What’s so special about the 3GS?

  • Posted: 28 August 2009 09:26 AM

    Its clear that demand for the 3GS is far outstripping supply, for a duration after launch that is much longer than previous iPhone releases.  Besides the anecdotal evidence of shortages around the world, Tim Cook for the first time refused to predict when supply would catch up to demand.

    I’m a little baffled as to why the 3GS is doing so much better than the 3G.  A speed boost can’t be the reason.  Adding video is nice, but was everybody really waiting for that functionality? 

    Or does the spike in demand have nothing to do with the 3GS, but rather the iPhone has hit an inflection point, and any iPhone would be selling like hotcakes now?

         
  • Posted: 28 August 2009 09:41 AM #1

    I personally think it has something to do with the speed boost, on top of that there’s a big bunch of 1st gen iphone uers waiting to upgrade. The video and compass are just bonuses.

         
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    Posted: 28 August 2009 09:50 AM #2

    Most of the people I know buying the 3GS are getting their first iPhones. Here, in Canada, the carrier has a message on their system when you call in stating that the iPhone is sold out and they are getting stock on a weekly basis. Their only recommendation is to keep trying. They have lots of stock of Android phones and Blackberries.

    I think we’ve hit “that point”, where the demand isn’t for a smart phone, but an iPhone. Much like the demand went from MP3 player to iPod.

         
  • Posted: 28 August 2009 10:08 AM #3

    Adding video is nice, but was everybody really waiting for that functionality?

    Maybe some of it was resistance to a 1st generation release. That and the fact that the most juandiced of Apple bashers have to admit that the iPhone has brought us our own Captain Kirk communicator , only the iPhone does a few more things.

         
  • Posted: 28 August 2009 11:15 AM #4

    CdnPhoto - 28 August 2009 12:50 PM

    Most of the people I know buying the 3GS are getting their first iPhones. Here, in Canada, the carrier has a message on their system when you call in stating that the iPhone is sold out and they are getting stock on a weekly basis. Their only recommendation is to keep trying. They have lots of stock of Android phones and Blackberries.

    I think we’ve hit “that point”, where the demand isn’t for a smart phone, but an iPhone. Much like the demand went from MP3 player to iPod.

    It feels that way to me also.  I would love to see a chart of the ipod sales history overlaid with the iPhone.  I’m guessing they would look somewhat similar.

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    Posted: 28 August 2009 12:11 PM #5

    Here is most of the data but the scales don’t exactly match and 3rd Qtr 09 for Iphone is missing.  The Iphone rate of initial growth is impressive and ahead of the Ipod.

    Fiscal Year   Q1   Q2   Q3   Q4   Total
    2002   125,000[1]  57,000[2]  54,000[3]  140,000[4]  376,000
    2003   219,000[5]  78,000[6]  304,000[3]  336,000[7]  937,000
    2004   733,000[5]  807,000[8]  860,000[9]  2,016,000[10]  4,416,000
    2005   4,580,000[11]  5,311,000[12]  6,155,000[13]  6,451,000[14]  22,497,000
    2006   14,043,000[15]  8,526,000[16]  8,111,000[17]  8,729,000[18]  39,409,000
    2007   21,066,000[19]  10,549,000[20]  9,815,000[21]  10,200,000[22]  51,630,000
    2008   22,121,000[23]  10,644,000[24]  11,011,000[25]  11,052,000[26]  54,828,000
    2009   22,727,000[27]  11,013,000[28]  10,215,000[29]      43,955,000
    Fiscal Year   Q1   Q2   Q3   Q4   218,048,000

         
  • Posted: 28 August 2009 03:35 PM #6

    For me, the difference is the “S.” I could have purchased a 3G handset and saved $100. I wanted the reported speed increase. With that came (presumably) a better camera and video capability (which I’ve yet to use).

    It was the “S.” that made my decision.

         
  • Posted: 28 August 2009 03:45 PM #7

    Absolutely, it’s the speed. If it were a car, it would clearly have dual waddies; chrome revers, zooooomm… (don’t ask about dual waddies.. I’ve just been saying it, tongue in cheek, my whole adult life. Anybody else?)

