Did Apple make a big mistake by canceling the 4-inch iPhone SE?

“As the bad news on the new iPhone sales continues to build, was Apple’s key mistake pivoting towards the luxury high margin smartphone market by sacrificing the iPhone SE line?” Ewen Spence wonders for Forbes.

MacDailyNews Take: What “bad news?” Oh, you mean the ludicrous “iPhone sales are dying” blather in the echo chamber that’s based on specious data points and so-called “channel checks?” We’ll see how “bad” the news is when Apple reports all-time record quarterly results in January.

“The strategic issue with the iPhone SE was that – no matter its popularity – it was much cheaper than the rest of the iPhone portfolio,” Spence writes. “The entry-level model is now the iPhone 7. That handset is arguably $150 more than what the iPhone SE would be priced at for this festive season.”

“Apple would rather push the iPhone XR as the ‘affordable’ handset and bring people into the iOS ecosystem with a handset priced at $749,” Spence writes. “[An updated SE] would have boosted the unit sales of the iPhone, it would have created a less expensive route to bring new users into the iOS ecosystem, and those users would be feeding Apple’s software and services for the next few years.”

Apple's 4-inch iPhone SE
Apple’s 4-inch iPhone SE

“Instead the ladder was pulled up and the iPhone became a luxury brand, Tim Cook took the decision to hide the unit sales of the iPhone from the quarterly reports to reduce the impact of lower sales, and Apple as a whole moved to increase the profitable rake from each user,” Spence writes. “The iPhone SE was Apple’s route towards the mainstream smartphone market. The current expensive handsets show no sign of increasing Apple’s share of the smartphone market…

Read more in the full article here.

MacDailyNews Take: Let us state this plainly:

Bargain hunters, cheapskates, and the poor do not purchase services, apps, accessories, etc. after the sale.

Apple certainly has data regarding how much SE users brought to the services table and the result speaks volumes: No more iPhone SE.

Apple has never been about amassing market share for market share’s sake. Newsflash: Apple sells premium products at premium prices to premium customers.

Last Christmas, Apple’s iPhone dominated smartphone industry by taking 87% of the industry’s profits, not by peddling low/no margin phones sold two-for-one in order to rack up meaningless market share. Every story you hear that calls Samsung “the world’s largest smartphone maker” is a lie by omission. What’s “larger,” a meaningless number of units peddled or owning 87% (likely more this year) of the industry’s profits?

Apple targets high-value consumers. Apple separates the wheat from the chaff with their value proposition. Android phone assemblers generally do not target high-value consumers (they target price-conscious customers with endless BOGOF promos) and when they do go after the high-end, they simply do not compete well against iPhone.

Apple customers are the wheat. [Those who settle for Android] for whatever reason, failed to make the cut; they are the chaff. — MacDailyNews, November 13, 2013

Android is pushed to users who are, in general:

a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.

Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.

Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong.

Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.

iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth.MacDailyNews, November 26, 2012

“All men are created equal.”

Well, not when it comes to users of smartphones and tablets…

The bottom line: Those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.

The quality of the customer matters. A lot.

Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.

When it comes to mobile operating systems, all users are simply not equal.SteveJack, MacDailyNews, November 15, 2014

No one wants a ‘cheap’ iPhone: Apple sells premium products – December 10, 2018
Apple’s focus is not iPhone market share, it’s on dominating the higher end of its markets – November 3, 2018
Apple’s iPhone just had its best year ever – November 3, 2018
Apple’s App Store is destroying Google Play in services and subscriptions – April 18, 2018
Apple App Store users spent nearly double that of Google Play users in Q417 – January 26, 2018
Apple’s iOS continues to attract content apps first, despite smaller unit share – October 30, 2017
Bernstein: Google to pay Apple $3 billion this year to remain the default search engine on iPhones and iPads – August 14, 2017
Higher income U.S. states use Apple iPhones; lower income states use Samsung Galaxy phones – September 27, 2016
iOS users are worth 10X more than those who settle for Android – July 27, 2016
Apple’s App Store revenue nearly double that of Google’s Android – April 20, 2016
Poor man’s iPhone: Android on the decline – February 26, 2015
Study: iPhone users are smarter and richer than those who settle for Android phones – January 22, 2015
Why Android users can’t have the nicest things – January 5, 2015
iPhone users earn significantly more than those who settle for Android phones – October 8, 2014
Yet more proof that Android is for poor people – June 27, 2014
More proof that Android is for poor people – May 13, 2014
Android users poorer, shorter, unhealthier, less educated, far less charitable than Apple iPhone users – November 13, 2013
IDC data shows two thirds of Android’s 81% smartphone share are cheap junk phones – November 13, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]


    1. Missing a huge market. My mom would still be on an iPhone 4 if it weren’t for the SE (or gotten my old 5). She is not a services user, she doesn’t buy apps, but stays in touch via Facetime and is far better off remaining on iOS than being forced to move to Android.

