As the bad news on the new iPhone sales continues to build, was Apple’s key mistake pivoting towards the luxury high margin smartphone market by sacrificing the iPhone SE line?
The strategic issue with the iPhone SE was that – no matter its popularity – it was much cheaper than the rest of the iPhone portfolio. With Tim Cook and his team focusing on high-priced high-margin handsets, the iPhone SE was an aberration. Those looking for a ‘good’ iPhone found the low price of the iPhone SE and the wide compatibility with iOS software and the Apple ecosystem an attractive proposition.
That option is no longer there. Although you can hustle around online and with network stores to find the final stocks of iPhone SE models, the entry-level model is now the iPhone 7. That handset is arguably $150 more than what the iPhone SE would be priced at for this festive season.
Apple would rather push the iPhone XR as the ‘affordable’ handset and bring people into the iOS ecosystem with a handset priced at $749. If you feel like trading in an iPhone 7 Plus you’ll pick up a $300 discount, but Apple’s goal with the iPhone SE was never about upgrading existing users, it was about bringing new users into the ecosystem, boosting sales, and holding on to market share.
Without the iPhone SE there is no easy way into Apple’s ecosystem.
There is no entry-level handset at a sensible price for the average consumer outside of the second-hand market (and most people researching older handsets will be very conscious of the battery issues in older handsets). And the ‘affordable’ iPhone XR is a courageous definition of affordable.
Was the iPhone SE the perfect handset? Far from it. In Apple’s eyes it was built around older technology, relied on a TouchID scanner rather than the gee-whizz facial recognition, it proudly supported the 3.5 mm headphone jack for audio, and it was a small screened pocketable phone that did not have aspirations of replacing your computer.
Tim Cook had the option to update the iPhone SE in 2018 with a new processor, middling levels of storage, and a focus on bluetooth for audio to push peripherals such as the AirPods. That would have boosted the unit sales of the iPhone, it would have created a less expensive route to bring new users into the iOS ecosystem, and those users would be feeding Apple’s software and services for the next few years.
Instead the ladder was pulled up and the iPhone became a luxury brand, Tim Cook took the decision to hide the unit sales of the iPhone from the quarterly reports to reduce the impact of lower sales, and Apple as a whole moved to increase the profitable rake from each user.
The iPhone SE was Apple’s route towards the mainstream smartphone market. The current expensive handsets show no sign of increasing Apple’s share of the smartphone market, and orders to component suppliers are being cut.