Strong cycle ahead for the Apple iPhone says fresh report

Loup Ventures is known for its research and the venture capital firm decided to crunch some numbers in an effort to see whether the just-released 2019 Apple iPhone models got off to a good start. This year, Apple focused on a trio of features starting with the camera. The company added a new ultra-wide-angle camera to both the iPhone 11 and iPhone 11 Pro versions, introduced Night mode allowing users to snap viewable photos under low-light conditions, and will add Deep Fusion (via a software update) to produce sharper photos with less noise thanks to AI. Battery life has been greatly improved with the iPhone 11 battery offering as much as an additional hour of power over the iPhone XR. The iPhone 11 Pro will run up to four hours longer on a charge than the iPhone XS, while the iPhone 11 Pro Max provides up to five hours of additional battery life compared to the iPhone XS Max. And while the iPhone 11 can be submerged to a depth of 6 and a half feet for up to 30 minutes, the iPhone 11 Pro models can be held underwater to a depth of 13 feet for the same time period.

While the consensus was expecting the launch day lines around the Apple Stores to be short and short-lived, Loup Ventures found that the opposite was true. In its research report, Loup Ventures noted that it had "observed longer than expected lines that persisted throughout the day." In fact, the firm's research indicated that the line at the just reopened Fifth Avenue Apple Store in New York City was 89% longer than the ones seen for the launches of the iPhone XS series and iPhone XR combined last year. Loup Ventures also took count of the lines at five Apple Stores in the Minneapolis metro area and found them to be 20% longer than the ones seen during 2018's launch day.

The venture capital firm had expected 70% of those on line to buy a more expensive iPhone 11 Pro model, which makes sense since those who wait for hours to buy an iPhone are usually Apple fanatics who are willing to spend more on the higher-end models. But according to the report, an even larger number of those on line-82%-opted to buy one of the more expensive phones. Breaking down the data some more, 54% of those buying an iPhone 11 Pro purchased the top-of-the-line iPhone 11 Pro Max. That was down from the 70% that purchased the larger-screened iPhone XS Max last year and brought the percentage back down toward the historical average. As far as storage is concerned, only 13% of those waiting on line purchased an iPhone with the largest amount of native storage (256GB for iPhone 11, 512GB for the iPhone 11 Pro). 34% bought a new iPhone sporting the base amount of storage (64GB) while the majority ended up selecting a model in the middle (128GB for iPhone 11, 256GB for iPhone 11 Pro). Loup Ventures notes that even though buyers are taking home the more expensive iPhone 11 Pro models, the 7% drop in price for the iPhone 11 will result in a 2% decline in the Average Selling Price (ASP) of the iPhone for the current cycle.

And speaking about the current cycle, the bottom line here is that according to Loup Ventures' research, the tone of the cycle is set on launch day. Long lines and crowded Apple Stores typically forecast a strong year for the latest iPhone models. Considering how low expectations were for the 2019 iPhones, things might turn out to be much better than expected for the company. Does this mean that Apple will record huge profits from iPhone sales this year? Well, there is the matter of the 25% import tax that takes effect on December 15th in the U.S. The new iPhone models will be affected and if Apple decides to eat the additional cost itself, that could obviously reduce Apple's profit margins. And as unstable as the relationship between the U.S. and China is right now, that 25% tax could go higher at a moment's notice.

Still, Apple and CEO Tim Cook have to be pleased. The new iPhone models were written off as soon as the first renders surfaced showing the square camera modules. However, the cameras look much better in person. And by improving the camera, battery and water resistance Apple enhanced three customer pain points with this year's devices. That appears to be enough to get iPhone users upgrading in number to the newest handsets.