1 Move That Could Supercharge Apple's iPhone Revenue

Preorder trends suggest that Apple's (AAPL 0.86%) iPhone 14 lineup could turn out to be another successful smartphone flagship from the tech giant.

Delivery times for the latest iPhones have started extending already, even in price-conscious markets such as India and big smartphone markets such as China and the U.S. What's more, Apple has reportedly asked its suppliers to bump up production of the pricier iPhone 14 Pro and Pro Max models, a move that will improve the company's average selling price (ASP) and give its top line a nice boost.

Apple may be producing more units of the iPhone 14 in 2022, as compared to the 80 million units of the iPhone 13 that it made last year. Supply chain gossip suggests that the company may end up making 95 million iPhone 14 units this year. However, Apple may have missed a trick this time that could have helped it move more units of its latest iPhone lineup and helped it enter a fast-growing smartphone niche.

Apple's missing out on this lucrative smartphone trend

Counterpoint Research points out that foldable smartphones are gaining terrific traction among consumers. The market research firm estimates that 9 million foldable smartphones were shipped last year. This form factor is expected to clock 73% growth in 2022 and hit shipments of 16 million units.

Foldable smartphone shipments are expected to head higher next year as well. Counterpoint forecasts shipments of 26 million units in 2023, which would be an increase of 62% over this year. The impressive growth of the foldable smartphone market indicates that consumers are warming up to this style and are also willing to pay a premium.

This is evident from Samsung's solid share of the foldable market. Counterpoint estimates that Samsung controlled 62% of this space in the first half of 2022, though its share could jump to 80% in the second half thanks to the recent launch of the Galaxy Z Fold 4 and Flip 4. It's worth noting that the Galaxy Z Flip 4 starts at a price of nearly $1,000 and the Fold 4 starts at almost $1,800. Even the older Galaxy Z Flip 3 is now being sold for $795, while the previous-generation Fold 3 starts at a price of $1,390.

This means that the premium pricing isn't deterring people from buying foldables at a time when the broader smartphone market is under stress due to surging inflation. The ASP of smartphones globally is expected to land at $402 this year, according to market intelligence provider IDC, so foldables are commanding a solid premium.

In 2021, the ASP of an iPhone stood at $825. It won't be surprising to see Apple's ASP head higher this year as the more expensive iPhone 14 Pro models remain in stronger demand compared to the plain-vanilla versions of the device.

All of this indicates that Apple could have made the most of the foldables trend by introducing its own foldable device this year. Such a move would have allowed the company both to increase volumes and to push up ASPs, especially considering that it enjoys solid pricing power in the smartphone market.

There's still time for the tech giant to crack this market

Supply chain rumors and patent filings indicate that Apple could launch a foldable device by 2025. While some analysts believe that such a device could enter the market in 2023 or 2024, noted Apple analyst Ming-Chi Kuo estimates a launch in 2025.

So it may take some time for Apple's foldable devices to arrive, and the company could miss out on this market's growth over the next two to three years. But Apple investors shouldn't be disappointed. That's because foldables still form a small part of the overall smartphone market. Counterpoint's 2022 shipment estimate of 16 million units is a small speck when compared to this year's estimated total smartphone shipments of 1.27 billion units.

In simpler terms, foldables have yet to gain critical mass. That's why Apple can take its time, fine-tune a foldable iPhone, and enter this market at a time when the device could move the needle for it in a bigger way. The company did something similar with the iPhone 12 lineup, the first 5G iPhone series released in 2020. Apple was late to jump onto the 5G bandwagon, as Samsung's Galaxy S10 5G arrived in April 2019.

Apple's late entry, however, didn't dent the sales of its 5G iPhones. The company ended 2021 controlling 31% of the 5G smartphone market.

Can foldables move the needle in a big way for Apple?

ABI Research indicates foldables could account for 10% of global smartphone sales by 2030. IDC estimates that global smartphone shipments will grow at a compound annual rate of 2.3% through 2026. Assuming a similar growth trajectory through 2030 means that global smartphone shipments could exceed 1.5 billion units annually by the end of the decade.

So, if we go by ABI's forecast, 150 million foldables could be shipped annually in 2030. If Apple manages to corner a third of this market (as it did with 5G smartphones) and generates an ASP of at least $1,000 at that time from each foldable, this fast-growing smartphone niche could add $50 billion to Apple's annual revenue.

That would be a big boost considering that the iPhone generated $191 billion in revenue for Apple in fiscal 2021. It gives the tech giant a big reason to enter this market.