updated 01:59 am EDT, Wed June 25, 2014
Investment bank study shows strong interest, even if bigger screen costs extra
A new survey of future smartphone buyers by RBC Capital Markets suggests that a new iPhone with a larger display could help Apple chip away at some of Samsung and other rivals' sales of Android-based big-screen smartphones and "phablets." Analyst Amit Daryanani, who recently raised his 12-month target price for AAPL stock to $100, told investors that the study showed that screen size was a significant factor in consumer resistance to buying an iPhone.
The iPhone is already the top-selling individual brand of smartphone worldwide, and nearly half of those surveyed (49.4 percent) said they plan to buy an iPhone in the next three months. Two factors have combined to help Android-based rivals gain traction against the iPhone, however: price and screen size.
Competitors like Samsung and Nokia sell a huge variety of phones, ranging from "dumb" feature phones to middle-grade "barely-smart" models that are cheap to make and sell, but lack a number of the features, style and polish of Android-based "premium" smartphones like the Galaxy S5 or the HTC One M8. The bulk of sales by competitors to Apple appear to be in the middle group of smartphones, which are used much more for simple telecommunication, messaging and games in order to keep the cost of monthly plans as low as possible.
The survey was conducted among 4,000 respondents, and found that 23 percent of all respondents, and 35 percent of current or future Android buyers, would consider an iPhone if Apple sold a model with a display larger than four inches. Large-screen smartphones are said to account for nearly a quarter of Android end-user sales -- and although some models may overreach in screen size simply for bragging rights, there is no denying that smartphones with moderately larger screens than the iPhone offers have caught on with a segment of the market (though the majority of cellphone buyers overall appear to prefer four-inch or less displays, which outsell larger and more expensive phones quite significantly).
The survey also revealed that the top answer from respondents (35 percent) to the question "what prevents you from buying an iPhone" was "price" -- even though iPhones cost the same both on- an off-contract as its premium rivals. The result suggests that budget buyers do not even consider flagship phones, from any manufacturer, and thus have more to choose from among Android-based offerings.
The survey also found that desire for a large-screen iPhone was so strong that 64 percent buyers planning to get an iPhone as their next smartphone would prefer a 4.7-inch or larger iPhone, and some would be willing to pay extra for something even bigger. A theoretical 5.5-inch iPhone was deemed worthy of up to a $100 premium by 26 percent of respondents, pushing the contract down-payment price to $300. Apple is thought to be considering such a model, but to date few legitimate leaks have verified the idea that it is actually in production or eminently to arrive.
The most popular choice among would-be iPhone buyers was a 4.7-inch model priced at the same level as the current iPhone 5s, garnering 38 percent support among iPhone buyers. The current iPhone 5s and 5c, priced at $99 and "free" with contract based on a future iPhone 6 taking the $199 price point, took second place with 36 percent support, with respondents slightly favoring an iPhone 5c at no up-front cost (21 percent) over a $99 iPhone 5s (15 percent). The theoretical 5.5-inch iPhone at $299 with contract drew 26 percent support.
The fact that Apple upgrades its iPhone on a yearly basis -- generally in the late summer or early fall -- is now apparently well-known. Some 74 percent of respondents were aware that Apple is planning to refresh the iPhone later this year, and 40 percent of current iPhone owners said that they plan to upgrade when the new iPhone is available. The current move by T-Mobile and other carriers to allow more frequent equipment upgrades in exchange for small monthly extra payments could benefit Apple, as iPhone owners are always eager to get the latest model when possible, the RBC report told investors.
The main feature customers said they look for when deciding on upgrades was reported to be battery life. Around a third of those polled listed that as the top priority, with 23 percent naming a larger screen as most important, followed by 18 percent that rated faster processors as the top-most factor in their decisions and 12 percent that listed the camera as most important to them. The RBC report says that larger-display iPhones from Apple could lead to as much as a 20 percent jump in year-over-year sales of iPhones, and was generally very positive on the company's outlook for the remainder of 2014 and beyond.