Apple's aggressively priced $399 iPhone SE viewed as a 'substantial' market opportunity

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in iPhone
For the first time ever, Apple will be competing in the $400 smartphone range with its most affordable new iPhone model ever, and one Wall Street analysts believes that could net the company 17 million additional sales this year alone.




Rod Hall of J.P. Morgan issued a research note to investors on Tuesday, in which he noted that the $400 to $450 smartphone price range is estimated to have generated 43 million total sales in 2015 with an average selling price of $426.

Prior to this week, Apple didn't compete in that market. But with the new iPhone SE priced at $399 for an entry-level 16-gigabyte model, Hall believes the company could make a splash and drive its sales incrementally higher.

In the $450-and-up price range, where Apple has competed until now, the iPhone has about a 65 percent unit share, and controls nearly all of the revenue and profits. Hall believes Apple could "easily" take about 40 percent of the $400 to $450 smartphone market with the iPhone SE, which is how he arrived at a 17 million estimate for 2016 sales.

At an average selling price of $399, sales of 17 million units would equate to $6.9 billion in additional revenue. With a conservative gross margin estimate of 40 percent, that would result in $2.8 billion in potential incremental profit, he said.

"Not bad for a day's work in Cupertino," Hall wrote.




Arguably the biggest surprise in this week's iPhone SE announcement was the price. It was largely expected that the new 4-inch model would simply replace the iPhone 5s at the low end of Apple's lineup, carrying the same $450 price. But by hitting the market at under $400, Apple has introduced its lowest entry price yet for the iPhone.

Apple is also offering a 64-gigabyte version of the iPhone SE priced at $499. Both models feature an A9 processor with 2 gigabytes of RAM, Apple Pay, and a 12-megapixel iSight camera, matching specifications in the iPhone 6s.

To achieve the lower price point and presumably maintain its margins, however, Apple did make some concessions. The chamfered edges on the iPhone SE are matte, the Touch ID fingerprint sensor in the home button is the slower first-generation hardware, and the handset lacks the pressure sensitive 3D Touch technology found in the iPhone 6s series.
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Comments

  • Reply 1 of 43
    paulmjohnsonpaulmjohnson Posts: 1,380member
    I might as well be the one to complain about something!

    I wish they made that design in the bigger screen!  When I moved to the iPhone 6, I thought I wouldn't like the bigger screen, but then when I powered on my old iPhone 5 to sell it on eBay, I was shocked by how cramped the experience was - the bigger screen is definitely better, in my opinion.

    However, I absolutely loved the design of the 5!  It was so solid.  First phone I've had, post Nokia, that felt like it could survive anything!
    daren_mitchell
  • Reply 2 of 43
    TupcekTupcek Posts: 3member
    well, not so aggressively in Europe with 489€ price tag
  • Reply 3 of 43
    asdasdasdasd Posts: 5,293member
    Tupcek said:
    well, not so aggressively in Europe with 489€ price tag
    Mostky vat though. Tis a pity alright. 
    mcarling
  • Reply 4 of 43
    designrdesignr Posts: 502member
    Tupcek said:
    well, not so aggressively in Europe with 489€ price tag
    Does the VAT account for the difference?
  • Reply 5 of 43
    calicali Posts: 3,495member
    And it isn't a piece of s***!!
  • Reply 6 of 43
    christophbchristophb Posts: 1,457member
    If it's just as fast, I'll move back to a 4" if there's a 7SE.  I end up carrying an iPad 99% of half the time anyway.
    cintos
  • Reply 7 of 43
    rogifan_newrogifan_new Posts: 3,979member
    Apple is iPhone, Inc. Wall Street needs to see iPhone growth again. Apple is hoping this phone will spark that.

    cnocbui
  • Reply 8 of 43
    sog35 said:
    "Rod Hall of J.P. Morgan issued a research note to investors on Tuesday, in which he noted that the $400 to $450 smartphone price range is estimated to have generated 43 million total sales in 2015 with an average selling price of $426."

    Tim Cook said yesterday Apple sold 30 million 4 inch devices last year. JP Morgan said they sold 43 million...

    Only 4 inch devices would fall in the $400-$450 price range in 2015.  

    Hard to trust an analysist who does not even pay attention to what Mr Cook says.
    Apple (wasn't it Greg?) was talking about the number of 4" iPhones they sold.

