Apple is planning to unveil a 5G iPhone SE in March—but the big news could be a price drop for the current model. Also: Amazon’s Astro robot remains elusive, and it was a wild week for Apple Stores.
Last week on Power On: Apple is readying an end-to-end overhaul of its Mac lineup this year.
The Starters
For years, the technology industry has been clamoring for a low-cost iPhone aimed at
emerging markets.
A device priced at $200 could make inroads in regions like Africa, South America and parts of Asia that are currently Android strongholds. That would let Apple Inc. sign up more customers for services, potentially making a low-end iPhone quite lucrative for Apple in the long run. But so far, the company has steered well clear of that approach.
In 2013, when carrier subsidies began to disappear and demand for a lower-cost iPhone grew, Apple executives said they wouldn’t release a cheap model just to blindly chase market share. It did put out the lower-end SE in 2016, but the phone was $399—well above the level of many Androids—and the price never came down over the following five years. The company has stuck by Steve Jobs’s “don’t ship junk” ethos.
But when Apple introduces a 5G version of the iPhone SE, which could come as soon as early March, the company has a great opportunity to make a change.
I suggest Apple continue to sell the older iPhone SE at a new, lower price—namely, $199.
Third-party resellers are already distributing the current iPhone SE at under $200, and refurbished models are plentiful. If Apple offers its own $199 device, the company could have a hot seller in developing markets. It would also provide an option to shoppers who don’t care about 5G service—and aren’t interested in a $1,000 iPhone 13.
By expanding its user base with a $199 iPhone, Apple could create more long-term services revenue and add people to its ecosystem. Those people may then be more willing to try AirPods, an Apple Watch or—later on—a higher-end iPhone.
The move would also give Apple an easy answer to its iPod touch conundrum. Over the years, the iPod touch has been a popular alternative to an iPhone—and Apple still sells the device, its last remaining iPod—but the product hasn’t been updated since 2019. The current model has an outdated 4-inch screen and a slow A10 chip from 2016.
The iPhone SE, on the other hand, has a 4.7-inch screen, an A13 chip and more modern internal components. If the iPhone SE matched the iPod’s $199 price, Apple could finally discontinue the iPod line.
But what would this mean for Apple’s famously fat profit margins? When it comes to hardware, the company likes its margins to be in the 30%-to-40% range.
Bill-of-material estimates from two years ago pegged the hardware cost of the iPhone SE at around $200, meaning a $199 price tag would be a money-loser. But time and economies of scale have probably made that cost much lower by now. Would the cost be low enough for Apple to earn its typical profit margins? No, but the chance to sell services and other products to big new markets could make up for that.
Such a device could help Apple greatly in India. The company once talked up the country as the next China, but the iPhone has struggled to gain much of a foothold.
Research data suggests the iPhone has less than 5% of the market in India, but a $199 device could change that. According to estimates, the average phone sales price in the country is now $196, up $40 from 2020.
A $199 phone would also be a hot seller in the U.S., allowing Apple to make money on services and beat out cheaper alternatives from the Android world by touting its fit and finish.
It’s unclear if Apple will ever actually take this step, but there may be no better time than the release of the 5G iPhone SE next month.
The Bench
A hostage situation erupts at Apple’s Amsterdam store over millions in crypto. Some very scary news out of Amsterdam this past Tuesday: A robbery gone wrong at Apple’s flagship retail store turned into a hostage situation. A gunman held a person in the Apple store for several hours before the hostage was able to flee and local police apprehended the suspect. Police later said the suspect asked for millions of dollars worth of cryptocurrency. Apple stores already have pretty tight security, but I wonder if the company will increase its precautions following the incident.
The Schedule
March 4: Apple’s annual shareholder meeting. These gatherings don’t typically produce much news, and Apple shareholders usually follow the company’s suggestions for voting. But this will be the next time we get to hear comments from Chief Executive Officer Tim Cook, so stay tuned for live coverage of the proceedings.
March 8: Apple set to unveil a new phone and tablet. The company is planning to launch an updated iPhone SE with 5G and a faster processor, an iPad Air and at least one new Mac. The products are expected to be unveiled at a presentation around March 8, though Apple hasn’t announced the date yet. The event is likely to be one of many in 2022—with iPhone 14 and Apple Watch Series 8 launches set for later in the year.
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