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25 Reasons Why The iPhone SE Is A Big Risk For Apple

Forbes logo Forbes 21-03-2016 Ewan Spence, Contributor

Tim Cook in the shadows at WWDC 2015© Provided by Forbes Tim Cook in the shadows at WWDC 2015

This Monday, March 21st, will presumably see the launch of Apple’s latest iPhone. The iPhone SE is expected to replace the iPhone 5S in the portfolio, and update the four-inch form factor of the 5 series with the internal hardware of the 6S series.

But the SE is an awkward handset for Apple. it comes in the middle of Apple’s normal iPhone update cycle, it offers very little that is ‘new’ and it comes at a time when questions are being asked of the iPhone’s retail performance.  Given the critical strategic nature of the iPhone SE, here are twenty-five areas where Apple needs to be careful as it launches the iPhone SE.

1. The iPhone is no longer untouchable.
January’s earnings call showed a significant slow-down in sales of the iPhone, with year-on-year growth barely reaching one percent. Furthermore, CEO Tim Cook noted that sales in the first calendar quarter of Q1 could show the first drop in the history of the iPhone. The iPhone SE might just sneak in enough sales in March to halt that slide, but many could argue we are now past ‘peak iPhone’. That puts a lot of pressure on the iPhone SE to perform in the second quarter.

2. The iPhone SE is not the next big thing.
Putting aside that terrible size-based pun, the real leap forward for Apple will happen in September with the launch of the presumptively titled iPhone 7. New technology, new designs, and big gambles are all expected. Which leaves the iPhone SE as little more than a specifications-matching exercise for the iPhone 5S, attempting to carry the flag of innovation.

3. Expectations have been diluted.
Apple failed to manage expectations ahead of the launch of the iPhone 5C, with analysts and commentators expecting to see an aggressively priced ‘plastic’ handset to grab market share from Android. When that didn’t arrive, the mood turned. Apple may be secretive, but it can still exert some control over the message. Ahead of March 21st there’s less demand for a land-grab device.

4. There are no surprises.
One side effect of this approach is that the whole story of the iPhone SE has been laid out. I would love to think that Tim Cook has managed to hold back a ‘one more thing’ moment in the hardware but given the ports supply chain and Apple’s recent records, there’s not going to be a ‘wow’ moment on Monday. And that makes the SE just a little less special.

5. Is there a follow-up story?
What happens the week after reviews? What is the story behind the iPhone SE? Where does it fit into the Apple ecosystem? Can Apple continue to excite the consumers on this handset after the launch, or will it simply become the plaything of carriers wanting a ‘free’ iPhone (with a twenty-four month contract)? Given the continued promotion of the Apple TV and the 12.9 inch iPad Pro, I’m not confident in Apple’s ability to keep the iPhone SE in the limelight.

iPhone Se Leak Detais Printed In 3D (Image: TechSmartt): TechSmartt’s 3D Printed iPhone SE (image: TechSmartt)© Provided by Forbes TechSmartt’s 3D Printed iPhone SE (image: TechSmartt)

6. Is there really a demand?
The internet can provide a lot of amplification to a small group of supporters. No doubt Apple has feedback from consumers as well as the anecdotal evidence and analyst reports that people want a smaller phone. When it comes to the crunch, will consumers actually buy the iPhone SE and make it a hit device?

7. Can it fail in America and still win?
America likes big handsets, and tends to bias to large screens and phablets more than other territories. I suspect the iPhone SE is going to be more popular in Europe and Japan than the US market. Can Apple get the media to focus on global sales as opposed to the more-often reported US market?

8. Lets sell the same peripherals again.
Early investigations with various leaked cases show the iPhone 5S design has been very slightly tweaked to change the sides from the 5S’s hard edges to a more curved look from the iPhone 6 family. That means anyone upgrading from the 5 or 5S potentially need to buy all their cases, peripherals, chargers, and holders once more. Which feels a touch cynical.

9. It can be sold as a new phone.
One advantage the iPhone SE will have in the market is that it’s a ‘new’ phone. By going with iPhone SE and dropping any numbers from the branding it leaves marketing teams from Apple and all its carrier and retail partners to push this as a new phone, as opposed to an update to (arguably) a four-year old design.

10. Quietly killing the iPhone 6.
While I expect the iPhone 6 and iPhone 6 Plus to remain on sale, the rumored specs of the iPhone SE make it more powerful than the first devices in the ’6′ family. It probably signals the quiet scaling down of availability on the iPhone 6, although I would expect to see the 6 Plus remain as the ‘cheaper’ phablet model after September this year.

11. The Trojan Horse.
Specifications wise the iPhone SE is going to be a monster of a phone, pretty much matching the iPhone 6S and 6S Plus in capability. That leaves Apple an interesting challenge in how to market the SE without cannibalizing the existing handsets. The simplest pitch of ‘all the power in a smaller space’ might be enough for the SE, but does that weaken the rest of the line? There’s already a story of ‘larger is more powerful’ tat customers can easily appreciate, the SE is going to upset that understanding.

12. The question mark over 3D touch.
One of the areas where there does not seem to be a huge amount of confidence is the inclusion of 3D Touch in the screen. Introduced with the 6S family, this allows iOS to register the different levels of pressure   on the screen and offer alternative options, pop up menus, or new UI views. For 3D Touch to really make a difference to iOS, it needs to be on as many devices as possible. If the SE launches without it, the adoption rate is going to be slowed down.

