In late January, Apple’s CEO Tim Cook announced that Apple had achieved its most successful quarter—an impressive $76 billion in revenue and $18.4 billion in profits. Sounds pretty good, right? But what else would we expect from the one of most innovative companies in mobile technology? After all, the company has earned the title of “world’s most valuable,” and by all accounts it’s the most successful company of the 21st century.
So, if profits are sky high, and more products like the Apple Watch are in the works, why would Apple release a budget device last week?
What’s in a Name?
Before we get into why Apple would release a budget smartphone, let’s take a look at the device itself. The iPhone SE is the cheapest phone Apple has ever introduced to market. Basic specs include a modest 4-inch screen, 326 ppi, embedded M9 motion processor, 12-megapixle iSight camera, and Touch ID on the Home button.
Truth be told, this phone isn’t exactly new. Said Kate Knibbs of Gizmodo, “There is nothing new or distinctive in the size, shape, look, hardware, or software of the iPhone SE.”
Apple’s ‘new’ budget phone is more-or-less the iPhone 5S, but it’s been relabeled a low-cost smartphone to meet specific market trends that could otherwise cause problems for the company.
The Big Picture
Apple closed a huge quarter in December of last year. While it was, strictly speaking, the most profitable quarter the company had ever seen, these four months were only about 2 percent more profitable than the same time from the year before.
This information is relevant for a few reasons. Apple’s year-over-year trends between 2010 and 2015 were far more significant. For example, between 2014 and 2015, Apple enjoyed a 30 percent increase in sales, and revenues were skyrocketing fivefold in some cases. But that’s not what we’re seeing from the company anymore.
Apple has done a great job of maintaining the company’s position as a luxury brand—new phones usually go for as much as $650, a hard pill to swallow if you’re used to operating a cheaper device. The 16GB iPhone SE will cost about $399, with payment plan options available. Apple’s even offering free phones for people who sign up for a special two-year contract. So, how does this fit into the big picture of why Apple is offering a budget phone at all?
Until recently, Apple’s product lifecycle was pretty short—people would get a new phone before there was anything wrong with the old one. But that’s slowing down on several fronts, particularly in China, where budget phones have become increasingly successful.
If the product lifecycle is lengthened, Apple has no choice but to go after new users, users who may prefer smaller devices, or users who could never afford a $650 phone.
Repacking old phone iterations isn’t a bad idea—but it certainly makes you wonder why the phone was so much more money in the first place. In some ways, this undermines the company’s luxury branding, cheapening the value of each new device or wearable that comes to market. If everyone has an iPhone, it’s hard to call one a luxury item.