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

SEE ALSO:
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.]

46 Comments

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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).

  6. 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.

  7. 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.

  8. 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.

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