Apple's battery controversy could cost the company over $10 billion in lost iPhone sales
- Apple is now offering $29 battery replacements for old iPhones.
- The battery replacement should both improve performance and battery life.
- Barclays analysts believe that millions of Apple customers could opt for a battery replacement over a new iPhone.
Apple started offering $29 in-store battery replacements last week, in an apologetic move after the company revealed that an older battery can actually make an iPhone run slower.
It's a win for customers who can now extend the life of their iPhone at a lower price, increasing both its battery life and its performance.But it might be bad for Apple's bottom line, analysts at Barclays wrote in a note on Wednesday.
"While this is a good PR move for Apple to resolve the issue, we are concerned it could be a mild headwind for iPhone unit sales if more iPhone users decide to take the offer instead of upgrading to a new device," the analyst Mark Moskowitz and team wrote.
They model that as many as 16 million fewer iPhones could be sold in the coming year thanks to the offer. That comes out to as much as $10.29 billion in lost revenue, according to the Barclays model.
There are four reasons battery replacements could impact iPhone sales. From Barclays' note:
- This incident has caused significantly higher public awareness of Apple's behavior, and thereby, the $29 offer.
- $29 is affordable, and it will provide a significant boost in speed (from 600MHz to 1400MHz for an iPhone 6).
- Our August Wireless survey suggests battery drain is No.1 reason for users to upgrade to new device - therefore, a new battery may deter some upgrade intention.
- Apple allows for replacement regardless of the diagnostic test result. Given the same form factor from IP6 to IP8, some customers may prefer the battery swap over upgrading.
To recap the battery story: iPhones used to have a random shutdown issue. It was because older batteries - the batteries you find in 2-year-old phones - couldn't provide enough power at certain times, and the phone would then shut down to protect its components.
Apple's fix for this problem was to limit the peak power draw an older iPhone was capable of through software updates, which was revealed in December. People were furious as Apple admitted that older iPhones can take longer to launch apps, may display choppy scrolling, and can have dimmer screens and quieter speakers.To smooth over this issue, Apple announced that it would offer $29 iPhone battery replacements in 2018 - a significant discount from the normal $79 price, which Apple says will improve the performance of an older phone.
Apple now has to hope that iPhone users don't decide to take a $29 battery over a $999 iPhone X.
"Even a small percentage opting for battery replacement over upgrade could have meaningful impact on iPhone sales," warn the Barclays analysts.