iPhone SE
iPhone SE Image Credit: Apple /Supplied

iPhone SE priced at $399

CUPERTINO, CALIFORNIA: Apple Inc on Wednesday released a smaller iPhone priced at $399, cutting the starting price for the company's smartphone line in a move to broaden its appeal to budget-conscious customers as the coronavirus hobbles the global economy.

The lower-cost model could also attract more consumers to Apple services, a growing driver of revenue.

The iPhone SE, available April 24, is the second generation of a previous value model. It will start at $50 less than what was previously the cheapest iPhone available, the $449 iPhone 8, which will be retired.

The SE comes with the following basic features:

  • 4.7 retina HD display
  • A13 Bionic, same processor chip as Apple's most advanced phone, the 11 Pro
  • Single-camera system, with computational photography including Portrait mode
  • Computational photography including Portrait mode
  • Dust and water resistance
  • One free year of streaming TV service

No 5G capability

The SE lacks 5G capability and Apple's facial recognition system to unlock the device, instead relying on a fingerprint sensor similar to older models.

The announcement comes as the United States and much of the world is reeling from the novel coronavirus, although US political leaders have begun to talk about ending stay-at-home orders and restarting the economy, hoping record deaths and falling hospitalizations represent a peak.

Every previous iPhone has been unveiled in a polished presentation in front of fans, but large events remain banned in Apple's home base of Santa Clara County, California, where public officials ordered the first lockdowns in the United States to slow the spread of the novel coronavirus.

'Corona iPhone'

Apple's cheaper phone reflects the coronavirus-driven economic downturn and job loss.

The cheaper phone enters a cut-throat market for value phones, especially in China, where Apple derives about 17% of sales.

While the new iPhone adds features such as wireless charging and a high-end camera, it lacks connectivity for 5G, the next generation of mobile data networks. In China, rivals such as Xiaomi Corp last month announced models with 5G features starting at about $425.

With wavering hardware sales, Apple has been investing in subscription services such as its Apple TV+ streaming television service, Apple Music and iCloud.

The new SE will come bundled with a one free year of the streaming television service, similar to Apple's flagship devices released last fall.

Apple said in January that it had 1.5 billion active installed devices and 480 million subscribers to both its own and third-party paid services, compared with 1.4 billion devices and 360 million subscribers a year earlier.

The company also set out a goal to reach 600 million paid subscribers by the end of calendar 2020.

The coronavirus has created a volatile start to the year.

Sales in China, the first nation hit by the virus, plunged, then rebounded as the country began to reopen. Sales of 500,000 phones in February rose to 2.5 million phones in March, according to government sales data there.

Apple will begin selling the new model online while its stores around the world are closed, except those within its greater China sales region. Apple will start taking orders for the phone on its website on Friday, with delivery of devices expected to start April 24.

Apple gets about 31% of its sales from its elegant stores and website, with 69% coming from partners such as mobile carriers and other retailers. Apple said partners would decide whether to sell the phones in their physical stores. Many of Apple's resellers are trying to guide customers toward online sales. Major partners such as Best Buy Inc have reduced their hours, and AT&T Inc has closed about 40% of its U.S. retail stores.

Earlier story

SAN FRANCISCO: Is now the time to launch a new iPhone?

Despite a pandemic-induced global economic crisis, Apple is widely believed to be set to release a reduced-priced handset that aims to fill a gap in its lineup, as early as this month.

Google could also follow a similar path, after Samsung last week unveiled new devices costs less than $500.

Reports suggest that the new Apple handset, to be called iPhone SE or iPhone 9, could have a starting price under $400, and generate some growth with the timetable uncertain for a new flagship smartphone for the California giant.

iPhone 9
Alleged iPhone 9 photo leaks. Reports suggest that the new Apple handset, to be called iPhone SE or iPhone 9, could have a starting price under $400, and generate some growth with the timetable uncertain for a new flagship smartphone for the California giant. Image Credit: Screengrabs

"While launching a mid-cycle budget/entry-level smartphone into the backdrop of a consumer global lockdown and unprecedented pandemic will be head scratcher to some, we note that Apple is viewing this as a low volume, low touch release with little fanfare as the phones are already ready to ship," Wedbush Securities analyst Daniel Ives said in a research note.

Ives said Apple is likely to be able to sell 20 million to 25 million of the new devices before a new flagship iPhone 12 is ready to ship.

Any new smartphone release would be without the splashy unveiling for which Apple is known, and would rely on online sales with most retail stores closed.

Consumers seeking upgrades

South Korean colossus Samsung last week introduced new smartphones that included a model designed to work on much-hyped new-generation 5G mobile networks and priced less than $500.

"People might have less money to spend, but at the same time they want better technology," said Creative Strategies analyst Carolina Milanesi.

"In the US, where it was very high-end or cheap smartphones and the middle had disappeared, that mid-tier has come back."

Milanesi said these new phones could have some appeal to financially strained consumers, as some high-end devices reach dizzying prices as much as $1,500.

Tis the season

Design and production of smartphones launching this year began long before the coronavirus pandemic, meaning makers are locked into model specifications.

"We are getting into the season," Milanesi said of escalating rumors that Apple and Google are poised to announce new handsets.

But some of the new devices may end up being timely in appealing to budget-minded consumers seeking an upgrade or replacement.

A mid-priced iPhone has potential to appeal to users more interested features such as cameras, screens, and battery life and less interested in "gimmicks" prized by early adopters, Milanesi maintained.

"This is not a response to coronavirus for sure; it just seems to suit the market better," she said.

Apple has remained mum on any iPhone plans.

Google has been known to introduce devices at its annual developers conference, which was slated for next month but cancelled due to the pandemic.

The likely entry for Google would be a Pixel 4A - a successor to its reduced-price sibling for its flagship Pixel smartphone.

Analyst Patrick Moorhead of Moor Insights and Strategy said Apple and others are being forced to consider the economic upheaval.

"Forced to chose between buying a new iPhone and eating, people will chose to eat," Moorhead said.

"It's important for Apple to just not lose iPhone sales."

It remains to be seen if the new devices can generate traction during the deep economic slump.

The new models will be arriving at a time of surging use of desktop or laptop computers by people staying home instead of being out and about relying on smartphones, according to Milanesi.

"A lot of people are home, so mobility is not a top priority," the analyst said.