The iPhone Growth Strategy
I continue to view doubling down on iPhone is in management's best interest as the iPhone 6 and 6 Plus serve as possible inflection points, reinvigorating the iPhone line. Apple can market the larger-screen iPhones to the hundreds of millions of smartphone users who did not buy an iPhone as their first smartphone over the past few years.
There are a number of pieces that need to come together for Apple to sell more than 300 million iPhones annually within three years.
Maintaining the iPhone Upgrade Cycle. With approximately 80-85% of iPhone unit sales coming from previous iPhone owners, it is crucial that Apple maintains a healthy iPhone upgrade cycle. Assuming a 2-3 year life cycle and relying on a few data points from Apple's recent earnings call, I estimate that approximately 185 million iPhone users are likely to buy a new iPhone in 2015, up from 165 million users in 2014 and 130 million users in 2013. Exhibit 1 highlights how crucial iPhone upgrades are to total iPhone sales.