Android switch rate to iPhone is increasing
In the previous part of the series, we discussed why Apple’s (AAPL) revenue growth for fiscal 1Q16 could be subdued. Although Apple does not provide guidance beyond the next quarter, the management is optimistic about the company’s growth prospects in the long term. The company believes that a number of factors will drive its growth in the long term:
- Android switch rate: Apple claims that it experienced the highest Android (GOOG) switch rate to iPhone in the last quarter at 30%, and Apple expects the rate to continue to grow.
- iPhone installed base upgraded to iPhone 6 or newer device: Apple mentioned that only 31% of the iPhone installed base has upgraded to iPhone 6 or 6S series so far. This means that there is ample opportunity for Apple to sell its latest iPhones.
Low LTE penetration in emerging markets is an opportunity for Apple
The 4G/LTE penetration in emerging markets (EEM) is still low, which again provides Apple with an important opportunity. According to Cisco’s (CSCO) Mobile VNI forecast, only 4.7% of the total mobile connections in China were 4G in 2014. However, growth in 4G penetration is coming mostly from China Mobile (CHL). China Mobile’s 4G customers have grown significantly from ~20.4 million in July 2014 to ~208.8 million in July 2015, as the chart above shows.
Apple said that by 2020, China’s middle class will grow ten times compared to what it was in 2010, according to a study from Mckenzie. This growth is an important growth driver for Apple.