    JP Morgan is talking about every brand of phone in the $400-$450 price range, not just iPhones.
    jackansixamax
  • Reply 9 of 43
    Tupcek said:
    well, not so aggressively in Europe with 489€ price tag
    I hear ya on that. $579 entry price in Canada for the SE. But that's a steal compared to the $899 entry price for a 16GB 6s or $1029 for a 16GB 6s Plus. The new iPad is $799 too here. Not blaming Apple or anything at all, it's the garbage exchange rate right now, so I understand the disparity in price. Even at the $579 price, I still believe the iPhone SE is a great value and should be a great product for Apple.
  • Reply 10 of 43
    rogifan_newrogifan_new Posts: 3,979member
    Entry price in India is over $500. I'm not convinced this is a phone for emerging markets.
    jackansicnocbui
  • Reply 11 of 43
    williamhwilliamh Posts: 652member
    Wasn't the iPhone 1 $399 after the initial price drop from $599?
  • Reply 12 of 43
    jkichlinejkichline Posts: 1,335member
    williamh said:
    Wasn't the iPhone 1 $399 after the initial price drop from $599?
    I forget the specifics, but I know my wife paid $700 out of pocket for the original iPhone.  I think six months after launch and they got it down to $400 or $500.  However, that was including a contract with required data plan which was subsidized.  The big news with the iPhone 3G was an entry price of $199, but again... it was subsidized.  The $399 is the unsubsidized price. In other words, you can buy this outright which is a HUGE deal.  Apple is going to be printing money with these.
    lolliver
  • Reply 13 of 43
    It seems to me there are going to be many analysts claiming the aggressively priced iPhone will destroy Apple's profit margins and cut into higher-end iPhone sales. In other words, Apple can't possibly win and that also goes for Apple shareholders. It's really a double-edge sword for anything Apple tries to accomplish. If this were any other company offering a lower priced smartphone, Wall Street would be on its knees praising the company to the heavens for trying to increase market share. With Apple it will be seen as some desperation move that isn't going to help the company at all. Tim Cook will be said to have no more ideas left and a rehashed iPhone is all he can come up with. Wall Street isn't going to give Apple any credit for anything. It's all going to be about Alphabet, Amazon, Netflix, Facebook and Microsoft as the leaders of tech. Apple's share price is going to stay mired close to $105 all year long because Wall Street will claim there's no spectacular product to move it any higher.
    MaxxHoo
  • Reply 14 of 43
    Apple sold 30 million iPhone 5S models in 2015 and they think they'll only move 17 million this year? With the upgrades the SE has internally? Seriously?
    MaxxHoo
  • Reply 15 of 43
    sog35 said:
    "Rod Hall of J.P. Morgan issued a research note to investors on Tuesday, in which he noted that the $400 to $450 smartphone price range is estimated to have generated 43 million total sales in 2015 with an average selling price of $426."

    Tim Cook said yesterday Apple sold 30 million 4 inch devices last year. JP Morgan said they sold 43 million...

    Only 4 inch devices would fall in the $400-$450 price range in 2015.  

    Hard to trust an analysist who does not even pay attention to what Mr Cook says.
    Apple (wasn't it Greg?) was talking about the number of 4" iPhones they sold.

    JP Morgan is talking about every brand of phone in the $400-$450 price range, not just iPhones.
    and that's interesting... they already have 70% off the 4" market, if both apple and JP Morgan are stating the same facts.

     Obviously they want:
    1. 4" market penetration (that's what she said) closer to 90%
    2. drive what little profit out of the competition and into Apple (Apple will end up making 120% of the total smartphone profit (with everyone else losing 20%)) 
    3. move the umbrella even lower to the ground so for features/$, Apple has a newer phone that gets adopters in developing markets [india, china], locking them into the ecosystem. 

     Apple has always felt that you're first smart phone is just one with training wheels... eventually you'll buy an iPhone... I'm thinking now they are looking at making that adoption earlier in the cycle.
    edited March 2016 patchythepirate
  • Reply 16 of 43
    cintoscintos Posts: 112member
    I might as well be the one to complain about something!

    I wish they made that design in the bigger screen!
    The more rounded edges on the 6 series phones was an attempt to reach a one-hand operation despite the bigger screen realestate.
    lolliver
  • Reply 17 of 43
    TupcekTupcek Posts: 3member
    sog35 said:
    Tupcek said:
    well, not so aggressively in Europe with 489€ price tag
    not Apple's fault your currency sucks
    if they used current exchange rate it would cost 356 without VAT, 427€ with VAT. 62€ is just bigger Apple margin
  • Reply 18 of 43
    cintos said:
    I might as well be the one to complain about something!

    I wish they made that design in the bigger screen!
    The more rounded edges on the 6 series phones was an attempt to reach a one-hand operation despite the bigger screen realestate.
    I feel the rounded screen and skinnier profile makes it harder for one handed operation... 
    MaxxHoo
  • Reply 19 of 43
    Entry price in India is over $500. I'm not convinced this is a phone for emerging markets.
    Did Apple mention India in the keynote?  I must have missed it if they did. I was watching the Twit.tv stream with Leo and others talking on top of it.

    But two things:

    1.  Wouldn't this be the cheapest brand-new iPhone ever sold in India?  That's gotta count for something.
    2.  With 1.2 billion people in India... surely some of them can afford a $500 iPhone.  

    I read an article from a couple months ago that said Apple sold the most iPhones ever in India last quarter.  And that was before the cheaper iPhone SE.
  • Reply 20 of 43

    Apple sold 30 million iPhone 5S models in 2015 and they think they'll only move 17 million this year? With the upgrades the SE has internally? Seriously?
    I'm reading as... before yesterday  analysts thought that (pick a number around 250M) of phones were sold in 2016 (5s, 6, 6+, 6s, 6p)
    today, analysts feel a number around 267M (250+17) phones is the number to pick to hold Apple's feet to the earnings fire next January 22.

    And more importantly, and sooner, you'll see the June and September expectations to be around 8Million higher each quarter based on this announcement.
    (we should see less 'drop' in the summer slow months because of this amazing technological price pointed phone).
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