What’s Apple’s rationale for a budget iPhone?

“Under Steve Jobs’ guidance, Apple has had the charter to create the best products they can in every area they compete, and the Macs and iPhones are no exception,” Tim Bajarin writes for Forbes as he explains what might be Apple’s rationale for a budget iPhone. “Jobs made design, innovation and usability the heart of Apple’s business model, and the fact that they ended up perceived as premium products were by design.”

Tim Bajarin for Forbes:

Apple's budget iPhone 5c
Apple’s iPhone 5c
One ironic twist of this strategy is that by holding this course since 2007, when the iPhone debuted, Apple continues to make the lions share of profits in the smartphone business. While unit shipments of iPhone pale in comparison to cheaper, low and mid-range smartphones, Apple continues to be the most profitable maker of smartphones by a wide margin…

I have no direct information as to whether a lower-cost iPhone SE or iPhone 9 is around the corner, but if it is, there will be some strong reasons for Apple to introduce a lower-priced iPhone at this time… I believe the iPhone SE introduced in 2016 was more of a pricing experiment than a long term strategy… The fact that they killed the SE in 2018 says a lot about a lower-cost iPhone’s viability…

If Apple decided to enter the sub-$500 iPhone market this time, this would not be another pricing experiment… lower-cost iPhone could make sense early in this decade as a means of getting more people into Apple’s ecosystem of products and services. All the while, building up more services and laying the foundation for an eventual AR push.

MacDailyNews Take: Of course, it’s a balancing act since buyers of low-priced iPhones are naturally less inclined or even unable in developing markets to spend extra on services. As we wrote last week, “Obviously, neither the iPhone 5C or the iPhone SE were successful enough for Apple to continue iterating. The idea of a budget iPhone SE 2 is quite a tightrope to walk. It has to have a perfect mix of specs at a magic price point. It has to grow the user base, not cannibalize from higher-priced, more-capable iPhones. Hopefully, after iPhone 5C and SE, the third time’s the charm!”


  1. I suspect that with the battery fiasco & cheap OEM battery replacements, Apple has been watching the average lifespan of iPhone users and is smart enough to correlate demographics, behaviors and Model#….probably age too.

    … as such, they could see a cheap iPhone as a way to make a sale to a customer that wouldn’t otherwise buy – they’d just keep on using the existing “good enough” old iPhone that they already own.

    Of course, the other alternative could be that they finally realize that anthropometrically, women have smaller hands and don’t all want a phablet, so the emphasis is actually on form factor instead of price. Nah…. /S

  2. I believe some people want a smaller phone for their hand or pocket, so size matters.
    Also some people may want a “cheaper” phone for their kids, so price matters.
    Others just can’t afford (or refuse to pay) for a higher priced phone, so reality matters.

    One other thing I noticed. Of course Apple wants people in their ecosystem as soon as possible, and many may get a phone only to realize they can’t buy into it as much as hoped.
    I think Apple has seen most of these people buy USED iPhones so unless they DO buy Apple services, Apple gains very little from them.

    With this in mind, looks like Apple took a page from President Obama’s cash for Clunkers uh…..project and started taking trade-ins AND offering no-interest credit, the used ones reconditioned for warranty replacements, dumping into third world countries, or retiring (all three winners for Apple).

  3. What’s Apple’s rationale for a budget smartphone? At least 1.4B consumers in India who can’t afford Apple’s high-end iPhones. It seems like a stupid question when nearly everyone knows Wall Street is just dying to devalue Apple’s worth because Apple can’t manage to sell enough iPhones to quench big investors’ greed. Apple is expected to sell as many expensive iPhones as other manufacturers can sell some low-cost Android smartphones.

    Apparently, market share percentage is still king on Wall Street. That isn’t likely to change. There’s this belief on Wall Street how if a company doesn’t have the most market share, they’re going out of business shortly. This is despite the fact that companies that have had the highest market share percentage have also gone out of business in a short span of time. The major tech companies are all being highly valued based on their high market share percentage which is something Apple doesn’t have. Apple would need to convince Wall Street that iPhone sales growth is actually possible. Fat chance of that happening. A $399 iPhone might increase Apple’s market share in India a few percentage points, but not much more. Wall Street wants double-digit gains. Innovation won’t do it. A large number of consumers just want cheap junk they can afford.

  4. I would prefer a small iPhone and for it to be as fully featured as possible. Obviously such an iPhone wouldn’t be particularly cheap, but the small form factor is the most important consideration for me. I’d always choose a small but limited iPhone over a larger iPhone with all the bells and whistles.

    I don’t like the SE 2 name and would prefer that they called it iPhone mini. Come to that, I don’t like the numbering system for iPhones either. I think they should be iPhone, iPhone mini and iPhone Pro, followed by the year number – most probably referring to next year. So in September we might expect the launch of iPhone 21 and iPhone Pro 21 while iPhone mini 20 would have been released in the spring of 2020.

    1. There’s a parallel in the automotive industry to this.

      The classical automotive market sells product by physical size: “Subcompact – Compact – Full Size”

      At the same time, they want to sell at different price points … again, “Economy – Midline – Luxury”.

      In theory, this is a full factorial 3 x 3 matrix of products to satisfy all customer interests …
      but the automotive paradigm has historically been to cull it down to just the diagonal:

      (Small & Cheap) – (Medium & Moderate) – (Big & Expensive/Luxury))

      Certain market gaps are satisfied in various ways. For example, (Medium & Cheap) and (Large & Cheap) get addressed by the used car market.

      But … where’s (Small & Luxury)?

      To a certain degree, this niche is filled by impractical sports cars (Porsche 911, etc), but the thing to note is that it isn’t satisfied by the used market, because for the most part, there’s no (Small and {not-Cheap})” tier except for Small & Cheap, so the only place that (Small & Cheap) can go is down to (Small & Even Cheaper).

      Enter the SE / SE 2 discussions.

      There’s some customers who are interested in (small & cheap), whereas there’s others who are saying that they’d like (small, but well appointed). Don’t know if this will be (Small & Moderate) or (Small or Luxury), or even if it will be offered at all…

      …but it is a dilemma similar to what the automotive industry was looking at, before they were disrupted by cheap gas and the SUV craze.

  5. If I had a choice a smaller iPhone with all the features is what I would have got, I don’t want cheaper just smaller.

    And that Porsche any one of them are awesome from the Cayman, Macan to the higher end 911’s they are the best that now includes the best EV in the world the Taycan which will sell at a profit from day one like a iPhone, IPad, or a Mac….

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