source: Forbes.com (Mark Rogowsky , CONTRIBUTOR)
Apple’s 4-inch iPhone Strategy Could Devastate The Competition
The latest leak on Apple’s upcoming 4-inch iPhone suggests Apple might be ready to deliver a two-punch combo to competitors by rolling out not only the new iPhone SE but also keeping the 5s alive. What does that do? Well, if what KGI Securities Ming-Chi Kuo believes comes to pass, the 5s will see its price cut in half when the new, updated model is announced in late March. It seems probable the iPhone SE, as most now believe it will be named, loaded with an iPhone 6s-class A9 processor, 12-megapixel camera, TouchID and NFC for Apple Pay support will slot into the $450 price tier where the 5s currently resides. But could the 5s really be headed for pricing around $225? And if so what does that mean for mid-tier Android phones?
The lay of the land
Before we get there, it’s worth understanding the shifting sands of pricing. Apple used to sell the 2-year-old iPhone for $0 in the U.S. with a contract but those days are mostly history. Now, most phones are purchased here for full price on 24-month installment payment plans. While the carriers have adjusted pricing to reflect the fact they aren’t subsidizing phones any longer (e.g. Verizon charges $20 per month for each smartphone instead of $40 on current plans, a savings of $480 over 2 years) it means the phone that once was $0 is now $450.
But here’s where things get interesting. Historically, Apple’s phones have been more expensive in overseas markets than in the U.S. And recently, the strong dollar has only made that problem worse. Yet if you shop on Amazon in India, you’ll see the 5s is already available for the equivalent of around $300. So when you hear a rumor that the price could “fall by half”, try to understand that doesn’t likely mean $150 in India, nor does it necessarily mean there will be much availability of that model at a lower price in the U.S.
What’s Apple after here?
The reality is that Apple is trying to achieve three goals by introducing this new iPhone SE, and it just might pull off all of them if everything falls right. First, it’s hoping to entice people using older 4-inch (or smaller) phones — like the iPhone 4, 4S, 5 and 5S — to upgrade to a phone that’s basically state of the art inside. With support for Apple Pay and the current A9 chip, the only important things an SE will lack that a 6S has are the larger screen and 3D Touch. Apple’s goal here isn’t just a desire to have more people running modern hardware, it’s of course that it wants to make money and selling $450 phones with margins around 50% is very good business indeed.
In the U.S. alone, more than 40 million people are using models pre-dating the iPhone 6 and some are likely wedded to the smaller form factor. The SE could be the perfect upgrade.