Monthly Archives: April 2016

Apple iPhone SE Is A Flop Already…Or Is It?

It’s been a month since the arrival of the much-hyped 4” iPhone SE, and its sales have not yet been the raging success story that we have come to associate with Apple iPhones. After the first weekend of its launch, iPhone SE had an adoption rate of a measly 0.1% (compare that with the healthy 2% adoption that iPhone 6 had racked up within the same time-frame). Couple this with the fact that overall traffic to the Apple website spiked a lot less (83%) on March 21 – the date of announcement of iPhone SE- than what’s usual when new iPhone models are released, and it might seem that people are not REALLY excited about the new ‘small’ phone in the first place. However, will it be right to write off iPhone SE as an expensive flop already? Let’s take a look:

  1. There is demand for the phone – If there weren’t, Apple Insider would not have come up with the report on how the demand for iPhone SE is constantly outstripping supply. Most iPhone SE models (across carriers) have been sold out online, and several Apple retail stores have resorted to taking pre-orders only – since the phone is not in stock. That, in turn, has also led to delivery dates being pushed back. Given that iPhone SE is expected to collect nearly $7 billion revenue for the Cupertino tech giant, it cannot exactly be classified as a flop.

Note: Many market analysts and iPhone app developers have, however, pointed out that Apple had made comparatively less units of iPhone SE available for sale. This has been one of the reasons for the quick stockout reports.

2. Not a flagship device – The adoption of iPhone SE has not been anything to make a song and dance about – but then again, it was never meant to be an instant hit. The model had been positioned as a smaller, ‘budget’ iPhone that would help Apple penetrate emerging markets, like those of China and India. The high traffic levels (160% spike in India; almost 150% in China) from these countries are a fair indication that iPhone SE is doing this job perfectly well. It’s an altogether different thing that both India and China has several sub-$100 smartphone models with at least 5” display. Whether people who use these phones will move to a 4” model remains the question (although that Apple logo is always a factor).

3. A cheaper alternative to iPhone 5S – Early adopters of iPhone SE as well as professional software and mobile app development experts have praised the powerful features of iPhone SE (the absence of 3D Touch hurts though). The handset packs in several of the features of iPhone 6S, and what’s more, it is compatible with the cases of older iPhones (iPhone 5/5S). $399 is the entry-level (off-contract) price of the new handset, as opposed to the $450 price-tag of the iPhone 5S. Apple has slashed the entry-level price of iPhones in a bid to: a) make iPhone SE a viable option in face of intense competition, and b) lure more Android users to the iOS ecosystem. And this strategy is working well, with around 16% of all iPhone SE-buyers being Android-users previously.

4. But, it’s not really cheap – The last time Apple tried to enter the middle-tier of smartphones with its ‘plasticky’ iPhone 5C, the results were not good. Those who are into making iPhone apps pointed out that the iPhone 5C was not much cheaper than its principal competitor, iPhone 5S – and that contributed to the former’s failure in a big way. iPhone SE might well be facing that problem as well. In India , for instance, 7 out of every 10 smartphones are priced at less than $150 – way lower than the $399 entry-level cost of iPhone SE. More interestingly, the new phone costs significantly more (around 36%) in India and China, than in the US markets. A move below the $400 level as the price of iPhone might seem to be a big move on the part of Apple – but it is still a figure way out of reach of many Indian and Chinese customers.

Note:In 2015, only 2% of overall smartphone sales in India were Apple devices. Less than 10% of the newly purchased handsets were 4” models. These stats, along with the not-so-cheap pricing of iPhone SE, do suggest that the phone might find the going tough over here…and India is one of the main targets for iPhone SE.

5. A cover for the season of lower sales – iPhone 6 was a flagship model; iPhone SE is not. According to several researchers and iOS app developers, Apple strategically planned the release of iPhone SE at the March 21 ‘Let Us Loop You In’ event – to tide over the traditionally low-iPhone-sales season of the year. Yes, the early adoption has not shot through the roof – but the new handset has given people a new iPhone to consider buying during this slack season. Apple has, however, missed a trick by keeping the supply of iPhone SE so low.

6. Not far behind iPhone 6S – In 2016 Q1, the sales of iPhone 6S tapered off rather alarmingly. The general consensus is that, the phone ‘lacks exciting new features’. The first weekend adoption rate of iPhone 6S (1%) was also only a half of what the corresponding figure for iPhone 6 (2%) had been. Under such circumstances, the figures of iPhone SE do not seem that bad. It has given Apple some buffer time until it comes up with the flagship iPhone 7 in September.

7. No chances of cannibalisation – iPhone 5S ate into the sales figures of iPhone 5C – as clear a case of cannibalisation as there can be (even though 5C wasn’t a particularly good phone). With the iPhone SE, there are no such risks. Surveys have shown that, hardly anyone who is already using the ‘larger’ iPhone 6 or iPhone 6S were willing to trade down to a smaller, 4” device. On the other end of the spectrum, current owners of 4” handsets were interested in getting new phones with larger displays. iPhone SE, by itself, might not be breaking any sales records – but at least it is not hurting the sales of any existing Apple iPhone model.

8. A closer look at the demand for larger phones – Almost 30 million people across the world currently use older models of iPhone – and nearly 90% of them are looking forward to replacing their handsets with iPhone 6/6 Plus or iPhone 6S/6S Plus. At first glance, this might seem a general move away from ‘smaller’ devices – but there can be one other, extremely important reason. The older iPhone models are, in comparison with their newer counterparts, considerably power-deficient and lacking in features (no Apple Pay in iPhone 5S, for instance). The iPhone SE, with its cutting edge 6S-esque features, might just be that missing link for users who want high-end phone capabilities without having to switch over to a ‘larger’ device.

9. More ‘conservative’ supply-chain model – Adding fuel to the early rumours of iPhone SE being a flop have been the repeated assertions by Apple about how well the phone is doing (a very un-Apple like behaviour). The fact of the matter is, the Cupertino company has been growing more conservative with the supply of its latest iPhones for some time now – and with less units of iPhone SE available, highlighting it as ‘sold out’ has not been a problem. Provided that the next flagship iPhone (iPhone 7) is well-accepted, we can fully expect Apple to become more aggressive with its smartphone inventory policies.

10. Two new iPhones in a year – iPhone SE is out in the wild, and iPhone 7 will be coming in the fall. For the first time in a very long time (after 2008’s 16-GB first-gen iPhone (February) and iPhone 3G (July)), Apple Inc. is releasing two different (make that, very different) models of the iPhone in the same calendar year. It is something that every Apple fan would celebrate – and let’s face it, one of the two is not a flagship, so it cannot have the usual hefty sales.

The main cause for concern for iPhone SE is its acceptability in the emerging markets. Tim Cook and his team might be planning to distribute the phone ‘to a lot of people’ in 110+ countries by the end of May – but in most of these nations, the smartphone market is extremely price-sensitive, and the average purchasing power is low. Some more time has to be given to see whether iPhone SE manages to make a mark in the developing countries. Touting it as a flop already would be unfair.

The lull in the sales of iPhone 6S and the weak start of iPhone SE have resulted in a drop of almost 25% in iPhone sales in the first quarter of 2016 (compared to 2015 Q1). There is yet time for iPhone SE to pick up though (a slash in price would help), and iPhone 7 should bolster sales in a big way. The 4” iPhone SE is not a huge success story – but it is certainly not another iPhone 5C!