For the last several years, Apple has pushed the limits of premium price points with its flagship iPhone line. Priced at nearly $1,500, fully-loaded iPhone XS and iPhone 11 Pro phones are now more expensive than some MacBook Pro laptops. This pricing strategy has helped Apple maintain its premium position in the market, grow revenue on a per unit basis, and attract more affluent consumers. While this approach helps Apple court consumers who can further purchase subscriptions and services like AppleCare and Apple Music, it leaves demand from a lower income segment better served by its competitors—until now. Enter the iPhone SE 2 with a base price of $399. Marketed as a budget phone similar to the 2016 first-generation iPhone SE, it seeks to expand Apple’s share in a more price sensitive part of the market. In this report, Flurry measures how market share has shifted among leading OEMs in the U.S. since the release of the iPhone SE 2 earlier this year.
Flurry Analytics, owned by Verizon Media, is used in over 1 million mobile applications, providing aggregated insights across more than 2 billion mobile devices per month. For this analysis, Flurry additionally used U.S. Census Bureau data to group devices by median household income (HHI). We then backed into disposable income levels by adjusting household income using the ACCRA cost of living index, compiled by the Council for Community and Economic Research. For example, while HHI is higher in California and New York, so too is the cost of living. By accounting for both, we get an adjusted income level that better reflects true disposable income. Finally, we use the Pew Research Center definition for income tiers: Upper income is defined as $150,000 or greater, Middle Income is between $50,000 and $150,000, and Lower Income is below $50,000.
Let’s first look at how U.S. market share has shifted among smartphone OEMs so far in 2020.
In the chart above, we show market share in the U.S. by manufacturer from January through August. We separated OEMs by Apple, Samsung, Chinese Manufacturers and all Others. This helped us better identify where market share shifts were occurring. On the left hand side, January through April, you can see that the market share held per OEM remained relatively stable. The story changes in May, however, following the release of Apple’s iPhone SE 2 on April 24. On the right hand side, May through August, Apple gained 3 percentage points while Chinese OEMs lost 5 percentage points. Over the same period, Samsung and Other OEMs each gained 1 point. With the simultaneous changes in market share between Apple and Chinese OEMs, we believe that Apple’s iPhone SE 2 most directly took share from lower priced Chinese OEMs including Huawei, Xiaomi and OPPO.
With its lower price point, we formed a hypothesis that the iPhone SE 2 made its largest market share gains for Apple among a lower income segment of the population. To test this, we grouped Apple’s market share gains throughout 2020 by upper, middle and lower level income segments. Let’s check out the results.
The chart above shows Apple’s share of the market by upper, middle and lower income levels. For example, in August, Apple had a 53% share of the Upper Income level segment, where household income is greater than $150,000. Prior to the launch of the iPhone SE 2, Apple’s share by income level was relatively consistent. After the launch of the iPhone SE 2, however, Apple’s share of the lower income segment surged in May by 4 percentage points, from 35% to 39%, and has held that share up through August. What’s noteworthy is that Apple not only expanded share into the Lower Income segment but also simultaneously grew in the Upper Income segment. By doing so, Apple can both expand its install base while continuing to serve the segment with the highest income. This best positions Apple to continue accelerating growth of Apple Services, its fastest growing source of revenue according to Statista.
Despite the COVID-19 recession, Apple successfully expanded market share down market while maintaining its strong lead within the high income segment. With this strategy, Apple will have to manage a new risk of potentially eroding its premium perception among the most affluent consumers while offering less expensive, more mass market devices. With the premium-priced iPhone 12 launch just months away, we’ll continue to monitor Apple’s market penetration and keep you updated. For the latest reports, subscribe to the Flurry blog and follow us on Twitter and LinkedIn to get the latest industry analyses.
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