Some Would Like a New, Less Expensive iPhone. That’s Not Going to Happen

2 minute read
| Analysis

The idea keeps cropping up. Apple should resurrect the iPhone SE or make a less expensive version of a current iPhone. Apple has rejected that notion.

iPhone SE. Loved by a few, but a market failure.

There are many reasons why this eternal fantasy is a bad idea.

State-of-the-Art

Each year, the iPhone technology improves. Not every user uses all of the new features, but many users use many of them. In order to lower the cost, Apple would have to sacrifice abitrary functionality in a new model iPhone. For example, a less capable camera would sacrifice touted Augmented Reality (AR) capability as well as pose a dilemma for some developers.

Apple has solved this problem by continuing to sell older models at discounted prices. At least the customers know what they’re getting. They willingly live in the past, with a known, less capable iPhone in exchange for a more favorable price. Expectations are set, and there’s no buyer’s remorse when purchasing a modern iPhone that somehow doesn’t have a critical feature that they didn’t realize would be missing.

Cost Engineering

There are basic components of any iPhone that create a minimum subset of functionality. The wireless modem must still support all frequencies and carriers. The Secure Enclave mut still be there. The display and glass must meet Apple’s quality standards. And so on.

It’s very difficult to look at an iPhone’s bill of materials and identify where significant cost savings can occur and then meet some fantasy price that would ignite customers who had otherwise passed on a full-featured, expensive iPhone.

That price elasticity is well understood by Apple, and a suitably attractive low pice is hard to engineer. Customers would just rather pay an extra US$10/month to have the best iPhone and be done with it. iPhone SE sales proved that.

And don’t even think about Apple accepting a lower profit margin to promote sales. Apple doesn’t go down that road with new products. Share holders would howl.

iPhone SE Failure

Apple’s iPhone SE was a failed experiment. Much loved by a few, it lacked the most modern technologies of its big brothers and was not a hot seller, averaging 7 to 8 percent of all iPhone sales in the years it was shipping.

If selling a new iPhone with constraints just to have a low cost leader—to introduce new users—was such a good idea, Apple would have continued the iPhone SE tradition. It did not. And the fabled SE 2 was shelved.

But Apple knows its customers. Those customers don’t want last year’s technology in a branded new iPhone that might be missing something they need for a special app. Even if it’s at an attractive price. Better to know what one is getting with an older iPhone model, and that’s why Apple does continue to sell the iPhone 7 and 8.

In summary, Apple is showing no signs of conjuring up a new, cheaper iPhone model to undercut its flagship models. Apple makes the best iPhone money can buy. It’s Apple’s brand. What Apple is doing is working.

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xmattingly
Member
xmattingly

If Apple knows their customers so well, they’d better start thinking seriously about smaller form factor phones that actually fit comfortably in a pocket & don’t have camera bumps. Until then, they’ll never pry my SE out of my cold, dead hands… I won’t buy another iPhone unless this one becomes obsolete or a similar-sized, practical iPhone comes to market.

Member
ToneWilliamsUSA

I agree that Apple is not going to give its customers a less expensive iPhone, one that offers value over obscene profit. Apple’s new business model is to extract every penny it can from its customers, quite different from what Steve Jobs did — create the very best user experience possible and sell it for a modest premium. Excellence and outstanding value, that was Jobs’ secret sauce. And boy did it work. It created an enormous amount of goodwill (that Tim Cook has squandered) and laid the foundation for the incredible riches enjoyed by Apple shareholders today.

JonGl
Member
JonGl

For me, it’s less about the price than it is about the form factor/size. Last August, i went back to the SE from Android because I was tired of ever larger and larger phones. Give me a full-featured iPhone with a 4.5″ or 5″ screen, and I’ll pay for it!

wkrjr
Member
wkrjr

IMHO, I believe that’s a shortsighted move on Apples part and will price many out of the iPhone market and Apple ecosystem. I was a self employed business owner when I suffered a devastating injury that left me permanently disabled and SOL. I lost everything I had worked for all my life. At the time I had a brand new mid 2010 MacBook Pro which became recently obsolete after eight years of dependable service. For me the only Apple alternative was the SE which was the only thing I could afford from Consumer Cellular with a $10.00 down payment and… Read more »

geoduck
Member
geoduck

Sadly I think you’re right. I love the small form factor of the SE. The lower cost was just an added bonus. But it isn’t around any more and won’t be. I’m looking at an XR this fall probably, though how the hell I’m going to carry it is still up in the air. I’m not sure it’ll fit in my pants pocket, especially with a case.

Lee Dronick
Member
Lee Dronick

I’m not sure it’ll fit in my pants pocket, especially with a case.

Same here, that is why I opt for the smaller iPhone. Not mention my small hands.

geoduck
Member
geoduck

Up here the XR starts at over $1000. I can’t justify an additional couple hundred for the base XS. I’d rather put that money into upgrading an XR