How Competitive is the iPhone SE?
When Apple announced the iPhone SE in March, the combination of an A13 processor, a superb camera, and a $400 price point proved irresistible for some in the tech press. It certainly benefited from good timing, and, along with the A series from Samsung, it will help create a significant mid-tier market in the U.S. for the first time. After living with a review unit for several weeks, I have a clearer idea of where it fits in the market, how it will help Apple in different geographies, and how rivals can compete with it.
The iPhone SE is an absolute bargain for people who don’t need more or can’t spend more, and it is sure to be a hit for Apple. The timing was not deliberate, but Apple lucked into launching the right product at the right time, that, on paper, is almost impossible to compete with. There are some markets (India, parts of Asia) where people really do shop on specs, and the iPhone SE opens up the iOS ecosystem there in ways that have not been possible before.
However, the iPhone SE also entails serious compromises. Most buyers don’t shop based on specs, and the iPhone SE’s insane processor performance/price ratio does not trump screen size and battery life. If the iPhone SE cannibalizes sales of the iPhone 11, it will be because of macroeconomic issues that force consumers to lower their sights, not that the iPhone SE alters the value proposition of Apple’s more expensive products. Both the iPhone SE and iPhone 11 will receive software updates for many years to come, but the iPhone 11 will be much easier to live with over that time. Consumers on a budget who don’t need iMessage or the many tangible and intangible benefits of the iOS ecosystem will be well served – likely better served – by modern mid-tier Android phones from Samsung, Xiaomi, Motorola, and others.
Hands-on with the Smallest iPhone: Small Screen, Small Battery
While the market has spoken loudly in favor of larger screen sizes, I personally prefer smaller phones that comfortably fit in my hand and pocket, so the iPhone SE’s form factor was welcome. It should be noted, though, that while the iPhone SE’s 4.7” display is genuinely small, the case itself is not. The iPhone SE has large bezels on top and bottom of the screen, and the total width of the phone is 2.65”. Sony and Samsung have (more expensive) phones that manage to squeeze in a lot more screen in the same width, and Apple plays that game as well with the slightly wider iPhone 11 Pro. People who loved the original iPhone SE for its tiny footprint may not be satisfied with the tradeoffs on the new model, and anyone who is not graduating from another 4.7” iPhone (iPhone 6, 6s, 7, or 8) will find the display limiting.
The lack of screen real estate bothered me a lot more than I expected. Games were less immersive. Email and web pages required more scrolling, and autocorrect played a bigger part in my typing. However, the two biggest issues were common use cases that were not as common a few years ago: watching video and on-device photo editing. Compared to any other phone I have used in the past two years, video content on the iPhone SE was unpleasant to watch. When I used the iPhone SE to take formal pictures of my kids, I was unable to choose the best frame from each Live Photo on the phone itself because it was nearly impossible to see the details. I ended up editing the photos on an iPad Pro 11”, but this is a process I’ve done many times on the iPhone 11 Pro.
Consumers also spend a lot more time on their phones today than they did when Apple introduced the first iteration of what became the iPhone SE, the iPhone 6, back in 2014. Apple has tremendously modernized the processor since those days – and the A13 is efficient – but the cavity for the battery is about the same size, and battery technology has not advanced as quickly. The iPhone SE dropped to 20% or less by 7 PM most nights, despite much lighter-than-average usage (especially of the cellular network and camera) during lockdown. My iPhone 11 Pro usually still has 60% battery left under similar circumstances; Motorola’s $249 Moto G8 Power only hit 20% after nearly four days in these conditions. Under heavy loads, I expect that the iPhone SE will require a recharge or a portable battery pack to last a full day.
Another throwback design point was more successful: the front fingerprint reader is instantaneous, and it feels even more so when compared to Face ID in a facemask era. I’ve tested hit-or-miss under-glass fingerprint readers on premium Android phones for several years now; the speed and reliability of Apple’s tried-and-true solution is dramatically better. Even if people stop wearing masks, this element does not feel like a downgrade.
The Strengths and Limitations of More Powerful Silicon
One of the big selling points on the iPhone SE is that it uses Apple’s 7nm A13 Bionic SoC, which leads the industry in performance at any price point, and positively embarrasses the Qualcomm 600 series Snapdragons found in most mid-tier Android phones. However, in practice, the iPhone SE’s CPU and GPU advantage is not as pronounced as you might expect. Yes, the iPhone SE is fast, but for most activities, mid-tier Android phones don’t feel especially slow. (This is a big change from just a few years ago, thanks to Moore’s Law and marked improvements in Android.) When gaming, it can be noticeable that the iPhone SE’s frame rates are higher. For example, the animations in Two Dots were smoother on the iPhone SE than on three different equivalently priced Android phones I tested. However, the iPhone SE’s small screen size hampers enjoyment as a serious gaming device, blunting the advantage of the silicon.
