Apple's aggressively priced $399 iPhone SE viewed as a 'substantial' market opportunity
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.
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.
Comments
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!
JP Morgan is talking about every brand of phone in the $400-$450 price range, not just iPhones.
Obviously they want:
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.
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.
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).