Apple Back to School promotion starts June 16 with a $100 gift card

I can think of a few reasons to go shorter than every two years. A two-year cycle would put, on average, 25% of phone buyers in an awkward position of either buying a 1.5 year old iPhone or waiting 6 months for an upgrade. Similarly, another 25% would have to buy a 1 year-old iPhone or wait a full year for an upgrade. As it is, whenever I read forum posts about whether to buy the iPhone 4 right now, a large proportion of responses come from people saying, "I wouldn't spend $xxx on a phone with year-old technology. I would buy an Android phone instead." Second, Apple can very easily induce a lot of people to upgrade their iPhone six months before their contract ends. Proportionately, a much smaller proportion of people - really hardcore Apple users - will upgrade every single year. Third and most importantly, Apple needs to keep selling hardware in order to keep its profits up.

Of course, I'm just speculating. I kind of thought Apple might delay their next iPhone after we found out the timing of the Verizon iPhone launch. It didn't really make sense to me that Apple would release an upgraded iPhone just six months after the Verizon iPhone launch - it would have angered too many people. And of course, Apple has really been hurt this year (in terms of sales and stock prices) because of supply shortages for the iPad, so there's that element. Finally, Apple can't (or doesn't have to) keep up the pace of releasing a new chipset every single year that doubles the CPU speed and quintuples the graphics power, for instance, from the standpoint of keeping iOS upgrades usable for three generations of iOS devices.

Alternatively, it's possible that we'll see Apple work on its supply lines over the next couple years and resume yearly upgrades. They have enough money lying around to do certain things towards that end. But consider all the components that have already seen shortages in the recent past - LCD screens and NAND flash memory in particular - and add to that Apple's squabble with Samsung and the disaster in Japan. Apple would have to get into a lot of basic component-manufacturing infrastructure which it doesn't currently own to be able to supply all of the necessary parts for its iOS line.

I think that the yearly interval is no longer important to maintain, while there are advantages to a 1.5 year time interval. At first, Apple was interested in picking up new customers. Each iPhone release succeeded in reaching more people and added significant hardware changes: compass, better cameras, video recording, LED camera flash, and FaceTime.

But the way things are now, I see Apple's position with the iPhone leading to different strategies than their strategy in the first few years of launch. I propose that Apple can actually capture more overall sales among people who already own an iPhone by releasing a new model every 18 months. It's a psychological/financial argument, based on the two-year contract time frame, with the support of fake math. A current iPhone user would have to spend quite a lot of money to upgrade every single year. The average person is not going to shell out hundreds of dollars half-way through their contract while their current iPhone works just fine, just because a new model with incremental hardware upgrades is out. A person could be much more easily induced to upgrade by 1.5 years into the contract. Proportionately, that might add to sales to existing iPhone users by let's say 15%. (That's the fake math.)

It's just a hypothesis I have. It seems like that the iPhone 4 could probably last an additional six months on the market, although Apple might be keen on getting into NFC payments early on. Given the hypothesis that the performance of Apple's mobile chipset is now focused on the more demanding iPad platform, the iPhone's chipset is always going to be more capable than necessary and therefore relatively underclocked (so to speak) for battery life. To me, that means that iPhone releases every 1.5 years maximize Apple's profit margins: reduced costs to develop, test, and distribute the newest iPhone, increased return from their just outdated iPhone model, and increased sales to its very large existing user base, while retaining the ability to draw in new customers by the enduring hardware capability of each model. A new color model thrown in at random intervals would contribute to that as well.

This could be true as long as new hardware components are not required to draw in sales or profits. Right now, e.g., NFC might be just such a hardware upgrade that would bring in more profits. But Apple doesn't need to keep adding better or more cameras, accelerometers, etc. every year. There are only so many doodads that you need to put on a camera. Wifi and Bluetooth protocols, cellular radios, etc. don't change fast enough to warrant yearly hardware changes. As you mentioned, iOS upgrades can add functioning as long as the hardware is capable.

At this point, it is more important to upgrade the iPad every year than the iPhone. There's more potential growth in that market than the smartphone market, which can expand by increasing the number of carriers and the international distribution.