The Purposeful Nature of the iPhone SE
Today Apple introduced the highly rumored update to the iPhone SE. With a starting price of $399, Apple says in its press release that the second-generation iPhone SE embodies the core qualities of the original model affordability, compact size and, thanks to the A13 Bionic, performance. Of course, since the original iPhone SE, the market has changed quite a bit and so has the concept of a small size phone. Considering that today’s phones are as big as 6.7 inches, it clear that as cute as it is, a 4inch screen would have been too small for most people. I also think it is important to consider the type of customer who would be drawn to the updated iPhone SE because if there is a model that, in my view, has been designed with a purpose, it is this one. Do not get me wrong. Of course, Apple must consider the role that each model plays in its portfolio as well as the market. Still, usually, Apple does not narrow down the addressable market for a specific product. In the case of the iPhone SE, it is hard to neglect the most significant opportunity offered by much of the install base who is using a 4.7-inch iPhone. Whether it is the iPhone 6, the iPhone 7 or the iPhone 8, users have been accustomed to that size as well as features like the home button. It would be fair to characterize this user base as a more pragmatic one, that puts value on core features that have a long-lasting impact on their experience.
Leading up to today, the rumors on the name of Apple’s new phone were split between the iPhone 9 and the iPhone SE. Given the changes in the naming convention that we saw last September when Apple moved from the XR to the 11, one can understand why people thought we might have had an iPhone 9. At the time, I wrote:
“While not immediately evident at the start, it became clear that iPhone 11 is the new iPhone XR. The name is a smart move from Apple as it simplifies the naming convention but, even more so, because it does not label the product as inferior. You might not be able to afford the iPhone 11 Pro, or you might not see yourself as a pro user, but you do not feel like you are settling for a “second best” product by buying the iPhone 11.”
The iPhone SE feels like a different kind of product, though. It is not a model we should expect to be refreshed with the regular cadence we see in the rest of the portfolio. Instead, it’s a product that serves the purpose of getting the most pragmatic users to upgrade after holding on to their phones for years. These users might be coming from a hand-me-down or a secondhand iPhone or even be Android users looking for their first iPhone. Last September, I felt the new price of the iPhone XR at $599 and the iPhone 8 starting at $449 offered some great options for upgrades. But in some markets where installment plans are not as common or for those consumers on a tight budget, $50 makes a difference, so the new iPhone SE will certainly further widen the addressable market.
For Apple, upgrades are not only driving hardware sales nowadays, but they also assure that as many users as possible can take advantage of Apple’s new services, such as Apple TV+, which comes free for a year with the new iPhone SE.
Future Proof Purchase
Despite the irregular launch pattern of the iPhone SE, the model still fits into a portfolio and hitting the right price with the right features seems like a carefully balanced recipe. The iPhone SE offers a single camera system similar to the iPhone XR but with the computational capability of the A13 chip, which makes up for some of the limitations. The iPhone SE also starts with 64GB of memory compared to the meek 16GB of its predecessor, but now it also has a 128GB and 256GB at $449 and $549. At the higher configuration, the iPhone SE slides in where the iPhone 8 was and replaces it. Apple gave the iPhone SE wireless charging and fast charging (with the right adaptor), two features that are much appreciated by users and will allow the SE to better compete with similarly priced Android models. Finally, Touch ID instead of Face ID. While if you have an iPhone model with Face ID, you might never entertain the idea of going back to Touch ID (even with the current mask requirements) the consumers who are likely to be interested in the iPhone SE love their Touch ID.
If I had to guess when a good time for the next refresh of the iPhone SE might be, I would say that in another four years sounds like a good time considering that by then, 5G will be truly mass market.
Launching a product in the current environment is certainly not easy. I argued a few weeks ago, when Apple introduced the new iPad Pro, that this kind of device is likely to appeal to a segment of the market that might not be too concerned about the less favorable economic environment. In contrast, a more mainstream device like the iPhone SE, although competitively priced, might remain out of reach in the current uncertain economic climate. I was asked whether Apple should have delayed the launch further and to be honest, I am not sure if it would have made a difference if the economic downturn many are forecasting will materialize. It could be that Apple was hoping to have at least some stores open by now. The type of customers interested in the iPhone SE might be reluctant to purchase online without seeing the device first. That said, bringing a phone to market impacts the supply chain partners as well as the channel partners. Delaying any further might have had a channel domino effect on other products both from Apple and from other brands.
One last point on the iPhone SE is that it is one of those slow-burning models that will have a long-tail impact on sales and considering how much more we depend on technology the need for a phone that does the essentials well especially for consumers who use their phone as their primary computing device.