iPhone SE for $199 could make financial sense for Apple


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Bloomberg’s Mark Gurman is suggesting that Apple should sell the existing iPhone SE for $199 as a loss leader in parts of the world where iPhones remain largely unaffordable to the masses.

Effectively he is arguing for the equivalent of the Apple Watch Series 3: a way to bring people on board who are unable or unwilling to pay even entry-level Apple pricing …

To be clear, Gurman is not suggesting he has any information that Apple is considering such a thing – he simply thinks it ought to.

For years, the technology industry has been clamoring for a low-cost iPhone aimed at emerging markets. 

A device priced at $200 could make inroads in regions like Africa, South America and parts of Asia that are currently Android strongholds. That would let Apple Inc. sign up more customers for services, potentially making a low-end iPhone quite lucrative for Apple in the long run […]

when Apple introduces a 5G version of the iPhone SE, which could come as soon as early March, the company has a great opportunity to make a change. I suggest Apple continue to sell the older iPhone SE at a new, lower price—namely, $199. 

Of course, we’d no more recommend buying the iPhone SE 2 than we would buying an Apple Watch Series 3. But in both cases, if $200 is your budget, it’s still going to be substantially better than competing devices. In Brazil, for example, $200 buys you a Moto E7 Plus – complete with slow-charging and state-of-last-century’s-art MicroUSB port. An elderly iPhone SE would be a far better deal.

Gurman does acknowledge that the Cupertino company would have to sacrifice margin to do this, but argues that the long-term benefit of bringing more people into the Apple ecosystem would justify this.

Apple could create more long-term services revenue and add people to its ecosystem. Those people may then be more willing to try AirPods, an Apple Watch or—later on—a higher-end iPhone. 

It would effectively replace the elderly iPod Touch, and finally allow Apple to retire a product category that was critical to the company’s success, but has now been rendered effectively obsolete.

Of course, the counterargument would be that if you can’t afford a…