Apple finally gets serious about the mass market with the iPhone SE

Apple has launched a new smartphone called the iPhone SE that marks its first serious attempt to offer a new phone at a more mass market price point.

Superficially the iPhone SE looks almost identical to the iPhone 5s, which was launched over two years ago. However Apple has done some serious engine upgrading, essentially giving the SE the same processor as the current flagship iPhone 6s. And the critical part is that you can get all this SoC goodness for just $399, which is almost half the cost ($649) of the equivalent iPhone 6s.

Prior to this Apple’s only concession to people who couldn’t afford its flagship phones was to discount its one-year-old phone by $100 (which is essentially what the 5c was) and its two-year-old one by $200. By that logic, until yesterday, the iPhone 5s was still available to buy from Apple for $449, but now you can buy a far superior phone for $50 less!

Apple’s marketing department feels compelled to attach a superlative to every new product, although these are becoming somewhat strained. The SE has been announced as ‘the most powerful phone with a four-inch display’. “iPhone SE is an exciting new idea – we started with a beloved, iconic design and reinvented it from the inside out,” said Philip Schiller, Apple’s SVP of Worldwide Marketing. “Everyone who wants a smaller phone is going to love iPhone SE.” By which he means ‘cheaper’.

How much cheaper, of course, depends on where you live. In the UK the starting price is £359. Today’s exchange rate is $1.43 to the £, which would translate to a price of £279, so we’re paying an £80 or 29% premium over here. And then there’s Apple’s $100 (£80) premium for an extra 48GB of built-in flash storage, which probably costs the company a dollar or two to buy, but that applies to all iPhones so this is still a relatively good deal.

“A less powerful processor would have been perfectly acceptable in a cheaper iPhone but, with the processor and graphics on par with the iPhone 6s, you’re left wondering what features have Apple scrimped on to keep costs down? Other than the screen size, not many it seems,” said Stephen Ebbett of gadget insurer Protect Your Bubble. “Those who weren’t bowled over by the 5c, Apple’s previous lower-cost iPhone, should be willing to give the SE more serious consideration.”

“Targeted at Millennials with smaller budgets, the SE offers a fully-formed iPhone experience for around £170 cheaper than its flagship,” said Ernest Doku of price comparison site uSwitch. “The iPhone 5c was supposed to be a cheap and cheerful iPhone but raised eyebrows when it launched because it was only £80 cheaper than the flagship 5s back in 2013.”

“Whilst a 4-inch iPhone may not capture the imagination of the Technorati, the iPhone SE is a crucially important reinforcement of Apple’s entry level iPhone portfolio that promises to drive significant volume and margin,” said Geoff Blaber of analyst firm CCS Insight. “The iPhone SE is a product designed to strengthen the entry level portfolio rather than relying on cheaper pricing of older models. The iPhone SE stands to become the new workhorse in the iPhone portfolio. It addresses a new price point and plays a critical role in bringing new users into the Apple ecosystem.”

Until now Apple has always resisted calls to seriously address lower price tiers and who can blame it? Few people expected it to shift such volumes in places like China, where it was assumed iPhones were far too expensive for the mass market, but that country alone now accounts for a quarter of Apple’s revenues.

This move indicates that Apple now thinks the only way to maintain shipment growth, or perhaps even just to prevent a decline, is by making a cheaper device and targeting it at countries like India, Indonesia and Brazil, as well as the Android market in developed markets. Apple’s margin on the 16GB iPhone SE is likely to be significantly lower than on its more expensive devices but that, at last, seems to be a price it’s willing to pay.