According to reports, Apple plans to launch a 5G version of the iPhone SE in March this year, but the real concern is whether the existing models will be significantly reduced in price. For years, the tech industry has called on Apple to launch a lower-priced iPhone in emerging markets.
Since Africa, South America and parts of Asia are now important bases for Android, if Apple launches the $200 iPhone in these regions, it can use it to attract more users to its services. This will make low-end iPhones very profitable in the long run. But the company has so far avoided that model.
In 2013, when carriers were just starting to remove subsidies and demand for lower-priced iPhones was growing, Apple executives said they would not launch lower-priced iPhones in blind pursuit of market share. The company did release a low-end iPhone SE in 2016, but that phone cost $399, well above many Android phones.
The price has not been lowered in 5 years. Apple was trapped in the minds of its late co-founder Steve Jobs’ “don’t sell junk” rhetoric. But when Apple launches the 5G version of the iPhone SE, it is expected to make adjustments to this model. Industry insiders suggest selling the older iPhone SE for $199.
Third parties are already reselling current iPhone SEs for under $200, and refurbished models are plentiful. If Apple launches an official $199 device, it could have a best-selling model in emerging markets. This could provide an option for consumers who don’t care about 5G service and don’t want to spend $1,000 on an iPhone 13.
When Apple broadens its user base with the $199 iPhone, it can earn long-term revenue and include more people in its ecosystem. These people may be more willing to try AirPods, an Apple Watch, or a higher-end iPhone later.
This move can also easily solve the sales problems of the iPod Touch. The iPod Touch has been a popular replacement for the iPhone for years — and Apple has been selling the last remaining iPod, too. But the iPod Touch hasn’t been updated since 2019, and the current version still uses an outdated 4-inch screen and a slow A10 processor.
The iPhone SE has a 4.7-inch screen, an A13 processor and a more modern interior. If the iPhone SE can match the $199 iPhone Touch, Apple could abandon the iPod line entirely.
But what effect will this have on Apple’s historically lucrative profit margins? From a hardware perspective, the company’s profit margin is likely to be between 30% and 40%.
In terms of material costs two years ago, the hardware cost of the iPhone SE was around $200, so the $199 list price is equivalent to selling at a loss. But 2 years later, the economies of scale have been further strengthened, so the cost may have been greatly reduced now.
Is selling it now at $199 enough to earn Apple its regular profit margins? I’m afraid not, but they can make up for it by increasing the sales potential of their services and other products in huge new markets.
Such devices help Apple to perform well in the Indian market. The company once called India the next China, but the iPhone has been slow to make a big breakthrough in India.
Research shows that the iPhone has less than 5% market share in India, but a $199 device could change that. It is estimated that the current average mobile phone price in India is $196, an increase of $40 from 2020.
The $199 iPhone SE will also be a hit in the U.S., allowing Apple to generate revenue from services and a blow to lower-priced Android phones with sophisticated features. It’s unclear if Apple will actually make the move, but next week’s 5G iPhone SE launch would be the perfect time to make the change.