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  • Posted: 28 August 2009 04:46 PM #8

    pats - 28 August 2009 03:11 PM

    Here is most of the data but the scales don’t exactly match and 3rd Qtr 09 for Iphone is missing.  The Iphone rate of initial growth is impressive and ahead of the Ipod.]

    Thanks for providing this pats.  When I get good and bored I may combine the two and you’ve saved me some time in tracking it down. 

    For the rest of the conversation…,multiple factors.  Improved camera is pretty important.  We’ve found ourselves taking a lot of pics with the iPhone simply because we have it with us.  The quality of the new pics is significantly better and the ability to control light level and focus is much improved.  Our original phones were two years old and ATT was going to charge us for the subsidy whether we liked it or not so might as well move to 3g from edge.  They are investing substantial dollars in there network so we might as well be able to take advantage of it.

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  • Posted: 29 August 2009 01:07 AM #9

    BillH - 28 August 2009 02:15 PM

    [...}

    It feels that way to me also.  I would love to see a chart of the ipod sales history overlaid with the iPhone.  I’m guessing they would look somewhat similar.

    From Kleiner Perkins, I think this is what you want to see.

    [ Edited: 29 August 2009 01:17 AM by capablanca ]      
  • Posted: 29 August 2009 01:35 AM #10

    macorange - 28 August 2009 12:26 PM

    Its clear that demand for the 3GS is far outstripping supply, for a duration after launch that is much longer than previous iPhone releases.  Besides the anecdotal evidence of shortages around the world, Tim Cook for the first time refused to predict when supply would catch up to demand.

    I’m a little baffled as to why the 3GS is doing so much better than the 3G.  A speed boost can’t be the reason.  Adding video is nice, but was everybody really waiting for that functionality? 

    Or does the spike in demand have nothing to do with the 3GS, but rather the iPhone has hit an inflection point, and any iPhone would be selling like hotcakes now?

    One more thing I thought about today. Apple’s iPhone upgrades have been predictable. Similar to the way many informed buyers would wait until the January expo before buying a new iMac or postpone purchasing a laptop until after WWDC, there were probably millions of buyers waiting for the new iPhone recently released before taking the plunge. If one looks at the change in demand before and after the release of the original 3G phone, I’m confident one would see a similar sales curve.

    This year Apple had more of a global market satisfy than the two years prior and the app store’s presence I’m sure has been a boon to sales.

         
  • Posted: 29 August 2009 06:18 AM #11

    The Kleiner Perkins chart is awesome, but all it really shows is that the iPhone had a much faster jump than the iPod.  That’s all due to the hype that the iPhone had before it launched.  The iPod had only a fraction of consumer awareness that the iPhone had at its launch.

    More relevant is what happens after the iPod hits the inflection point.  According to the chart Pats provided, that was fiscal 2005.  So assume fiscal 2009 for the iPhone is equivalent to fiscal 2005 for the iPod.  The chart would suggest that fiscal 2010 for the iPhone will double sales from fiscal 2009.  That sounds aggressive to me, but not implausible.  The more interesting year will be 2011.  In 2007 iPod sales start showing a very dramatic maturing of the market with decelerating growth.  The law of large numbers will kick in for the iPhone too, but I’m guessing that the market is so vast for the iPhone, and the replacement rate so great for the next several years, that the deceleration of growth for the iPhone will not be as dramatic as it was for the iPod.

         
  • Posted: 29 August 2009 01:19 PM #12

    macorange - 29 August 2009 09:18 AM

    The Kleiner Perkins chart is awesome, but all it really shows is that the iPhone had a much faster jump than the iPod.  That’s all due to the hype that the iPhone had before it launched.  The iPod had only a fraction of consumer awareness that the iPhone had at its launch.

    More relevant is what happens after the iPod hits the inflection point.  According to the chart Pats provided, that was fiscal 2005.  So assume fiscal 2009 for the iPhone is equivalent to fiscal 2005 for the iPod.  The chart would suggest that fiscal 2010 for the iPhone will double sales from fiscal 2009.  That sounds aggressive to me, but not implausible.  The more interesting year will be 2011.  In 2007 iPod sales start showing a very dramatic maturing of the market with decelerating growth.  The law of large numbers will kick in for the iPhone too, but I’m guessing that the market is so vast for the iPhone, and the replacement rate so great for the next several years, that the deceleration of growth for the iPhone will not be as dramatic as it was for the iPod.

