An In-Depth Look Into Apple’s Decision to Launch a Budget Phone
At face value, Apple’s decision to launch the second-generation iPhone SE with a recession looming may not make sense. But there’s more to this move than what meets the eye.
Apple has always been known for its expensive smartphones, laptops, tablets and excellent brand value. Apple even tops Forbes’ annual look at the world’s most valuable brands for the ninth straight time. The brand of the tech giant is itself worth $205.5 billion.
Here, we take you into a journey of how Apple went from launching some of the most expensive smartphones, to launching a $399 budget iPhone, and mention the underlying reasons for the change in direction.
September 2019 and the Launch of iPhone 11
In 2019, Apple maintained a market share of 11% for the first three quarters. The market share spiked to 18% in the last quarter solely due to the launch of the new iPhone 11 series.
iPhone 11 became the second best selling phone globally for 2019. It was the first iPhone with multiple cameras which was launched at a lower price than its predecessor.
In India, Apple accounted for 62.7% of the $500+ smartphone segment in the first quarter of 2020, beating competitors Samsung and OnePlus. iPhone 11 took a 68% share of shipments in the $700 to over-$1000 segment over the next three-month period, and the company has estimated a 4% year-on-year growth in India for the first quarter. Apple also noted strong iPhone 11 sales on the back of discounts from online sellers.
The iPhone 11 featured a 6.1‑inch (diagonal) all-screen LCD Multi-Touch display with IPS technology, with the A13 Bionic chip.
The above chart shows the rise in the stock price of Apple. One can see the upward surge in the stock price in 2019.
iPhone 11 was clearly a signal that Apple had understood one of the primary concerns for people in the next big markets of the world- Pricing. However, the $699 price tag wasn’t low enough to suffice for the years of neglect Apple had towards the price sensitive markets. In markets like India and South Asia, they had failed to get people into their ecosystem by pricing their products way higher than its competitors did and therefore, had less than a small fraction of the market.
The iPhone 11 was viewed essentially as a premium smartphone, which it definitely was, rather than the “cheaper iPhone for everyone” which Apple wanted to showcase. This left price conscious customers flocking to other brands which had great phones in the mid range market.
The iPhone SE 2 clearly is another giant step towards the same direction Apple had since September and this time, they seem to have nailed the landing.
Reduction in Shipments Over the Years
Apple has been doing great in terms of market share, brand value and market valuation, but the tech giant has been experiencing a fall in shipments lately.
Over the past nine years, Apple’s total number of shipments has been falling gradually, due to their focus being primarily on the premium smartphone market.
Apple, which is in essence a consumer electronics brand, has always tried to showcase itself as a luxury brand. But the premium phone market is saturated. And this is where Apple’s troubles start brewing. Though it has around 32% of the total revenue of the market, its shipments are declining, and therefore their prices are soaring high every year.
According to the research and advisory firm, Gartner, there were two factors at play which led to the decline in the sales of smartphones:
- Shift in consumer demand away from flagship smartphones toward mid-range ones — an area where Apple doesn’t compete. Even Apple’s cheapest models sit well above the price range considered to be mid-tier.
- Consumers are waiting for 5G. Even though 5G handsets are available from Android brands, Gartner says that most are delaying their purchase until 2020, when 5G coverage is likely to have increased beyond the relatively token service offered so far. One recent report suggested Apple is expecting its 5G models to have a massive impact on demand.
Apple in Asia
Apple has been dominating the Asian markets (especially India) in the premium smartphone category. However, Apple’s footprint in the mid range is almost non existential.
According to the International Data Corporation (IDC), in the premium ($500 or Rs 36,000 and above) segment, Apple reached a record 75.6 per cent market share in 2020.
iPhone sales even improved primarily due to strong demand, aggressive pricing and strong promotion strategy by Apple India on its latest iPhone models including iPhone11 series and iPhone XR. iPhone XR emerged as Apple’s best selling smartphone with 33% of total Apple’s smartphone sales in nine months.
Since customers in India and some other South Asian countries are more price-conscious than the rest of the world, it seemed about time for Apple to launch something at the $400-$500 price bracket.
iPhone SE2- the Solution to Apple’s Woes?
To counter the above mention problem, Apple has launched the iPhone SE2 at $399 in the United States and Rs 42,500 in India.
The newly launched device is nothing but a rebranded iPhone 8 with upgraded internals. The battery, the design, the display, everything except the processor dates back to 2017.
All the tech savvy critics have been criticizing the device for the 5-year-old design and poor battery life, but there is a large section of the population that will be happy to purchase the device because the two things that matter the most to them are:-
- It has to be an iPhone.
- It has to work smoothly and click good photos.
Though the iPhone SE2 is nothing exceptional, it just nails the key areas of the device(camera, speed, the display is okay, though not great) and provides us with a device that is just right for the mid-range market.
It also comes with some novelty features that only Apple provides in this price bracket, such as the IP-68 water and dust rating and wireless charging.
Whenever a brand launches a device, they try to fill a void in the market and try to make a profit by solving some problems.
Similarly, even though the iPhone SE2 is nothing special and has been facing many controversies due to its old design, it is but a perfect bet by Apple to get back some market share by providing a device to those who can’t afford to buy the most expensive Apple product but at the same time want to step in the Apple ecosystem.
So, even though the device is a rebranded iPhone 8 , it might work wonders for Apple to gain a substantial portion of the mid-range market, that they have been eyeing for a long time now.
