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Apple Seeks to Pandemic-Proof Itself with the iPhone SE
In the midst of the Covid-19 pandemic that has brought global markets to a standstill, Apple announced a successor to its 2016 low cost iPhone SE. While the timing of this release has coincided with the beginnings of a global economic slowdown, the handset’s launch is designed to expand Apple’s footprint into more price conscious consumer demographics and geographies, increasing volumes through tapping into market segments where Apple’s premium handsets are often unattainable. However, the timing of Apple’s release, in a period where consumers are reducing discretionary spending due to the economic shock of the Covid-19 pandemic, means the handset is likely to appeal to a wider consumer base, and could potentially become a key handset for 2020.
A key feature of this new iteration of the SE is, of course, its price point. Starting at $399 at retail in the US, the iPhone SE is designed to compete in the mass market price segment of the industry. As a device, it retains some of the key features from the flagship range of iPhones, such as the A13 Bionic chip, but the overall design harkens back to previous generations of iPhones, reintroducing the home button and thick top and bottom bezels. At 4.7 inches, the display is also relatively small, and goes against the current trend of ever-increasing smartphone screen sizes. Nevertheless, Apple is hoping to repeat the success of the original SE with this new iteration, targeting emerging markets and aspirational consumers who can’t yet afford the 2018 iPhone XR or 2019’s flagship iPhone 11 range.
Viewed through a competitive landscape prism, the introduction of a new budget iPhone is an aggressive move designed to protect Apple’s position and brand in the face of rising competition both from long-time rival Samsung and international Chinese vendors such as Huawei. It is also a device that is well-placed to allow Apple to grow into markets that are being vacated by a Huawei that is declining in all non-Chinese markets as a consequence of the Sino-American trade conflict. Much of Huawei’s strength in recent years has been in its mid-tier devices, which have helped Huawei compete in markets across the globe and disrupt Apple and Samsung’s duopoly in the industry. While Huawei remains strong, having witnessed significant growth in its domestic market, its international footprint has contracted, leaving space for its rivals to grow in to. Samsung have already sought to capitalise on this, having aggressively marketed and promoted its A and M series of devices across key markets, and it is clear that Apple are looking to follow suit with the SE. The SE will allow Apple to grow across emerging markets and seed these markets with Apple consumers. Given the level of consumer loyalty Apple evokes in its customers, this will mean that, as these markets develop, Apple will have a ready base of consumers willing to upgrade through Apple’s handset ecosystem, as well as an expanded installed base to whom Apple can upsell its large and growing ecosystem of services and devices.
It is this expansion of the installed base that is particularly noteworthy and makes this decision from Apple especially interesting. In recent years, Apple has sought to expand its business across a range of verticals, with its Watch and AirPod business both driving the wearable and true wireless headphones markets respectively, while Apple TV+ is a foray into the increasingly competitive SVoD sector. Apple’s ecosystem continues to expand, but the iPhone remains a central pillar of the business and, currently, is what its wider ecosystem orbits around. The iPhone SE therefore significantly lowers the barrier to entry into Apple’s ecosystem, it’s available to both mass-market and premium consumers alike.
As the fallout from the Coronavirus pandemic continues to unfold, with economic and human costs continuing to rise and an increasingly bleak outlook across markets taking hold, the SE release shows Apple’s intent for this year. The vendor will continue to develop and promote its ecosystem. A question mark remains as to whether this is the beginning of a more regular upgrade of the SE range, given that it has been 4 years since the original iteration of this device. But, given Apple’s aim of expanding its installed base and the ability of the SE range of products to capture fringe Apple consumers, it is quite possible that this product may signal a new, long term strand to Apple’s strategy. While the vendor will need to maintain a gap between its flagship and mid-tier devices in terms of quality and range of specs in order to preserve its position as a premium brand, a regular iteration of a mid-tier device could act as the perfect supplement to Apple’s extensive portfolio. Overall, 2020 is set to be a challenging year for many industries and vendors, yet it is quite possible that the release of the SE helps to somewhat insulate Apple from the current market turmoil.
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