    These are two vastly different markets. While digital music players existed in the market before the release of the iPod, the global market for cellular phones had been years in development and smartphones were already established in the marketplace. In other words, Apple had to explain to consumers the benefits of the iPod versus a global understanding of the importance and need for cell phones. I remember attending an education conference in the spring of 2002 at which Apple representatives were pitching the iPod as a portable curriculum content device rather than as a digital music player to give the product relevance in that market.

    I suspect we are much further away from the inflection point on the iPhone relative to the iPod in a vastly different market.

    Further, the iPod needed commercial content via of iTunes to fuel explosive growth. The iPhone has realized the benefits to sales of the app store much earlier in its history.

    The iPhone has a much more robust eco-system to support its growth than the iPod had a similar period of time from original introduction.

    There’s also much more of a global need for iPhones (especially in global regions)  underserved by broadband and the iPhone has tangible economic benefits to the user that the iPod does not provide. As a primary computing and/or communications tool, there is a vast market for iPhones in regions throughout Africa and Asia, for example, in which an iPod has virtually no relevance in terms of providing a direct boost to the quality of life of the user.

         
  • Posted: 29 August 2009 02:12 PM #13

    macorange - 29 August 2009 09:18 AM

    The Kleiner Perkins chart is awesome, but all it really shows is that the iPhone had a much faster jump than the iPod.  That’s all due to the hype that the iPhone had before it launched.  The iPod had only a fraction of consumer awareness that the iPhone had at its launch.

    More relevant is what happens after the iPod hits the inflection point.  According to the chart Pats provided, that was fiscal 2005.  So assume fiscal 2009 for the iPhone is equivalent to fiscal 2005 for the iPod.  The chart would suggest that fiscal 2010 for the iPhone will double sales from fiscal 2009.  That sounds aggressive to me, but not implausible.  The more interesting year will be 2011.  In 2007 iPod sales start showing a very dramatic maturing of the market with decelerating growth.  The law of large numbers will kick in for the iPhone too, but I’m guessing that the market is so vast for the iPhone, and the replacement rate so great for the next several years, that the deceleration of growth for the iPhone will not be as dramatic as it was for the iPod.

    Your point is well-take if I understand correctly.  In effect you suggest sliding the iPod numbers to the right on the x-axis about 16 quarters.  And you then compare growth rates.  I have not drawn that chart, but just eye-balling it, it looks to me that the quarterly iPod inflection point was in Q4 of FY’04.  That interpretation would argue for a 12-quarter displacement.

    But either way, looking now at units rather than growth rates, iPod sales during Q404-Q305 were in the 4-6mm range.  While iPhone is hitting 13-15mm after its inflection.  Direct quarterly comparisons are messy due to the seasonality of iPod.  And yearly comparisons suffer from iPhone having only two data points.  Having said that, iPod has never exceeded 11mm in a non-holiday quarter.  And in the normally slow FYQ3 the still young iPhone nearly exceeded the mature iPod’s biggest holiday quarter ever. 

    And also noteworthy:  ASPs of iPhone are more than triple those of iPod.  The disparity in gross profit is probably even greater.  We have a hit on our hands; iPhone continues to exceed my expectations.

         
  • Posted: 29 August 2009 03:00 PM #14

    capablanca - 29 August 2009 05:12 PM

    And also noteworthy:  ASPs of iPhone are more than triple those of iPod.  The disparity in gross profit is probably even greater.  We have a hit on our hands; iPhone continues to exceed my expectations.

    Thanks for the chart capablanca.  That’s the one I was looking for but I’d also agree that it isn’t really a direct comparison due to the awareness of the iPhone.  Having said that, the iPhone had to face the hurdle of the data plan that the iPod never confronted.  I frankly expected the iPhone to take off faster than it has but continue to believe the end result will be the same.

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  • Posted: 01 September 2009 11:38 AM #15

    “Having said that, the iPhone had to face the hurdle of the data plan that the iPod never confronted.”  Very true.  And also it has had to face the hurdle of ATT.  When they open it up to others, especially Verizon, and maybe even some choices of data plan at the same time, is when I think the exponential growth will really happen.  Including me.  I think they will sell upwards of 50 million of them in a quarter (if they make them fast enough!)