      As for MDN’s take, they can totally stuff it. If Apple has gotten addicted to income from services, subscriptions and app purchases that’s their problem. They are not entitled to that money, and if they think forcing users into choosing a more expensive phone is the answer, that’s a far worse form of entitlement than the fanbois on here defending Apple’s ridiculous 5GB free iCloud storage regardless of how many devices are under a single Apple ID.

      1. It has nothing to do with what Apple can afford. Apple probably doesn’t see the SE as being profitable enough to offer. Apple isn’t Samsung and doesn’t have a huge product line like Samsung does.

      2. And a phone with a headphone jack, and a phone with an SD card, and a phone with a removable battery, and a phone with a keypad, and a phone…

        Android has all that because it has multiple OEMs.

      1. Which is paradoxical because it is people in the US prepaid market who would WANT the cheaper super-size phone. Bigger phones would tend to make them feel wealthier. The 64 oz Mountain Dew costs more than the 16 oz, right? Yippee I one big on pull tabs yesterday!

  1. Say what you want about Apple’s current iPhones. They no longer have a product like the SE for people who don’t want large screen phones. Has nothing to do with profit margins, numbers sold, services, blah, blah, blah.

    Apple once again has misjudged its customers by bungling its product availability. People can say that those of us who don’t want large iPhones are “Bargain hunters, cheapskates, and the poor.”

    But that’s really an idiotic stance to take on those of us who have been purchasing and using Apple products (and buying Apple stock) professionally since before you were in diapers. And it really diminishes the image of this site that it resorts to name calling any of us who would criticize Apple’s choices.

    1. I agree, the name calling is not needed. But, I think the point of what they were saying was if Apple has the data, and it suggests that people who buy the SE, on average, don’t also use Apple Music, or have a HomePod, or AppleTV and Apple Watch, then sure Apple may not want to continue the line.

      1. If what you say is true, then Apple has a far bigger problem than any of us can imagine. The day that Apple only provides (expensive luxury) hardware to markets that use its services is the day that Apple ceases to exist as a visionary company, and becomes just another business looking to milk customers for all they’re worth. In other words, we are seeing the second coming of John Scully and Gil Amelio. Apple without a visionary like Steve Jobs at the helm is just another AAPL — a luxury brand company like any other.

      2. People who have all those things don’t WANT supersize iPhones. They already own iPad pros which are a much more useful size when you need a tablet and the super big gulp ethos does not appeal to that demographic.

    2. Totally agree. The juvenile name calling is beyond childish, smacks of smug sneering arrogance and it is personally insulting to users like me who LOVE their SE.

      Heads up MDN, when the SE was launched 2 years, 9 months ago for $500 — it was definitely the most powerful “PREMIUM” 4-inch phone the world has ever seen. Five hundred is NOT EXACTLY CHUMP CHANGE, Apple just got greedier and greedier as time went on under Cook.

      Today they should be able to make it and sell it for less. How else are you going to penetrate the India market and other similar economics? Make it plastic if you have too and Jony will be drooling again in a new video. Again, as we have witnessed with Mac neglect for over five years Apple is leaving millions of dollars on the table.

      Apple has already proven it can sell a “premium” small phone, so what’s the problem? Abandoning developing nations and the rest of the world because you are not selling enough, OR, possibly they are selling TOO MANY threatening the overpriced high end phones and bottom line. No one knows except Apple.

      The short answer I suspect is they cannot the raise the price and rake in the money leaves…

        1. That’s (kind of) good news that Apple still sells the SE in the non-US postpaid market …

          … so then, how do I:

          (a) go about getting a new one?

          (b) put it onto a US postpaid service contract?

          FWIW, for (a), its no problem for me to buy one the next time I’m in Europe (if that’s where they’re sold), but for (b), it may be tricky if one needs CDMA for use with Verizon.

  2. The price of the SE wasn’t the big selling point for me, it was the physical dimensions.

    Apple now longer offers a small iPhone and as a result I will be hanging on to my SE for as long as I possibly can unless Apple launches another small form factor iPhone.

    I have an iPad nearby most of the time for when I might want to use a large screen, so I have no need of a large screen iPhone and many reasons to want a compact iPhone.

