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Apple's Delightfully Harmful iPhone Plan – jj

Apple's Delightfully Harmful iPhone Plan


Your regularly scheduled smartphone service from Apple will arrive in September with the iPhone 12 family; stopping at 5G connectivity, improved camera, the new A14 processor, and more memory.

But who will be left to step on board? With the geekerati expecting the follow up to the iPhone SE before the end of this quarter to be one of the most desirable handsets this year, has Tim Cook decided to put more emphasis on the size of Apple’s user base in exchange for smaller handset margins?

The danger of the iPhone SE2 plan is this.

I expect the SE2 (which may get a name change to iPhone 9, giving it a clear lineage from the iPhone 8 which of course uses the same design language) will pick up a lot of sales, and while it’s a bit of a risky bet, it could be the best selling ‘new’ iPhone of 2020.

Given an expected price range of $400-$500 for the lowest priced model, compared to the $700 price tag on the iPhone 11. No doubt there will be economies of scale at play, as well as using technology from a previous generation, but the dollar profit per iPhone SE is likely to be lower than the iPhone 11, with a noticeable fall compared to the iPhone 11 Pro and 11 Pro Max… even if the percentage margin is the same.

The lower revenue would have been a larger concern a few years ago – although there is an argument that the lower sales of the iPhone 6S and 6S Plus meant Apple’s bottom line (which was more reliant on hardware then as it is now) needed a boost. That boost was tweaking the two year old iPhone 5S and branding it the iPhone SE.

But Tim Cook has changed Apple’s strategy. It’s no longer just about the hardware, it’s about software and services. It’s about generating recurring revenue from iCloud storage, Apple Music subscriptions, the ongoing push into ‘TV’ and video. That’s a strategy that needs a wide user base to sell subscriptions. The iPhone SE2, while not the cheapest of smartphones, will be the cheapest iPhone of this generation on the market when it is launched. That means an increase in sales, an increase in the user base, and an increase in subscription sales.

And that is the delight of the iPhone SE2.

Opening up the iPhone family to a wider user base is something that could have been at any point over the last few years. This is a decision that will not have been made without strong evidence and financial models. Which implies that inside Apple, a tipping point has been reached. The power of iPhone sales is no longer paramount. There’s a new priority in town that wants to try and find success.

Now read why you should not be considering the upcoming iPhone 12…

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