verizon networks and will be available in October.
Maybe there’s enough Kenergy there to start a “dumb phone” supercycle.