Will Starlink Mobile matter for Apple?

Starlink Mobile, a service being developed by SpaceX, could potentially impact Apple's iPhone sales model in the United States, according to a research note from Bank of America. The company's analysts, led by Wamsi Mohan, explored how SpaceX's expansion into mobile connectivity might affect Apple's pricing power and sales of premium smartphones.

The research identified three potential risks for Apple. Firstly, Starlink Mobile might disrupt carrier subsidies, which currently account for around $800 per iPhone sold through the three largest US carriers. These subsidies help sustain demand for premium models and encourage customers to upgrade their devices regularly. The analysts estimated that a 10% migration of major carrier subscribers to Starlink Mobile could result in approximately five million iPhone sales and $6 billion in revenue loss for Apple.

Secondly, there is a possibility of competition from a hypothetical SpaceX smartphone. Although this scenario is speculative, it could potentially challenge Apple's market position.

Lastly, the integration of Tesla, SpaceX, and Grok AI services could also present challenges for Apple. While these potential risks exist, the near-term earnings impact appears limited, as the majority of these developments are expected to unfold before fiscal 2028. SpaceX has recently acquired the nationwide 800 MHz spectrum portfolio from Grain Management and secured regulatory approval for a 15,000-satellite constellation, enabling it to offer mobile services without partnering with a terrestrial carrier.

Despite these challenges, the research also highlighted potential benefits for Apple. For instance, existing carriers might initially increase promotions to retain subscribers who switch to Starlink Mobile, which could support iPhone upgrades. Additionally, Starlink Mobile's compatibility with existing smartphones means that customers switching networks could continue using their iPhones without purchasing competing devices.

Furthermore, lower wireless bills might leave consumers with more money to spend on Apple hardware and services.

In conclusion, while Starlink Mobile could potentially disrupt Apple's iPhone sales model, the near-term earnings impact appears limited. The research suggests that Apple could still maintain its competitive advantage through direct sales channels, financing programs, and the potential for lower wireless bills to boost consumer spending on Apple products.

As a result, Bank of America has maintained its Buy rating on Apple with a $370 price target, emphasizing the company's opportunities in AI-powered devices and continued shareholder returns.