John Shaw
Apr 13, 2020

Apple's budget phone: a democratic move for difficult times?

The tech giant understands that expensive hardware is no longer the main route to growth.

Apple's budget phone: a democratic move for difficult times?

Apple is rumoured to be getting ready to launch a successor to the iPhone SE (the "budget" iPhone, pictured) soon for less than $400 and potentially to be significantly delaying the 5G iPhone 12 – potentially leaving the company short of a major iPhone launch for the year.

This can’t be down solely to batshit conspiracy theories about 5G causing Covid-19 – so what is going on with Apple right now?

Sales of iPhones have been hit hard and not just by the pandemic. The business reported a 61% year-on-year sales fall in in March in China – a territory that accounts for roughly 15% of its business. The knock-on effect of a disrupted supply chain and travel restrictions is likely to see the same picture emerging globally. Even before this, though, sales were cooling, with the company reporting a 9% drop in iPhone sales in the final quarter of 2019.

Meanwhile, Apple has not replicated the success of the iPhone with either of the two major categories it has moved into since: the 10-year-old iPad and five-year-old Apple Watch. While the latter is well-designed and sales are steady, the market will likely reach a point of saturation due to its niche appeal.

But hardware is only one half of the picture; Apple has diversified its portfolio in the hopes of enticing more consumers into its ecosystem. As Tim Cook said in the most recent revenue announcement: "Almost every kind of service, we’re in."

The biggest move has been the one into entertainment with Apple TV+, which launched in November 2019, backed by a $6bn commitment to producing content and a star-studded cast of programmes. Apple TV+ may be a long-term play, but it has lacked a big hit and it’s a strange feeling to watch Apple competing in a crowded sector with no clear advantage. But the right acquisition could change that (cf Beats). Apple Music has been helped by its recent multi-year licensing deal with Universal, Sony and Warner.

And what of the brand itself? Anyone who works in anything like advertising seems to be an expert on Apple. If I laid out end to end all the meetings in which someone has played, referenced, read out or recited by heart "Here’s to the crazy ones", then they would add up to a very long meeting indeed. 

We’re also likely to be heavy users personally. My family certainly drank the Apple-flavoured Kool-Aid. We have five Macs (one for each person, including the dog), an iPad and four iPhones (dog not included). IPods of every size and shape float around the house like space junk. Several drawers are afflicted by stubborn knots of cable ivy in which Apple earphones feature prominently. I’m a devotee of the experience too. There’s no more reassuring but challenging sound than an Apple start-up bong. It says: "If you fail, it won’t be down to the equipment. It’ll just be you."

I’ve never been quite so sure about Apple’s services, though. I’ve been mocked vigorously for my Hotmail email address, although it has always worked fine, and I like its retro charm. But when I tried using Apple email, I quite quickly ended up with triple identities (Mac/Me/iCloud). I’ve also felt that slight frustration of never quite knowing what song/playlist is where (and the accompanying unease about that probably being my fault rather than Apple's). To me, Google has always seemed a bit better than Apple at that crucial quality: seamlessness.

But it’s dangerous to look at Apple and its plans purely through the lens of our own relationship. "Here’s to the crazy ones" is a great film, but it’s not the rock on which Apple was built. Users with multiple Macs are but a tiny proportion of the potential global user base, many of whom didn’t bother with computers and just went straight to mobile. And a few glitches haven’t prevented Apple’s service business from growing rapidly to around 14% of its revenue.

You don’t need an expensive phone to access most of them. You just need a good relationship with Apple, which is why putting SEs (or whatever the new device ends up being called) in as many hands as possible makes sense and opens up an ever-widening audience for continuous servicesNot all of them have to be hits from day one, as long as Apple users feel like they are generally worth a look and a try. For Apple to put weight behind a cheaper phone is a strategic decision, not a tactical one, although in these strange times it feels like an appropriately timely move from a confidently timeless brand.

John Shaw is chief innovation officer at Superunion

Campaign UK

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