iPhone At $199 will help Apple take the market by the storm

Apple is all set for the launch of another low-priced 5G iPhone SE at a jaw-dropping price. Is the price of 5G iPhone SE enticing enough to appease customers in the developing markets where Apple's struggle to strengthen its market presence is far from over?

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A new Apple iPhone is around the corner as multiple leaks and rumors have confirmed that the Cupertino giant is all set to make a big announcement in March. No, Apple is not going to surprise us with the much-ahead launch of the successor of iPhone 13. It’s going to take the market by the storm with a new low-price iPhone SE.

if rumors and leaks have lived up to their claim, Apple will unveil a new 5G iPhone SE in March, but the jaw-dropping announcement could come in a form of a price drop for the iPhone SE models currently available in the market.

For a very long time, Apple has been giving deaf ears to the need for low price iPhone, specifically to strengthen its presence in emerging markets.

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Rumors claim that Apple will decide to lower the price of the upcoming 5G iPhone SE as compared to its predecessors. Analyst John Donovan claims that the price of the new iPhone SE could start from $300 onwards. If John is correct – nothing is final until Apple announces it officially – the price cut of $99 as compared with the price of the iPhone SE (2020) is significant. But, is the price tag enticing enough to end the struggle of Apple in developing markets?

Apple is known to discontinue its predecessors in a bid to boost the sales of new iPhone models. Apple did it with iPhone 11 while launching iPhone 12, then did the same with iPhone 12 after launching iPhone 13. Will iPhone SE (2020) meet the same fate? What if Apple slashes the price of iPhone SE (2020) and lets customers decide which phone they want to buy?

An iPhone priced at $200 could gain traction in regions such as Africa, South America, and most importantly India that are currently dominated by Android smartphones. The move will add millions of price-sensitive customers who are still maintaining distance despite being highly impressed with the features of iPhone to the Apple ecosystem. Besides, it will make an entry-level iPhone extremely profitable for Apple over the long haul. But, to date, Apple has stayed away from this approach for reasons best known to the leadership team of the company only.

In 2013, the demand for a less expensive iPhone increased after the carrier subsidies started to vanish. However, Apple executives decided otherwise and refrained from releasing a cheaper model of iPhone to be a part of the market share chase. After three years, Apple did launch the less expensive iPhone SE in 2016, albeit with a price tag of $399. It was comparatively higher than the price of many mid-level Android smartphones then. Even after five years, the price of the iPhone SE never came down to appease more aspiring buyers. The company strongly followed Steve Jobs’s “don’t deliver junk” principle.

Every company must revisit its principles and strategies at regular intervals to cater to the need of the hour and to meet the expectations of customers amidst the fast-changing market dynamics. Apple is no exception!

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When Apple unveils a 5G capable iPhone SE which could debut as early as March, the company would have an excellent opportunity to grab to change its appeal to the mid-segment.

While Apple may continue to tag the upcoming iPhone SE 5G with $399 – or even slightly more – don’t be surprised to see if Apple cuts the price of its predecessors to as low as $199.

Third-party resellers have already started offering huge discounts on the current iPhone SE to get rid of the existing stocks as soon as possible. The exiting iPhone SE models are available at under $200 while the market is already flooded with used models. If Apple decides to launch a $199 model there is nothing that could stop Apple from claiming a lion’s share of the quarterly sales in developing markets. Besides, it also makes perfect sense to stay focused on the sales of a non-5G device in developing markets where the penetration of the 5G network is either negligible or almost nil. Customers who don’t want to pay for a feature that they can’t enjoy would find non-5G low-priced iPhone SE at $199 quite appealing.

$199 iPhone would help Apple expand its current users base as well, and add more people to the iOS ecosystem. Apple could easily leverage on the huge customer base and generate additional revenue from services over the long term. Apple is known for maintaining an excellent retention rate when its customers go for an upgrade or replacement. Hence, it would become easier for the company to sell more premium devices (iPhone 12/iPhone 13) or ultra-premium devices, such as iPhone 12 Pro Max or iPhone 13 Pro Max, to existing customers. These people could then be more likely to consider AirPods or the Apple Watch as well.

Bid Adieu iPad, Welcome $199 iPhone SE

The decision to launch the $199 iPhone SE will also provide Apple with an easy solution to its iPod touch dilemma. The iPod touch is fast becoming a popular alternative to an iPhone for the last few years. Apple is still selling iPad touch though but hasn’t upgraded the model for three years. It still sports an outdated 4-inch display and carries a five-year-old A10 chipset under the hood.

iPhone SE, on the other hand, offers a 4.7-inch screen with an A13 processor, as well as more advanced internal components. If Apple decides to price tag iPhone SE with $199, the company could easily bid adieu to iPod.

The move, however, will throw up a challenge for Apple to revisit its ‘uncompromised’ term. The Cupertino giant prefers to maintain the margin to the tune of 40% on hardware.

If we take a two-year-old BOM (Bill of material) into consideration, the production cost of iPhone SE is nearly $200. It means a straightforward loss for Apple if it tags iPhone SE at $199. However, considering the fact that the developed market is fast adopting 5G tech, leading chipset manufacturers are focusing more on 5G components, and also factoring time and economies of scale, the cost of hardware being used in non-5G iPhone SE may have been reduced to a significant extent.

Will all the above three factors be good enough to let Apple maintain its usual margin of 40% with $199 iPhone? Not really! But that’s where the game of volume comes to compensate Apple’s loss of profit.

Launching a $199 iPhone will open floodgates of opportunities in developing markets which are huge by the numbers of smartphone users. India – the most important developing market for any company today – alone has over 600 million smartphone users. The market remains a big challenge for Apple and the lukewarm response to Apple devices has kept Tim Cook and the team on their toes. The country is known for its price sensitivity and unprecedented response received by Chinese brands, such as Xiaomi, Vivo, and Oppo, which has been one of the biggest success stories in recent times.

Apple once touted India as being the successor to China however, the iPhone has been unable to match the expectations, primarily because of its exorbitant pricing strategy.

Apple accounts for just 4% of the total active smartphone user base in India. The figure would easily cross double-digit if a $199 iPhone becomes a reality. It is estimated that the average selling price in India is currently hovering at $196, an increase of $40 over 2020.

India is not the only country that will benefit Apple!

A $199 smartphone would become a huge success across the U.S., allowing Apple to book profit from its services, and compete with lower-priced alternatives in the Android world by highlighting the quality and design of iPhone – something that Apple is known for.

All said and done, $199 iPhone is neither a rumor nor a leak. No one can tell for sure how convincing the approach will sound to Tim Cook & the team. But one thing is confirmed there could be no better time than now to launch the 5G iPhone SE, which most probably is just a week away from becoming a reality.

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