    1. iPhone 7/8 are barely 1/2 inch taller and 1/3 inch wider than the iPhone SE.

      Is that really THAT big of a problem?

      I currently have an SE and love it, but I will have no problem upgrading to a iPhone 7/8

      What I would love to see is an iPhone with a 4.7 inch screen (iPhone 7/8 size) using the XR/XS form factor! I’m guessing that would be almost the same size as the SE but have a noticeably bigger screen.

      1. If you’re really arguing that something slightly taller and slightly wider isn’t really a problem, then maybe you could have a word with Jony Ive and tell him that a slightly bulkier iPhone with a battery which lasts drastically longer would be very useful to many of us.

        Of all the dimensions which could be minimised, it’s the thickness which worries me least. Adding 2-3 mm to the thickness wouldn’t worry me in the slightest, but increasing the width or height would.

    2. EXACTLy!!!
      As long as Apple (and some people) think it’s a “cheaper” alternative to the other iPhone models, they will not produce the SE2. They are so bogged down to the idea that the reason the SE sold well (I believe) was the price, that cannibalized the other models.
      The very reason Apple made the 3 X musketeers, all in similar jumbo size (a big mistake. At least the Xr should have been slightly smaller than the Xs) was their thirst for the profitability that backfired. We do not need a “cheap” SE. We need a small sized but very capable and “high end” iPhone. Hell, I am totally prepared to pay a hefty premium for well spec’d and made SE, perhaps even the current Xr price (oh, Apple, don’t sharpen your craws yet..). If it is touted as a cheaper alternative, I have far less interest in it, and keep sticking to the 8.
      I am planning to buy an Apple Watch as soon as the ECG feature is activated in our country, and the new SE would be the perfect companion too.

    3. Apple can use the same SE enclosure if they want. It does not matter to me. Maybe it’s better if Apple wanted to save some cost.
      The SE2 with A12, a bit larger RAM, in-screen fingerprint ID (Apple can keep the face ID if they want but it sacrifices the “horn” area), the latest LED and we have the one we want.

  3. Let me put this plainly: No everyone has hands that are large enough to comfortably hold a large iPhone. My wife refused one until the SE was released and won’t upgrade until the SE replacement is for sale AND she needs a new one for some reason.

    “Bargain hunters, cheapskates, and the poor do not purchase services, apps, accessories, etc. after the sale”

    Really? That’s an easy escape from the face that Apple dropped a product that was most comfortable for some of their customers. My wife also has a MacBook Air and an iPad, Everyone in our family uses Apple products so “cheapskate”
    is an ignorant insult. Maybe Apple simply made a dumb decision to cut it and needs to reverse that decision.,

  4. I can afford whatever damn iPhone I want, yet i got an SE because i like that size, and i have big hands so screen size is a non issue. I want it to easily fit into a pocket. I want a smartphone not a purse sized thingy!

  5. I believe it is possible we will see a March launch of a smaller iPhone based on the A12 along with a new iPad Mini and iPad. Later in the year the flagship phones will move to the A13. It may offer the new devices with under screen fingerprint scanning, which is fitting for a lower-end product, but an improvement.

  6. Make the new SE for the iPhone “connoisseur market”, if Apple is so concerned about the price. Cheap SE will probably sell well to the mass market and developing nations etc. I am sure Apple already knew it but did not want to sell to those markets? That’s fine. It’s a policy matter. But lining up 3 X models all in similar sizes, features and prices (I know they are slightly different from each other) was a big mistake.

  7. Apparently, everything Apple is doing is a mistake yet it’s still one of the most successful companies on the planet. Well, at least up until a couple of months ago. No company can satisfy everyone and Apple certainly isn’t trying to do that and probably never has.

    1. I don’t think most of us are saying “everything Apple is doing is a mistake.” Apple has some great products — I’ve got two MacBook Pros, a new iMac, several Minis, an iPad Pro and several iPhones that we love. I’m a professional using all of these as tools (I’m a web developer). But the lack of forward migration on the 5s/SE iPhone line is as indicative of problems at Apple as was the lack of upgrades for the Mini until this fall, or the failure to upgrade/re-vision the Mac Pro. It’s this continued bungling that has many of us concerned about the future of Apple.

  8. Just some conjecture; I dont believe it has been abandoned for good.
    It possible that It will be redesigned to take advantage of the face id technology when it can be implemented on the smaller size. Right now the face id sys is disproportionately too big for the smaller screen and would be intrusive.

    In the meanwhile Apple could be, intentionally or unintentionally, creating some pent up demand for the smaller form factor for when it comes out.

