iPhone 5SE: Right phone for expanding Apple markets at right price and right specs - but boy is this years LATE for Apple

Good move from Cupertino. The iPhone 5SE is pretty close to optimal for Apple's so-called iPhone Nano strategy (which I called for five YEARS ago). The specs are slightly upped from the 5S and 5C, so this is a 'new' phone while its superficially essentially the same body of the iPhone 5S from 3 years ago. No problem, it now adds a better camera, the Apple pay functionality to the fingerprint scanner and tons more performance as 3 years would allow. The best part is the price. As the 6 series moved up-scale in price (as I urged Apple to do) now this latest Nano is finally priced 'low enough' to create distance and gain in pricing (when the product line was initially split with 5S and 5C, the price differential was not enough to help gain market share). So the unsubsidised price for the 5SE is 399 US dollars which is significantly less than the cheapest new 6 model, starting at 649 US dollars (unsubsidised price ie price without contract bundle, the only fair way to compare actual phone prices).

Now my minor quibble is with the naming, why not make this the 6SE or 6C, but who cares, its a genuinely new iPhone, it is internally mostly a repackaged 5S with some better tech. Its thus a fair entry-level iPhone - bearing in mind, thats like calling the Boxter its entry-level model which it obviously is for Porsche but that doesn't make it the peoples' car haha. At 399 dollars unsubsidised, the cheapest iPhone is still twice as expensive as the AVERAGE smartphone globally (which would run Android obviously).

The iPhone unit sales were set to decline this year. So they (finally) rushed the iPhone Nano strategy into play (as I said, they won't do it this way until the pressure comes from the market in terms of sales having peaked). Now they finally split the launch dates for one new iPhone or iPhones in the Autumn - for Christmas sales - and the second new iPhone launch window - the Spring launch. This makes sense and helps remove the weird volatility of iPhone sales from one quarter to the next. And all this means, the iPhone will pick up significant new sales, new customers, and also modestly some market share as well. I don't anticipate Apple to return to 20% market share but something around 18% is definitely possible for this calendar year 2016. Will this iPhone 5SE cannibalize 6 series sales. No it won't. Yes, some who really HATED 'too large' size of the 6 series will now switch but that is a very slight slice of loyal iPhone owners. Most do love the larger screens. You now get the better camera and the Apple pay functionality plus various tweaks and boosts to the junior model performance. But now of course the heavily addicted iPhone owners will await the iPhone 7 for the cool stuff. This is the entry-level model to help expand Apple's reach in less affluent markets, maintain its high desirability and win new converts to the Apple cult. A very smart move, the only problem I have, is that this is exactly the strategy that I outlined five YEARS ago when Apple should have done this. But that is money left on the table, Apple has managed just about ok in the interim haha, most profitable company in human history etc.. So they didn't exploit their market perfectly? Only a strategy consultant might quibble with that haha. 

Comments

[abdul muis]

@Tomi

Apple should give credit to you. They should pay you for this strategy.

[cornelius]

I think overall this strategy will help Apple increase sales slightly, but this small phone will not have great sales in Asia. Overall more sales, not much more profit (remember, this phone replaces the more expensive 5S).

[neil]

@Tomi,
Credit where credit's due - tip o' the hat. :-)

[neil]

Interesting titbit from Apple's presentation yesterday:

Apple executive Greg Joswiak noted that Apple sold more than 30 million iPhones with four-inch screens in 2015 — iPhone 5s and 5c devices.

It will indeed be interesting to see how that number grows with the new lower pricing and flagship internals.

That also means Apple sold around 200M big screen iPhone 6/6+/6S/6S+ models out of the 231M iPhones sold last year.

[Earendil Star]

Actually I think the SE will cannibalize some iPhone 6 sales, given the better specs (screen size apart), and the lower price. But still, the iPhone 6 is now a stop-gap and will only last until the iPhone 7 is released, which is now not so long away...
On timing, I think they did it just when they needed it. And did it the clever way: improved internals, with minimal extra design effort, since it is just an updated 5s...
Just as the decision to shift to a bigger screen was critical when it was made, despite going against Job's initial thoughts...
So, all in all, good move at a critical stage, made realizing that things were no longer so rosy. However, remember: for Apple it is not a question of surviving, it is a question of maintaining the breakneck momentum they have enjoyed until now. And SE or not SE, it will be a heck of a difficult target to achieve, given that the market is now becoming saturated.
Apple managed to replace Blackberry in corporates, tap all possible markets (and will keep doing so, e.g. in India). Will it still manage to find more and more areas of expansion? The price drops are showing this is becoming increasing difficult to achieve. But Apple remains Apple. Very well done.

[abdul muis]

I agree with @cornelius. I don't think this phone will have great impact in Asia.

I also don't know if European still like the 4" display.

[Paul]

I think that the market response to iPhone 5se would be a good measure of price vs screen-size in iPhone world.

[Tester]

@neil:

"Apple executive Greg Joswiak noted that Apple sold more than 30 million iPhones with four-inch screens in 2015 — iPhone 5s and 5c devices."

... and here's where things will get interesting. Since there's already considerable sales of small screen phones, how high is the chance that the new model will really affect market share and sales numbers?

There will surely be an upgrade spike by those who held out on the 5S but it's not like this phone will bring anything revolutionarily new to the table - not even in terms of price point.