13. Apple’s new world is supported.
What the iPhone SE will be offering is support for Apple Pay. Previously iPhone 5, 5S and 5C owners could use Apple Pay through an Apple Watch, but not directly on the handset. Expect the inclusion of the A9 system on chip (and Touch ID) to bring the contactless payments system to the lowest tier in Apple’s portfolio.

14. A forced upsell of storage.
Indications are that the iPhone SE will be available in 16GB or 64GB storage options. The limitations of 16GB with iOS 9 has been an area of concern for some time, and while Apple’s cloud services will help I would struggle to recommend a 16GB iPhone to anyone who has more than a passing interest in downloading apps, taking pictures, or recording video.

15. Smile for the camera!
Reports are that the camera hardware will match the iPhone 6S, with 4K video recording and a 12 megapixel sensor. Given the challenge that Apple is facing from Samsung’s superior imaging on the Galaxy range, giving a ‘mid-priced’ iPhone the specs to potentially beat Samsung’s increasingly vital mid-priced handsets is an important strategic decision.

iPhone 5C (image: Apple.com)© Provided by Forbes iPhone 5C (image: Apple.com)

16 Everything is already waiting for it.
The biggest advantage the iPhone SE is going to have is that it fits into the existing iOS ecosystem. There are countless games, apps, and services that will be available and should be compatible out of the box. Okay there’s not been a four-inch A9-powered device, but developers have kept the iPhone 5 family in mind while developing and are familiar with the A9 on larger devices. There’s nothing new to surprise developers.

17. Longevity for more updates.
Apple will be expecting the iPhone SE to have a long and fruitful life. The iPhone 5S would be struggling to stay at peak performance with iOS 10, and while it will likely receive that update, the iPhone SE gives Apple a platform that will be good for another three to four years of OS development. The extra horsepower will help upcoming features (no doubt with a lot of heavy encryption going on in the background). New SE owners can expect to still get software updates well into 2019 and likely into 2020.

18. A built-in market for accessories.
Putting aside the ‘buy it again’ trick, third-party peripheral manufacturers can assume that the iPhone SE is going to be a big seller, and that guaranteed volume of handsets creates a much larger addressable market for cases, bumpers, and holders compared to other manufacturers’ mid-range devices. The industry knows this is a multi-million unit device going on sale – the same cannot be said of handsets like the LG G5. Accessories will be available immediately, giving consumers confidence that the SE is the right choice.

19. Family sharing gets another bullet.
One of Apple’s services that I find useful is family sharing. This allows one purchase of an app, music, or game to be shared around family members. The iPhone SE is an attractive entry-level smartphone for children, but also a good purchase for an older relative. Thanks to family sharing the drive to stay within iOS is strong – especially for households where a single $15 Apple Music monthly subscription is churning out music across three generations of users with numerous Apple devices.

20. Direct to the consumer
Thanks to the worldwide appeal of the Apple Store, the iPhone SE can be pitched directly to customers. Don’t discount the power of that direct relationship. Android manufacturers have to rely on carriers and independent retail stores to push new hardware and will always be in competition with other brands. Apple can give the iPhone SE a clear run from Cupertino to its customers.

Assuming that the iPhone SE is pitched as returning a small-screened iPhone to consumers, how can Apple do this without suggesting that it went in the wrong direction with the iPhone 6/6S and 6 Plus/6S Plus? You can have a small portfolio of devices, or you can shotgun over multiple sizes and form factors. ‘An iPhone for everyone is attractive but dilutes Apple’s previous laser-like focus on a single form.

22. Managing Inventory.
Adding in a new four-inch screen is going to complicate the supply chain management. Historically this has been Apple’s strong point, but it’s widely assumed that Apple’s misjudged its iPhone stock levels after the launch of the iPhone 6S and iPhone 6S Plus, with a level of overstock that saw significant cuts in production during the first calendar quarter of 2016. Demand for larger screened handsets did not meet expectations, so can Apple be sure of getting it right now another screen size is available?

23. Is more power enough?
One clear strategy for the iPhone SE is to get existing users of four-inch screened iPhones to upgrade. Apple needs to pitch the SE as being better than the existing handsets that consumers own. Unfortunately the iPhone 5S is still an amazingly competent device. Selling an iPhone with ‘it has more power!’ isn’t an Apple strategy, it’s a Samsung strategy.

24. Will it join the upgrade program?
If the iPhone SE is all about the upgrades, will it be part of Apple’s iPhone Upgrade Program? I think it should. Consumers can pick up a new handset (with the automatic upsell to Apple Care) and start making monthly payments. In twelve months time, they can upgrade to a new handset by extending out the monthly payments for another year. Getting people back on the upgrade train should be Apple’s key strategic move for 2016.

25. Where’s the risk?
The iPhone SE is a safe purchase. There are no surprises and you know exactly what you will be getting. There’s (sadly) no new technology inside the handset, it’s as safe an iPhone purchase as you could possibly make. For many that will be a good thing. For me, it’s going to be a disappointment. The iPhone should not be an iterative experience.

(Now take a look at a 3D printed iPhone SE built up from all of the rumors and leaks).

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