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Apple goes deeper down market with iPhone SE

Four-inch device has high-end guts, but a relatively lower price suggests a new strategy.

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iPhone SE:

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As expected, Apple announced a new smartphone at a press event on Monday – the iPhone SE, which the company refers to as the “most powerful four-inch phone” ever created.

The diminutive size, a veritable throwback to iPhones one through five, isn’t the only noteworthy feature of the new device. At $399 (U.S.) or $579 Canadian, its price is also important. It’s the cheapest new iPhone the company has ever released.

The iPhone SE is thus something of a departure from Apple’s old mid-market strategy, which was to sell older devices at lower prices. If a consumer didn’t want to shell out top dollar for the latest and greatest iPhone, they could buy a one- or two-year old model for a couple hundred bucks less.

The iPhone SE, however, is no slouch in the specs department. It packs the same processor, battery life and camera, including 4K video capability, as the iPhone 6S and 6S Plus released in the fall. The A9 processor and 12-megapixel camera are on par with the current top-range models, and actually ahead of the 1.5-year-old iPhone 6 and 6 Plus.

In other words, Apple is selling a pretty good phone at a pretty good price, albeit with a pretty small screen.

Benedict Evans, a partner at venture capital firm Andreessen Horowitz, figures this is because Apple has lost a lot of traction in the mid-market. Older phones that went for $400 (U.S.) accounted for only about 13 per cent of the 231 million iPhones sold last year.

So, while Apple and Android – mainly Samsung – are duking it out for the high-end, the rest of the smartphone market basically belongs to Android.

On the downside for Apple, the higher-end specs on the iPhone SE are likely to eat into the device’s profit margin, Evans adds.

Whether the new strategy will be able to resuscitate slowing overall iPhone sales remains to be seen, but the main question now is whether there is still a large audience for four-inch phones.

The numbers suggest there isn’t. Only about 30 million of the 231 million iPhones sold by Apple last year had four-inch screens, while a report last year by analysis firm IDC found that devices with screens bigger than five inches will account for 71 per cent of the market by 2019.

In that respect, the iPhone SE almost seems like a primer – a stop-gap product designed to ease Apple’s further dipping into the mid-market with lower-priced phones. The iPhone SE is four inches in 2015, but it very well could be bigger next year.

1 Comment on Apple goes deeper down market with iPhone SE

  1. Maybe only 30 million sold – but there’s a question of how many people were waiting for a better 4″ option, or how many people only bought bigger b/c it was the ‘only option’ for the newest greatest thing.

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