So, slight increase in market share will be the most likely outcome, it remains to be seen how much this is cancelled by the lackluster demand of the 6S.

The most telling aspect is the change in tone in the commentaries I read. Something about 'Apple lost its magic', 'business as usual', 'beginning of the end' were among the things I read in my local newspaper, which has always been a staunch Apple supporter in the past.

Oh, and in unrelated news, Apple lowered the prices of some watch models. What does this tell us???

[Petri Hamalainen]

Small screen size will appeal to small people, namely to CHILDREN.

As a father of two 10-12 year olds, it haa been clear to le for a while that 4 inch iPhone is ideal for this age group.

[Tester]

Really?

For children I'd rather buy a cheap phone with plastic casing, not something that costs $400 and may break or bend if it falls to the floor - which with children will inevitably happen.

[Dave Barnes]

I have large hands and I hate the gigantic iPhone 6 size.
I have been waiting for a perfect iPhone to replace my iPhone 5 and the SE is it.
Will be ordering one this week.
Smaller is better.

[DarwinPhish]

Sadly the pricing is not as good outside the US. After taking into account current exchange rates and sales taxes, the equivalent price in other countries is $443 (Canada), $457 (France) and $470 (Japan & Australia). Not sure if this is over-aggressive currency hedging or the result of deals with local carriers.

[John Phamlore]

@DarwinPhish: Good observation.

I do not believe this device is aimed at growing market share outside the United States at all. Consider how it was announced at a relatively low-key event with not much customized international coverage.

A more likely explanation is Apple is tailoring this device and price point at United States consumers who will be buying a device without apparent contract subsidy. Lowering the price to $399 USD does nothing to make this device more affordable to those whose income level is an order of magnitude or more below those who can afford a $599 USD device.

[John Phamlore]

@Wayne Brady: The experiment of cutting price even by about a half of top-end phones has already been run. It just doesn't move the market share needle all that much, anywhere. This was shown by LG's Nexus 5 phones which had the extra bonus of an updated greatly improved Google Android OS without garbageware.

The LG Nexus 5 also shows that not only does there have to be greatly increased demand to move the needle, which did not happen, there has to be a willingness by the supplier to supply the product in all major markets, which LG was not quick to do either.

[neil]

@Darwinphish
True. The iPhone SE price is 15% more expensive in Australia than the USA while the iPhone 6S is only 6.4% more expensive.

In Australia, the base model iPhone 6S is AUD$1,079 which converts to US$822. Subtract Aussie sales tax of 10% gives US$747. This works out as US$48 or 6.4% more expensive than the US price.

At AUD$679 or US$470 (with sales tax subtracted), the iPhone SE is US$71 or 15% more expensive than the USA.

@John Phamlore
>"The experiment of cutting price even by about a half of top-end phones has already been run. It just doesn't move the market share needle all that much, anywhere. This was shown by LG's Nexus 5 phones"

John, I don't think you can use a Nexus devices as evidence in this context as Nexus devices have never captured any sort of significant sort of market share to be comparable. Also, there were already plenty of Android competitors with top-end specs available at half the price on the Android platform making the Nexus 5 price cut far less compelling, whereas there are no other top-end iOS-compatible phones already available at half the price of the iPhone 6s.

[neil]

@John Phamlore
I should note that even at a higher price than in the USA, with almost all the features of the far more expensive iPhone 6s, I think the iPhone SE is still going to be extremely compelling in Australia and elsewhere.

$470 is still a heck of a lot cheaper than $747.

>"I do not believe this device is aimed at growing market share outside the United States at all. Consider how it was announced at a relatively low-key event with not much customized international coverage."

Actually, it has been noted that foreign press made up a quite high proportion of the audience considering the large number of Apple staff present in the small Town Hall venue. I think it absolutely will have an impact internationally with that price and featureset.

[Emilia Srikandi]

To each his own
My 9 year old daughter has small hand prefer $200 5.5" phone than gold plated 4" phone because she can watch youtube better in 5.5" than 4". She can put 5.5" in her pocket. So 5.5" fine

[Paul]

I was very surprised to see how much bad press iPhone 5SE has gotten since launch. Even Apple's "attack dogs" from the press were not praising iPhone 5SE. It is sooooo weird to see that iSheep press is not so excited (that is less excited than I was expecting) about iPhone 5SE.

[Emilia Srikandi]

@Wayne

"But the $300-$400 mid range priced Android phones are in for a big hurt."

$40K two seater car will not effect $40K sedan car sales.
This small iphone will not have effect on big screen android

[Tester]

@Wayne Brady:

"I doubt the $250 and below Android market will feel the heat. But the $300-$400 mid range priced Android phones are in for a big hurt. "

Stop deluding yourself. For the same price you get a nice 5' Android phone with a decent feature set. Why should those users downgrade to a screen size from 5 years ago?

"I was very surprised to see how much bad press iPhone 5SE has gotten since launch. Even Apple's "attack dogs" from the press were not praising iPhone 5SE. It is sooooo weird to see that iSheep press is not so excited (that is less excited than I was expecting) about iPhone 5SE."

True. As some journalists said, 'the magic has ended'. The real danger here is not that this thing might sell badly but how it impacts Apple's reputation as a premium company with superior product. Because that's the sole reason they exist.