Apple recently released their much-anticipated second generation
iPhone se and so far it's definitely lived up to the hype the budget devices
starting price is just $400 but has features like wireless charging a true
tone display stereo recording and portrait mode features that just a
couple years ago were only available on flagship iPhone models but the new se
doesn't only have features from older iPhones it also shares the same a 13
Bionic chipset as the current flagship iPhone 11 Pro which sells for $1000 and
the reason why that's so important is because budget smartphones almost always
compromise on graphics and processing performance since they typically have
cheaper slower chipsets but that's changed with the iPhone se and it's not
only causing a huge disruption in the smartphone industry but it's also
leading people to wonder why Apple would even create this device in the first
place why after increasing the flagship iPhone starting price from 650 to $1,000
over four years would they then introduce a $400 iPhone that performs
just as well as the $1000 model at first glance it may appear counterintuitive
but the iPhone se is likely the last phase of a clever business strategy
Apple has been working on for years and today we're gonna find out exactly what
that strategy is this is Greg with Apple explained and I want to thank ting for
sponsoring this video if you want to help decide which topics I cover make
sure you're subscribed and voting polls like this one will show up in your
mobile Activity Feed now some of you may be thinking Greg this second generation
iPhone se really isn't a big deal since the first generation model was also for
$100 and shared the same a nine chip set as the flagship success and while that
is true you have to consider the climate of the smartphone market today compared
to four years ago when the original se was released in 2016 the iPhone 6s
wasn't selling for $1000 like flagship models do today instead it was just $650
so a $400 iPhone more affordable wasn't an unusual price
point for smartphones back then especially when it came to Android
devices let's just take a look at the prices of some of the most popular
smartphones of 2016 the Galaxy a7 retailed for $700
the Google pixel was 650 the iPhone 7 was 650 and the oneplus 3 was the year's
most affordable flagship at just $400 and keep in mind there were dozens of
Ultra budget Android phones in 2016 like the Moto G 4 that sold for just $200 so
you can see why the $400 se in 2016 wasn't as much of an impressive release
but a lot has changed in the last four years and it's almost entirely because
of Apple implementing a new smartphone business strategy you see Apple used to
only release one iPhone per year the first year was the original iPhone the
following year was the 3G the next year the 3GS
it actually took apples six years to begin releasing two iphone models at a
time and it started with the iPhone 5s and 5c in 2013 the 5s sold for $650 off
contract while the 5c was $550 and when you consider what you got with the 5c
the $100 savings wasn't really worth it the iPhone 5c was essentially a five
inside a colorful plastic shell so for most people spending $100 more for a
premium 5s with new technology was definitely the better choice but Apple
expected higher demand for the 5c which resulted in supply chain cuts just one
month after it went on sale and Tim Cook eventually admitted that they'd over
stocked the iPhone 5c while having shortages of the 5s
now since the 5c ended up being the most unsuccessful iPhone release Apple
wouldn't create another budget model until the first generation iPhone se 4
years later now if you're someone who bought the iPhone se like I did you
probably don't use much data especially now that we're all stuck inside using
Wi-Fi you can save a good amount on your monthly bill by using ting since they
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flat rate you can calculate how much you'd save by entering the amount of
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estimator most people end up saving almost 20% which really adds up over the
lifetime of your device tink service is powered by Sprint
t-mobile and Verizon 4G LTE networks so you'll always have a fast reliable
connection what's also great is how easy it is to switch 80% of phones are
already compatible with ting so all you need to do is switch out your SIM card
and you can start enjoying a lower monthly phone bill so whether you're
buying the new iPhone se or you're not planning on upgrading anytime soon you
can bring your phone to ting and get a $25 service credit by going to a e ting
comm you can find that link in the description now despite Apple not
releasing a budget iPhone a year after the SE their business strategy at the
time didn't change because Apple still released two new iPhones in 2014 they
were simply both flagship models the iPhone 6 and 6 plus in this strategy
continued in 2015 with the 6s and 6s plus and in 2016 with the 7 and 7 plus
but in 2017 Apple began implementing a new long term strategy to combat the
issues the company was facing at the time and it's really important to
