Overall mix creates true differentiation in marketplace. Channel check of 100 stores reveals iPhone 4 demand outstripping supply across several regions. Apps growing 10% to 20% monthly with majority of downloads costing $9.99. Most widely deployed smartphone OS is Symbian followed by Blackberry OS then iPhone OS. EMS provider Pegatron to develop CDMA version.
Its estimated Apple will sell 44 million iPhones in CY10 (8.5 miliion in the June quarter) and 55 million in CY11. Like iTunes, the App store has created an unmatched level of loyalty to the Apple platform which is translating into sustainable differentiation, stickiness and profitability for Apple.
In a report released by the research arm of investment bank Deutsche Bank, the bank revealed, through conducting multiple rounds of channel checks beginning Thursday June 17 through the weekend to gauge initial iPhone 4 demand, supply is having trouble keeping up with demand.
Channel checks were carried out at approximately 100 stores: ~55 Apple retail stores (50+ in the U.S. and ~5 in U.K.) and at ~50 authorized carriers worldwide (25 AT&T and 10 Best Buy stores in the U.S., 5 O2 stores, 5 Orange stores and 2 Car-Phone warehouse stores in the U.K.).
Deutsch Bank also waited in line for ~4 hours on June 17 at the San Francisco Apple flagship store to get their hands on the new iPhone.
The bank reports iPhone demand remained very robust through the weekend and calls the bank made to outlets across the US and UK revealed long lines, strong demand and frequent stock-outs as demand is outstripping supply in multiple regions despite frequent replenishment (daily at larger Apple retail stores).
By the evening of the official launch day, essentially all carrier outlets and 60%+ of Apple stores Deutsche Bank contacted reported iPhone 4 stock-outs with a slight preference for the 16GB version which tended to sell out first.
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Further, the bank’s report states it appears Apple retail stores and partners struggled to keep up with demand through Saturday. In addition, current on-line purchases face elongated wait times (~3 weeks) at Apple.com.
Deutsche Bank believes initial weekend volumes were 1 million+, but shipments could have been dramatically higher if there was more supply.
While the strong start is encouraging, Deutsche Bank feels the long-term opportunity for growth of the iPhone is even more significant as near-term shipments are being gated by supply constraints. (Read: China iPhone market demand projections)
Apple’s platform is a key competitive differentiator
As discussed in prior research from Deutsche Bank, Apple’s large and rapidly growing iOS installed base and iTunes / App store as the competitive moat which competing handset vendors cannot replicate.
As highlighted below, there are ~235,000 apps available on the iTunes App Store which is growing at a rate of 10% to 20% month-on-month. In addition, cumulative App downloads exceeded 5 billion in June 2010 (vs. 4 billion in April 2010, 3 billion downloads in January 2010 and 2 billion in September 2009).
By comparison there are approximately 61,000 Android Apps (although this platform is forking for various implementations) and 8,000 Blackberry Apps.
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In the bank’s report, Deutsche Bank continues to view the App Store and Touch UI as primary sources of long-term competitive advantage for Apple.
In addition, the bank believes attention surrounding the iPad introduction is generating greater developer investment and content creation / support for Apple’s platform. (Read: Apple iPad vs. netbooks, notebooks, smartphones)
Deutsche Bank expects these trends along with healthy uptake of the iPad to further propagate the virtuous circle of a large, growing user base attracting additional App developers / content providers – thereby making the platform even more attractive for both users and developers.
Apple’s iPhones are currently exclusively manufactured by EMS provider Foxconn. Additionally, EMS provider Pegatron is said to be soon manufacturing a CDMA version of the consumer electronics device which could help Apple drive market penetration deeper.
Source: Deutsche Bank, VentureOutsource.com, June 2010
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