    One thing is for sure.. Apple seems to love the SE design as the new ipad pros take cue from the SE form-factor.

  9. I really like my SE and am chagrinned that Apple won’t be offering anything similar. The form-factor is just right for my pockets, and the scalable fonts on iOS make the small screen usable for my aging eyes. I’d much rather save money on a phone put it toward a better Mac, so <$300 is my phone budget. Got my SE for $150 with a 6-month contract and called it a steal. Got a couple other folks to make the same purchase, folks who previously suffered with plastic garbage Android phones.

  10. MDN your arrogant condescending attitude to people like me who buy iPhones but have no interest in buying useless apps or useless services really “irks” me (for lack of a more profane term I really want to scream into your ears). Glad I’m not the only one here taking offense to your insulting of us site readers.
    Apple makes enormous margins on the hardware, no question. Do they really to make more on services etc from EVERYONE? NO!
    The bad news you are in denial of is three-fold:
    1) Apple hiked prices on this years models out what appears to be pure greed. Seems to me its to compensate for declining sales.
    2) They announced they would no longer announce unit sales numbers. What possible reason could there be for this other than a decline. Seriously.
    A smaller lower cost iPhone would still have the same high margins for Timmy the Gouger while being more affordable. Just like the XR is now. I just paid $200 CAD upfront on my wife’s subsidized 128GB XR, without changing her $50/month plan. The Xs would have been about $800 instead on same plan. So this is what we mean by lower cost. We aren’t talking cheap, Apple are still getting their big margin from us.

  11. Wow I thought I was a cynic then I read MDNs take. Well I am provably considered by them a cheapskate, poor and a bargain hunter by their sense of superiority. Yet I have been a loyal and exclusive customer since 1988 saving my pennies to be able to afford the products as best I can. What’s more I prefer the size of the SE but hey if the elitists at MDN or indeed Cooks Apple, no longer want apparent oiks like me tainting their products then maybe, if reluctantly, it might be getting close to the time to move on to a company that values my business… or at least doesn’t despise my lack of value to them. Personally I think that is exceptionally a short sighted and arrogant view.

    Personally with services being a vital cog in bringing new growth to the company in future years it seems rather short sighted to me as surely as long as they are making a profit from the product even smaller than average service income per phone, with one presumes the increased range of services to be one available the potential income surely not to be sniffed at. Hey I was interested in the streaming service when it finally arrives but if this is the attitude I presume it will be priced out of my range too. So the future under Cook at least if this evidence is to believed, is further milking of the top end buyer with increasing prices leading to stagnant or decreasing sales leading to higher prices to keep those profits up. If so, maybe some of the Cook baters on here with their monotonous prophecies of doom are a little less deluded than I thought.

    Personally I still think a new SE type phone will very possibly emerge in the next year or so to mop up all those avid users who will be hitting a choke point of pent up demand by then and desperate to renew. After all that’s been Cooks tactics for years now to maximise sales and profit while risking the tightrope walk between keeping customers onside …or not.

  12. Give me a fully-equipped high-end SE and I will gladly pay more money for it. It isn’t the price that makes the SE attractive, it’s the size. I’d give up my 10 in a second for an SE with the same specs (but smaller screen and size).

  13. They don’t necessarily need cheaper phones, but they need physically smaller phones that can fit into women’s pants and for people with small hands. Even the 5/SE had issues fitting into most women’s pockets.

  14. Apple is NOT a luxury brand. That’s the problem. It has a schizophrenic marketing and technological policy. It is targeting the Hee Haw demographic with supersize-me android on steroids phone at a quality and price that the Hee Haw demographic is hesitant to pay, while leaving the discriminating higher-end users hanging on to their cheap outdated SEs because, bizarrely, Apple won’t make the premium professional-quality iPhone Pro they would gladly pay a premium price for.

    If Apple wanted to increase its market share and profits and restore its luxury image, it would make a lower priced 48oz big-gulp phone for the Hee Haw demographic, and a 4.8 in premium cutting-edge technology iPhone X Pro that higher end users would gladly pay North of $1000 for.

  15. Tim Cook is not exacty an elitist. He is from a very working class background. I think he is puzzled that rich people like him would not want monster-sized phones because when he was growing up having more money meant you could buy the 48 oz big gulp.

  16. The SE could be the gateway drug to get more people addicted to the Apple ecosystem, who could end up buyers of Apple services and other products. The potential market includes citizens of less developed countries, Android users, those wanting a second phone, young people with less disposable income, etc. Smart companies make product decisions based on market share potential and brand awareness, not just profitability of each product.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.