It’s easy to write off Apple’s unveiling of the iPhone SE on Monday as an unimportant, gradual improvement over previous models, but it’s wrong to do so.
The iPhone SE is actually vital to Apple’s future – and therefore mobile technology overall – for a number of reasons, making it the company’s most important product since the larger-screened iPhone 6 launched in 2014.
At US$399, the iPhone SE is the cheapest new iPhone ever. Apple’s motive with the lower pricing is clear – it’s finally putting some gusto into going after more cost-conscious consumers.
The company’s previous mid-market strategy was to sell older iPhone models for less than current versions. If you didn’t want to shell out $649 for the latest iPhone 6S, for example, you could go for an older device, typically at a discount of $100 or more.
That strategy doesn’t seem to be serving Apple well, with only about 13 per cent of the 231 million iPhones it sold last year qualifying at under $400. The mid- and low-end of the smartphone market is owned almost exclusively by Android manufacturers such as Samsung, meaning that Apple is missing out on a huge chunk of buyers.
That’s a big reason for why overall iPhone sales are slowing. In January, Apple reported that sales grew at their slowest pace since the device’s introduction in 2007. For a company that depends on iPhones for two-thirds of its revenue and profit, it’s an unacceptable situation.
The cheaper iPhone SE gives the company a better weapon with which to compete for a larger segment of consumers, many of whom obviously don’t want to be saddled with older technology.
Despite its price, the iPhone SE is hardly a slouch under the hood. Housing Apple’s A9 processor and a 12-megapixel camera capable of capturing 4K video, it has essentially the same guts as the iPhone 6S and 6S Plus, released late last year. It’s also effectively more powerful than the 6 and 6 Plus.
The new device is also more powerful than many sub-$400 phones, which means that Apple isn’t just moving to compete in the space, it’s planning to dominate it.
The new phone’s high-end components, however, are likely to eat into profitability. It looks like Apple is willing to sacrifice some profit margin in order to appeal to a wider group of consumers, an uncharacteristic move for the normally premium-minded company.
Perhaps the biggest question the iPhone SE will answer is whether people still want a diminutive phone. With only four inches of screen, it will stand out as one of the smaller devices available.
A report last year from analysis firm IDC predicted that 71 per cent of smartphones sold by 2019 will have screens larger than five inches. There’s no doubt the lion’s share of the market is in big displays, but there’s still a sizeable number of people who might want smaller ones. The iPhone SE could tap into that pent-up demand the same way Apple’s bigger devices did in 2014, which resulted in record sales.
If the iPhone SE doesn’t sell in big numbers, it’s possible next year’s mid-range device will have to go bigger, which could raise questions about Apple’s entire product strategy. The company may have no choice but to start selling its bigger, more powerful iPhones for less.
It’s impossible to say what the late Apple co-founder Steve Jobs would have thought of his successor Tim Cook’s foray into different-sized products, but it’s reasonable to guess that the famous minimalist wouldn’t have liked it. Jobs saw no reason for bigger or smaller iPhones, or iPads for that matter, insisting instead that he knew what consumers wanted whether they could articulate it or not.
Cook has gone in the opposite direction, following evolving consumer desires rather than dictating them. Apple has continued to grow under this direction, but financial analysts and company observers have long suspected the company has been running out of steam.
Cook’s sole new product – besides introducing different sizes of devices originally launched by Jobs – is the Apple Watch, and it was all but ignored at this week’s event. The iPhone SE could be a last test of faith in Cook. If it fails to spark sales at Apple, questions about his long-term leadership ability will inevitably arise.
Peter Nowak is a veteran technology writer and author of Humans 3.0: The Upgrading of the Species.