recognize what those issues were in order to understand why Apple had to
change their business strategy first was the problem with emerging markets Tim
Cook invested heavily in China and India back in 2015 to try and combat
smartphone market saturation that would eventually lead to slowing hardware
sales Cook figured out that if Apple could capitalize on the untapped market
potential of China and India then growing
iPhone sales in those countries could offset or even exceed the slowing sales
elsewhere but that strategy didn't pan out the way Cook expected even after
visiting both countries in 2016 mainly due to their device simply being
too expensive so that brings me to the second prong
slowing revenue growth since hardware sales were expected to decline Apple had
to act quickly and find a ways to make up for lost revenue one of which was
increasing the price of their products if Apple could make more money from each
iPhone sale then they could still achieve revenue growth even if sales
began to decline another way to make money is by introducing services that
users pay to access for example Apple music apple arcade Apple news Plus and
Apple TV Plus so considering those problems and potential solutions Apple
crafted a new business strategy to not only continue making money but to force
their competition into a corner they recognized that Apple users are already
accustomed to paying a premium for their products and they're unlikely to switch
to competing platforms like Android since they're already so deep in Apple's
ecosystem so with this unique advantage Apple me the decision to raise the
iPhones price to $1,000 in 2017 with the release of the iPhone 10 that was a $350
increase over the previous year's iPhone 7 but what's even more interesting is
how this strategy affected the competition remember earlier in the
video when I covered the prices of popular Android phones in 2016
well when Apple raised the price of their phones that essentially gave the
competition permission to do exactly the same thing and in just a couple years
the oneplus went from $400 in 2016 to $700 in 2020 the Google pixel went from
650 in 2016 to $800 in 2019 and the Samsung Galaxy S went from 710 dollars
in 2016 to 1,000 in 2020 not to mention the new Galaxy S 20 altra which costs
$1,400 a higher starting price than any iPhone ever and while those companies
are enjoying higher profit margins they walked right into the trap Apple set
back in 2017 because just like having the unique advantage of sharply
increasing the price of their phones Apple now has a unique advantage of
sharply deep the price of their phones and it has
everything to do with their custom chipset which is created in-house and
specially designed to power iOS devices it all started with the iPhone 4 and
Apple's been enjoying the benefits ever since it's the reason why I phones have
been outperforming Android devices for years despite having half the RAM and
half the processing cores the chipset is so well optimized and efficient because
it only has to run on Apple's own devices whereas companies like Samsung
Google Huawei oneplus and others have to source their chipsets from third parties
like Qualcomm who's forced to design a one-size-fits-all solution capable of
powering thousands of different Android devices and that makes it impossible to
optimize the chipset for each individual device but that's not the only benefit
Apple is also saving money since they don't have to pay a middleman like
Qualcomm and they can take advantage of economies of scale in the manufacturing
process and that's exactly why Apple was able to cause a huge disruption in the
smartphone market with the $400 iPhone S II that outperforms the $1400 s 20 ultra
and that marks the last phase of Apple's 3-year smart phone strategy force the
competition to raise their prices and then undercut the most expensive Android
device with an iPhone that costs a fraction of the price this will not only
cut into androids market share but it'll also be one of the most popular phones
to buy in emerging markets like India especially if they're manufactured in
the country and are exempt from tariffs and import taxes but there's another way
Apple wins with this strategy as the company continues to focus on growing
their services business they'll need new users to sign up and pay for those
services and what better way to do that than with a low-cost high-value iPhone
that appeals specifically to Android users budget phone shoppers or customers
in emerging markets that couldn't afford an iPhone in the past because I think
most people buying the iPhone se won't be existing iPhone owners but rather new
customers who either switch to Android years ago or never gave the iPhone a
chance to begin with now it's impossible say with certainty that this strategy
will end up playing out the way Apple expects but I think it's the best chance
they've had in years to finally steal market share away from Android and to
aggressively compete in price sensitive markets like China and India all right
guys thanks for watching and I'll see you next time