iPhone SE: Hopes For A Smartphone Revival
Four years later, the iPhone SE is back.
Counterpoint Research estimates that Apple’s entry level smartphone will sell 15 million units in this highly unpredictable fiscal year. The figure seems very consistent with the volume of Apple’s small screen size phones sold in 2015. Should this be the case, and assuming an average selling price of $450 per unit, Apple can count on nearly $7 billion hitting its top line from the sales of the iPhone SE in 2020.
These numbers may not seem overly impressive at first glance. For reference, iPhones generated a total of $142.4 billion in sales last fiscal year, twenty times more than the iPhone SE is projected to produce this year.
But as the saying goes, the devil is in the details.
Extending the reach of smartphones
One of the benefits of having a high-performance smartphone in the product portfolio at a relatively low selling price is the appeal to mobile phone users in developing markets. While it is estimated that over 70% of the US population owns a smartphone, less than half of the entire world does. Herein lies an opportunity.
It is unlikely that those with lower purchasing power would be in the market for a top-of-the-line iPhone 11 Pro, or waiting patiently to pounce on the new 5G model that has yet to come out. But they could very well be enticed to give the iPhone SE a shot, especially if monthly payment plans are offered in their markets.
China needs a little boost
The other potential “superpower” of this year’s iPhone SE is the ability to boost China sales. Revenues in the region have been hurting for the past five years, as the chart bellow illustrates. One of the culprits has been weakness in Hong Kong, traditionally a tourist hub that has taken a hit from economic, political and social unrest, along with a strong dollar.
Maybe the secret to jumpstarting Greater China sales lies in the lower-end market. Apple has not been traditionally competitive in the sub-$250 smartphone category, which has been dominated by the likes of Huawei. At a bit higher price tag but offering more features and better performance, maybe the iPhone SE will allow Apple to claim a chunk of this underexplored market.
Adapting to tighter budgets
Lastly, there is also the effect of the COVID-19 crisis that extends beyond China and other developing markets. The most difficult challenge for smartphone vendors in the face of a global pandemic is the negative impact on consumer confidence or purchasing power.
Apple and its peers need to think carefully about their strategies to combat the consumer tendency to favor lower-end models or to put a hold on smartphone purchases altogether. The iPhone SE may be a crucial piece of the puzzle for the Cupertino-based company.