Why the iPhone 6 Will Conquer America

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Apple's latest batch of iPhones hit store shelves in the U.S. on Sept. 19. However, they didn't stay there for long. As expected, the iPhone 6 and iPhone 6 Plus -- which feature larger screens than previous versions of the device -- are helping Apple set numerous sales records.

The iPhone 6 is selling like hotcakes. Photo: Apple.

The iPhone 6 launch will be important for Apple across the globe, but especially in the U.S., its biggest market. By offering customers a wider choice of prices, features, and screen sizes, the company finally has the tools to gain a dominant share of the lucrative domestic smartphone market.

Growing smartphone market share
Apple revolutionized the smartphone market, yet it has been playing from behind in the U.S. due to its initial decision to give AT&T exclusivity for the iPhone. In January 2011 (the last month in which AT&T was the only U.S. wireless carrier with the iPhone) Apple held a 25% share of the U.S. smartphone market.

Since then, the iPhone has made steady market share gains here at home, due to wider distribution and the addition of new features. By July of this year -- shortly before the launch of the iPhone 6 -- Apple's share of the U.S. smartphone market had reached 42.4%.


iPhone U.S. Market Share

January 2011


January 2012


January 2013


January 2014


July 2014


Source: comScore. 

However, Apple's market share growth has slowed in the past year or so. Most of Apple's gains from 2011-2013 came at the expense of overmatched competitors like BlackBerry and Nokia. By contrast, iPhones and Android phones now hold 94% of the U.S. smartphone market, so Apple must gain share from Android to make further progress.

The growing consumer preference for big-screen phones has also slowed Apple's market share gains. In the U.S., the number of smartphones with screen sizes of 4.5 inches and up has more than doubled in the past year or so. The widespread expectation that Apple would join the big-screen club this fall also caused many people to hold off on buying new phones.

A great model lineup
By introducing the 4.7-inch iPhone 6 and the 5.5-inch iPhone 6 Plus, Apple has neutralized one of the key selling points emphasized by Samsung and other Android vendors: size. Apple now has a well-diversified array of smartphones.

The expanded iPhone lineup includes the 4-inch iPhone 5c and iPhone 5s, the 4.7-inch iPhone 6, and the 5.5-inch iPhone 6 Plus. These phones sell at price points (with a two-year contract) ranging from free (for the iPhone 5c) to $499 (for an iPhone 6 Plus with 128GB of storage).

iPhones are now available in a variety of sizes and price points. Photo: Apple.

By keeping last year's 5c and 5s models around, Apple can continue to attract customers who want smaller phones, as well as those who are looking to save money. At the other end of the spectrum, the iPhone 6 and iPhone 6 Plus finally allow Apple to tap into the massive pent-up demand for big-screen phones.

The iPhone 6 is a game changer
The more than 73 million U.S. iPhone users are spearheading demand for Apple's latest and greatest phones. This summer, a comScore survey found that 35% of iPhone owners in the United States planned to upgrade before year-end. If anything, word of mouth and positive reviews for the iPhone 6 and iPhone 6 Plus could convince more people to upgrade soon.

Additionally, a significant number of U.S. Android users are considering switching to the iPhone. Used-phone reseller Gazelle found that Samsung trade-ins tripled in the days leading up to the iPhone 6 launch. Gazelle polls have found that about one-third of U.S. Android users plan to buy an iPhone 6.

The iPhone 6 Plus is undermining Samsung's dominance of the "phablet" market (Photo: Apple)

People don't always follow through on what they tell survey researchers. However, if Gazelle's findings are accurate, the iPhone 6 will push Apple beyond 50% of the U.S. smartphone market, unseating Android from the No. 1 position. This suggests that screen size has been a key sticking point keeping some U.S. smartphone buyers from switching to the iPhone.

Early sales tallies look good
The early sales numbers demonstrate the enormous demand for the iPhone 6 and iPhone 6 Plus, especially in their home market. Apple received more than 4 million pre-orders for the new iPhones, setting a new record. That's twice the number of pre-orders seen for the iPhone 5 launch in 2012.

This strong pre-order demand translated to record first-weekend sales of more than 10 million iPhones. Not all of these phones went to the U.S. market, of course. That said, global usage of the new iPhones has dropped by more than 50% during the overnight hours in the U.S., suggesting that a majority of the initial 10 million phones were sold domestically.

Ready to roll
If it already seems like everyone you run into is holding an iPhone, prepare for more of the same. Despite iPhone 6 supply being heavily weighted toward the U.S., Apple is still far from meeting domestic demand, judging by the long wait times for orders of the iPhone 6 and especially the iPhone 6 Plus.

The iPhone 6 is off to a fast start in its quest to make Apple the dominant smartphone brand in the U.S. In all likelihood, well over half of U.S. smartphone owners will be using iPhones by this time next year, giving Apple a big leg up in its largest and most lucrative market.

Apple Watch revealed: The real winner is inside
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The article Why the iPhone 6 Will Conquer America originally appeared on Fool.com.

Adam Levine-Weinberg owns shares of BlackBerry and is long January 2016 $80 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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