Why Apple’s new 4-inch iPhone SE is so important

“One of the major themes of SE media coverage has been the argument advanced by many that it doesn’t really matter how it performs since it’s a budget product. Apple’s real test, the argument goes, will be to create a true ‘wow’ product in September,” Max Greve writes for Seeking Alpha. “I cannot offer any new clarity about sales performance, but I can say that this last is completely wrong. The fact that iPhone SE is so different from other iPhones is precisely why it’s so important.”

“The iPhone has long been the workhorse of Apple, accounting for 66% of total revenue. And because it has been such a reliable profit machine, it has essentially been on autopilot for years. This is not a shot at CEO Tim Cook, whom so many seem to love to belittle as being ‘not Steve Jobs,'” Greve writes. “In my opinion, Cook has done an admirable job trying to fill some almost impossibly big shoes after his old boss died.”

“For the first time, Apple will launch a non-flagship product with flagship-level internals. Joswiak made a point of emphasis that the new SE has the same graphics and computing power as the 6S, and the camera also is 6S level. Apple Pay is included as well. Aside from a slightly older Touch sensor, the SE basically is the 6S, just in a smaller shell,” Greve writes. “These changes also all point to one other big change. By taking a thicker body with a smaller screen like the 5S model and pairing it with power-sipping internals that were made for the 6S, Apple has produced a device with a substantial leap in battery life. And perhaps the most surprising thing was price. After charging $550 for a plastic iPhone with old chips just two years ago, Apple cut the price of an aluminum iPhone with cutting-edge internals to just $400.”

“The bad news of this ‘fire everything’ approach is that even if it works, Apple will still not know why it worked,” Greve writes. “If iPhone SE sales do come in strong, were they strong because of the form factor, the price cut, or the internal upgrades? All three? Two of the three? Which two? Would a $550 iPhone SE have done just as well, or close enough to make it more profitable? How about a slightly thicker $400 iPhone 5S, without the internal upgrades but with the battery life?”

Read more in the full article here.

MacDailyNews Take: Lots of handwringing from Greve over the iPhone SE which is really more a play for emerging markets (BRICS) than what Greve describes as a “semi-panicked” move by a “stumped” Apple. Simple user surveys will allow Apple to accurately ascertain iPhone SE users’ rating of the devices features (whether they preferred the device for true one-handed operation or because it offered longer battery life, for example.)

Apple should strive to execute annual iPhone updates, in three display sizes if the SE is successful (which we think it will be), and drop the off-year “S” model concept. Apple is certainly big enough and rich enough to do a new iPhone family each and every year. Apple should have killed the tock year “S” model idea years ago.

What’s happened with iPhone is painfully obvious: Apple was at least a year (more likely two years) late with properly-sized iPhones. When iPhone 6 and iPhone 6 Plus finally, blessedly materialized, buyers quite literally stampeded to get them. Then, when faced with such a “tough compare” this year, Apple was still sticking with their ill-conceived “S” model concept – making the tough compare much, much tougher.

The “iPhone 7” family – three models with the same case design and all with 3D Touch — comprised of the 4-inch iPhone 7 SE, the 4.7-inch iPhone 7, and the 5.5-inch iPhone 7 Plus — should have debuted last September. That would have taken care of the current tough compare with iPhone 6/Plus. Then, this year, the iPhone 8 family, again with a new case design, but now waterproof, with dual cameras, etc. would debut this September. In 2017, perhaps Liquidmetal and AMOLED will be ready go for the iPhone 9. Etcetera. No more “S” years, Apple. Duh.

Had Apple done as we’ve just described, they’d have sold millions more iPhone units this year and millions upon millions more each year going forward.

Apple’s raison d’être is to delight customers. “S” model “tock” year iPhones do not delight customers in the same way as new “tick” year models. Obviously. They’re still the best smartphones on the planet, but they’re just okay. A bit of a meh. We all know that “S” models exist so Apple can wring out nice margins from existing designs and tooling, not expressly to delight customers. When Apple strays from its main goal is when things get wobbly. Just delight customers, Apple, and the world will beat a path to your door.

If we didn’t work for MacDailyNews, we’d have skipped the iPhone 6s Plus and held onto our iPhone 6 Plus units with no qualms – and we’re the most rabid Day One iPhone buyers you’ll ever find. Why have an annual iPhone upgrade program, if you’re not going to wow us annually with new iPhones?


  1. The iPod set the stage of how to squeeze the competition. First own the high end market. Then start producing products that pressurize competitors in the mid range. After that, release low end products that kill off the remaining competition.
    The SE represents the mid range product for the iPhone. I don’t think Apple will bother about the low end. I doubt that the margins will be high enough. They will leave it to every other manufacturer who will end up breaking even on millions of units sold.

    1. The big difference between an iPod and the iPhone is that the media that the iPod handled was relatively standard across other similar such devices from other makers. The iPhone which is primarily an app-centric device may not ‘crush’ the competing devices similarly since the apps that run on it are not standard across similar devices from competitors.

  2. Wow MDN could not disagree with you more!

    Exterior design changes just for design sake are an Android thing. Apples designs are in general fantastic and changing them yearly is a waste of time and resources. I would prefer they keep working on the internals and make the radical kind of improvements they have been over the last couple of years.

    As for upgrading all three phone sizes at the same time, that one is just stupid. Having all the attention brought to the flagship phones is just good marketing. Also less choice in the whats new category simplifies thing for purchaser, if they want the latest by the flagship.

