Is Apple’s new product line a mistake?

Posted on March 28, 2016 by ATB Chartered Accountants

Given that Apple is the most profitable company in history, it may have come as a bit of a shock when they announced on Tuesday 22nd of March that they were planning on offering a cheaper product line in order to retrieve market growth.

Since analysts announced that Apple are likely to expect their first quarterly decline since 2007 when the first iPhone handset was released, shares for Apple have been driven lower with stock falling by 16%, while competitor brands reaching a 33% increase.

By releasing a cheaper iPhone, the company were hoping to enter into emerging markets, such as in Asia, however they failed to do so as Chinese markets, for example, are still able to produce cheaper and locally made options competitively and so iPhones only account for just over 10% of the market. Even in India, where there is a market of 1.3 billion people, Apple only holds 2% of the market share for mobile phones, compared to more than 40% in Australia. The reasoning behind releasing a cheaper phone was that given such a large proportion of the Indian market use smartphones (200 million people), a more affordable phone would be effective in increasing market share, and eventually lead to selling 20 million more phones a year (or 1% revenue).

The new iPhone SE will be sold at a retail price of $679 in Australia, however, it has received a lot of criticism from avid Apple users, who claim that the new 4 inch phone is too similar to the iPhone 5, despite having the same speed as the iPhone 6 model.

With over 1 billion Apple devices being used around the world, it begs the question of whether releasing a cheaper product line was a good idea. The Apple Brand thrives of the ideal of exclusivity and excellence, so is this an amiable investment for those individuals who are investing millions in the company? Given the large levels of sales of the iPhone 5C, the previous attempt at developing a cheaper iPhone, it would seem that the new iPhone SE will be a success for Apple. The 5C had an overall greater profit for the company than the iPhone 5 did.

Given this, what’s to say that the SE can’t do it again? It has a greater camera capacity than almost all other iPhones, and with the brand image the company already possesses, there is nothing to say that they won’t be able to succeed in attaining more market share, however, they need to be wary about whether these markets, namely India and China, are the right markets for them to go into.