Apple's iPhone: Is 10 Million Units In 2008 Realistic?

The iPhone frenzy has begun, but let’s cut to brass tacks: Can the iPhone really ship 10 million units in 2008?

That 10 million figure is what Apple (AAPL) is tossing out there as expectations for iPhone sales (see conference call transcript confirming the figure). Adrian Kingsley-Hughes notes that the 10 million benchmark is a big hurdle. These expectations present an interesting conundrum since Wall Street expects more than 10 million iPhone units to ship. To Wall Streeters 10 million units would be a failure.

Meanwhile, the expectations for the iPhone are reaching frenzy proportions leading up to the June 29 launch (see Techmeme).

Adrian writes:

It’s usually bad luck to bet against Steve Jobs, but I still find it hard to see how Apple is going to shift 10 million iPhones in 2008.

I agree on both counts. For starters, Adrian is a bit nutty for doubting Jobs. Then again I’m also doubtful of the 10 million unit mark. To be sure, the 1 million unit mark for iPhone is a no-brainer–Apple’s core customers will buy 1 million iPhones easily. In fact that’s part of Apple’s secret sauce. Apple has a core customer base that will buy the first 1 million units of whatever Jobs cooks up. That fact means Apple can move up the learning curve much faster and perfect the device.

Other companies struggle to ship 1 million units. Given Apple’s customer base it gets to 1 million units just by adding water.

But for 10 million iPhone units a lot of things have to go right. Among them:

• Apple needs to ramp up production quickly.
• The iPhone needs a ready supply of parts.
• Apple needs to overcome sticker shock. For Apple’s core users paying $499 to $599 for an iPhone is a given. But other customers are likely to be cost conscious.
• Apple is in bed with only AT&T (T). If other network providers–Verizon (VZ), T-Mobile et al.–I’d be more inclined to buy the idea 10 million units.

Perhaps everything will go right but expectations for the iPhone don’t allow for anything but perfection.

Comments

[BSM74:]

For the 10 million they just need to get it out in Europe and Asia later this year or for sure early 2008.

2007 Jun 05 01:32 PM

[reinharden:]

Mr. Jobs has publicly stated that the iPhone would be available in Europe for the year-end quarter of 2007.

Europe adds another 725 million+ possible customers to the US's 300 million. Probably Canada and Mexico will have similar ship dates; that's another 33 million and 108 million.

During 2008, the iPhone is supposed to ship in Asia. That all but requires a CDMA-derived phone to serve Japan and South Korea.

Anyway, by 2008, the iPhone will be shipping pretty much world-wide. And the rest of the world is a lot more cell phone savvy than the US.

By the by, I think Jobs said that they hoped to ship 10 million by the end of 2008. Which means that their metric is across 18 months of shipping.

Also, by MacWorld, if supply and demand are close to balanced, I'd expect the first generation iPhone to move down price and a 3G phone with more capacity to be introduced. I could be wrong...but I expect some portion of that 10 million to sale at perhaps $349 and $399 instead of $499 and $599.


Would I bet on 10 million? That's an awfully big number. I'll have a better answer after I actually touch one.

reinharden

2007 Jun 05 03:33 PM

[Jon T:]

Amazing that no-one states correctly what Jobs said. So many incorrect numbers are dandied around its madness. What Apple forecast was 10m iPhones BETWEEN LAUNCH AND END 2008.

Why does no-one ever do their homework?

2007 Jun 05 04:35 PM

[e1pecson:]

"Why does no-one ever do their homework?"

These so called expert's just want you and I to believe that they do know everything there is about Apple.

2007 Jun 06 12:18 PM

[xcer:]

Why does all these people still don't understand that the US market will be the smaller part of the whole iphone market. Look at the Razor, what % is sold in the US compare to the world, look at those expensive smartphone and what is the US market compare to the world? Also the iPhone is not expensive compares to other high end phone. The so call Verizon iphone killer which is the LG Prada phone retails for USD900. The reason why US consumer think all these phones are expensive is because they don"t realize that their carrier makes all the money back through their schemes and contract locks and phone locks. It only seem cheap in the US but everyone pays, always. That is also why dont gets the latest phones.

2007 Jun 05 11:54 PM

[Vitaboy:]

Not only do the so-called analysts here at Seeking Alpha not do their homework, but the assumption that are made are simply brain-dead.

Like what is this assumption that Apple is only going to have only the original iPhone models by the end of 2008? You seriously want us to believe that they are NOT going to release new models or update prices a year and half after launch?

Here's a clue, gentlemen. Apple is ahead of you. Not only did they follow up the original iPod with lower priced models (as well as higher priced ones), they introduced totally new models that blindsided the industry (the iPod nano being the perfect example). Today, there are 3 major iPod lines with prices that go from $79 to $349. And if you think Apple is going to go 18 months with just the original iPhone at the original specs at the original prices, you guys at Seeking Alpha are smoking something strong.

It would be surprising and gratifying if someone penned an revelatory article entitled, "Hey, Apple sold 100 million iPods by continually releasing new models and lowering prices!" But perhaps that's too much to expect around here given the quality of the iPhone articles.

2007 Jun 06 03:48 AM

[Tech:]

Apple is buying the chips (processor, memory, audio, radio,power,...) the screen and the case.
so anybody can then !
even if apple OS is good, others Oses are as good or near and then sufficients.
then they still have to be telecom certified worldwide.
copies from production sites area, will arrive as soon as this type of phone has success.

Iphone is not going to displace Nokia, nor LG, nor Sony Ericson soon, (Motorola will resist also!)
but it sounds possible to get 10 million phone out of a 1 billion/year cell phone market.

and reinharden seem to ignore china and india out of 1.3 and 1.1 billion there is a growing number of wealthy people (soon more than in US and Europe alltogether!) able to buy expensive phones!
without also taking russia and or south america into consideration
some should try to not be too USA centrics when they talk economy and look at new scales in 2007 and after!

2007 Jun 06 05:48 AM

[Tech:]

iphone unique?
just go there ;o)
www.htctouch.com/

2007 Jun 07 09:58 AM

[reinharden:]

I didn't ignore China and India, I just considered them part of Asia. I didn't enumerate the population of the entire world because doing so seemed kind of silly. By that part of my argument, it was clear that we were well beyond AT&T's 60-some-odd-million customers as our entire market.

While I did call out Japan and South Korea (although not their populations), I did so because serving them requires a CDMA-derived phone. Which means that in addition to serving the 85+% of the world using GSM-derived technologies, AAPL could offer a product to the CDMA Luddites back here in the States as well. ;-)

Which also expands us beyond AT&T's customers.


Like I said, by 2008, the iPhone will be launched pretty much world-wide. And that's a market that's buying one billion phones a year.

reinharden

2007 Jun 07 01:50 PM

[Tech:]

to reinharden, I am not treating you "silly"
You were citing numbers considering only some "developed" countries
I just exposed other numbers to relativize the importance of some markets and avoid "centric views" in this globalized world.

just to give you more numbers Nokia (selling worldwide already) this week said that they were targeting 1.5 Billion customers !!
10 million then is not even 1% of this !
on one hand this means 10 million is a lot but doable
on the other 10 millions is pretty small
precisions I have no shares in Nokia nor Apple ;o)

2007 Jun 13 05:36 AM

[Dr Dave:]

What kind of trade in program is Apple going to have for those of us who have only had our I Phones about 8 Months?

2008 Jun 09 06:10 PM