    Having the SE come out mid cycle allows Apple to take advantages of efficiencies and yield improvement over the year. This allows for a lower price and reduces the chances of phone shortages based on demand for certain parts. Just good product supply chain management.

    1. Phones are more of a fashion accessory than any other consumer electronic product. Many people like showing others that they are trend setters. Others just like the feeling of owning new things. Because of these desires, I see many iPhones in public, but rarely see cheap Android phones. A few years ago many people proudly displayed their larger Samsung phones because they thought it looked more modern than the boxy looking iPhone 4 and 5 series. When the iPhone 6 design was released these Samsung phones were relegated into pockets.

      Fast forward to today and the SE has the design language of a three-year-old iPhone. While this might be suitable for the less fashion conscious consumer, it’s not going to be the headline act. Apple’s top seller must stay current, which, at the minimum, means less bezels and no camera humps. Some think Samsung will release a foldable smartphone this year. If they do then they might steal the thunder again. This means Apple will be crushed if they remain on tick-tock and wait two years to compete.

  3. “Apple was at least a year (more likely two years) late with properly-sized iPhones.”

    Once again, MDN implies that ‘proper’ iPhones need to be huge. For many of us, a smaller screen iPhone such as the SE is the perfect iPhone. We all have different preferences and only a fool would claim that their particular requirements represent the perfect combination of features for users in general, with other alternatives being less good.

    Three differently sized iPhones is a great solution for all of us. Those who need a big iPhone can get one and those who need a smaller iPhone can get a smaller one. In terms of ability, they are all pretty well-specced, so the choice is more about size than anything else. I particularly like the combination of small size and long battery life. That is a brilliant combination for my purposes, with the lower price point coming as a very welcome but unexpected bonus.

    1. MDN has gone off their meds lately and are also getting hungry. They are often engaging in ‘hit-bait’ traffic drivers and are desperate for AAPL to go up to make them ‘rich’. They are putting some of the least desirable ads on their site and trying to belittle the readers into not blocking these crappy ads.

      If MDN was even the least bit like Apple, they would strive for excellence and quality on every aspect of their business model but alas, they are degrading themselves to the level of the Android crowd.

  4. Bravo for MDN’s common sense take. Apple’s product lineup needs to be clean and make sense. A revised iPhone lineup every year brings needed excitement.

    And dump the 16GB storage on the flagship. That’s OK for the SE but on the 6S that’s just greed.

  5. What a meal you’re all making of this! I don’t know whether the SE will go gangbusters in India, I doubt if it will in China – not shiny enough. But remember how few relatively of previous 4 and 5 owners had not jumped to the flashy, rather crude, Android/Samsungy 6s, even after two years. If they were like me, the 4 and particularly 5 format is the perfect “smartphone” and the 6 had no compelling upgrade power – too big, too klutzy, two-handed.

    Apple have seen that quiet pent-up demand. Need to give the 6 formats a clear run. But nows the time for the 4/5 upgrade. The SE is back-ordered, it was the best part of a week before any were actually for purchase in any Greater London Apple store. Queues round the block are old Apple, on-line back-orders for pick-up new Apple. I bet that when they announce the numbers, and they will be mainly the 64s in Europe and America, the pundits will look very silly, and that includes you MDN. And the profit margins on the 64s are not shabby.

    So I’m with IanS on this. The SE is the mature smartphone format: we’re now in BMW territory. And incidentally the engineering chutzpah to get 95% of the 6S hardware into the SE case is stunning. Other folks can enjoy the fashionista flagships, but not for me, and many others!

  6. If Apple gives up the ‘tock’ schedule for updates, their R&D costs go way up and their margins go way down much faster than their profits might rise. Furthermore, many people count on being able to reuse their accessories (cases, etc.) for 2 years or more (or even 2 separate phones, if they update annually). If you take away the ability of people to reuse those accessories, many will forego annual upgrading.

  7. I agree with MDN’s take, but what about thinking bigger:

    Apple could sell iOS to other smartphone manufacturers for around $75 a copy. This would garner around $19B in earnings if they sold a quarter billion licenses each year. They would probably lose some iPhone sales, but the gain in profits would still increase. For example, if Apple lost 50 million iPhone sales then they would lose around $7.5B in earnings. If they lost 75 million iPhone sales then around $11.2B would be deducted. These losses would be offset by the $19B gain in iOS licenses and increased revenue from services, other products, etc. The total net earnings increase could be between $18B and $30B a year.

    The benefit to the smartphone manufacturer would be differentiation, increased sales and profits. And the benefit to the consumer would be additional iOS smartphones choices, better security than Android, timely OS updates and inclusion in the Apple ecosystem. Win-Win-Win.

    How is this idea different from Apple selling the Mac operating system to other vendors years ago, which turned out to be a disaster? Back then, the killer feature with PC’s was Office compatibility and price. Today, Android doesn’t have that “sticky” app. Office can run on the majority of platforms and the majority of Google apps like maps, photos, etc. also run on iOS. Matter of fact, if Apple decides to sell iOS to other manufacturers then it would be the perfect time for Google to stop developing Android. How can Google move forward when only 10 percent or so of Android’s base is on the their latest OS? It doesn’t make sense that they continue to throw money into the Android pit. They make more money on iOS anyway = more wins.

    1. I think the trend has been towards ecosystems so Apple selling iOS to others will not make as much of a dent in OS marketshare as you would think. Amazon has built their devices with their ecosystem as core, Google has their version of Android focused on Google services, Apple also has their devices focused on their own more closed/focused ecosystem. Personally I see the ‘strengths’ among the above as ‘consumer convenience’, ‘diversity’ and ‘security’ respectively.

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