The real way the A13 raises the bar on the iPhone SE is not on app performance, but oin imaging and longevity. The 12 MP camera in the iPhone SE focuses instantly, shoots instantly, and consistently takes excellent photos. The iPhone SE produces markedly better video than many flagship competitors. Some of this is due to optics imported from the iPhone 8, and some can be credited to the software and silicon combination that Apple has perfected over the years. In an age of computational photography, applying processing and AI horsepower can make a bigger difference to image quality than better sensors.
The iPhone SE will also be usable longer than any equivalent Android phone. Many Android phones launch with older versions of the OS and get few, if any, subsequent substantive updates. The A13 in the iPhone SE will allow more demanding software to run on it far into the future, and iPhone SE buyers should expect Apple to deliver iOS updates for at least three to four years. This makes the iPhone SE an even better value, and if the consumer does want to upgrade in a shorter timeframe, iPhones retain much of their value for resale.
iPhone Intangibles: UX and Ecosystem
The presence of a fingerprint reader means that the iPhone SE uses the home button-centric user interface that debuted on the original iPhone. I got hands-on with an iPhone prototype after Steve Jobs’ keynote in January 2007, and, surprisingly, the UX holds up remarkably well over thirteen years later. I only had minor muscle memory issues unlearning the iPhone X generation swipes. I still regularly use an iPad mini, and many consumers will either be coming from older iPhones or will have a non-Pro iPad. Apple’s Face ID and swipe gestures are superb, but this just isn’t going to be a factor for most iPhone SE buyers.
Apple’s hardware design skills are renowned and often imitated, but the iPhone SE is admittedly an old design. A bigger draw is Apple’s ecosystem of software, services, policies, and accessories. The iPhone SE is the least expensive entry point for iMessage, Apple Arcade, Apple Watch, AirPods, iTunes, FaceTime, Apple Pay, Continuity integration with Macs and iPads, the App Store, and unique apps like GarageBand, iTunes U, and Dark Sky. Access to education and tech support at Apple Stores varies by geography, and Apple’s commitment to privacy is hard to measure, but neither should be underestimated. Even Apple’s ecosystem failures, like Siri (which has not kept up with Google Assistant or Amazon Alexa) or HomeKit (which has limited product compatibility) have unique appeal; Siri is a cultural icon, and HomeKit setup is simple and secure. The iPhone is so popular that an entire industry surrounds it with cases and other accessories.
For some market segments, just one of these elements is enough to drive sales; in the U.S., the popularity of iMessage has driven iPhone penetration above 80% among teens. Outside of China, Apple’s ecosystem is extremely sticky, and the iPhone SE grants the buyer full access, despite the mid-tier price point. In addition, in the 100+ geographies where Apple has launched Apple TV+, the iPhone SE comes with a year’s subscription to the service – a $60 value.
Conclusion and Industry Recommendations
The iPhone SE’s performance-per-dollar ratio is extraordinary, but most consumers don’t scrutinize processor specs. There are exceptions; specs do play a bigger role in buying decisions in India and some Asian markets, and Apple would be wise to highlight benchmarks that show the iPhone SE outperforms many laptops on single-threaded tasks. However, these same markets also prioritize larger screen sizes, which the iPhone SE decidedly lacks. Also, at $400, the iPhone SE is actually an extremely expensive phone for emerging markets where ASPs are typically under $200 (just $163 in India according to IDC). In China, many of Apple’s services are unavailable, and privacy is not a realistic expectation in a country where you can be forced to load tracking apps. The iPhone SE’s appeal in China will depend almost entirely on performance, user experience, and Apple’s brand. The 2020 iPhone SE should sell better in all of these geographies than the 2016 iteration did, but not necessarily by a large margin.
In developed markets where the 2016 iPhone SE once sold based on its size, the 2020 version is likely to outperform, but this time due to the size of its price tag. U.S. teenagers may want an iPhone 11 Pro Max, but if all they can afford is an iPhone SE, that will get them onto iMessage at a reasonable price without social embarrassment. In a pandemic, iPhone 6, 6s, and 7 owners who need a new phone may not be willing or able to buy the latest mainstream equivalent – an iPhone 11 – and may opt for the iPhone SE, which is an updated version of what they are already used to. There is little that rivals can do to peel deeply committed iOS users away from Apple’s ecosystem – especially once they have invested in other Apple products.
However, for everyone else:
Promise OS Upgrades. Google may need to provide memory and performance baselines, so this won’t be simple. Still, the main thing holding back the promise of years of Android updates on mid-tier phones is the willingness for OEMs to invest in supporting products for years after they are sold. Consumers are holding on to phones for nearly three years; if you want consumers to buy your product, they need to know that they are making a smart investment.
Highlight design, display size, and battery life. These are all areas where the iPhone SE struggles. While the iPhone SE’s build quality is superb, even by Apple’s standards the design is badly dated.
Don’t over-emphasize the camera. Rivals may be tempted to highlight the versatility of their multi-lens mid-tier phones. It is true that the iPhone SE’s portrait mode is just fair, its digital zoom is limited, and it cannot take ultra-wide pictures at all. However, despite its single lens, the iPhone SE takes noticeably better photos than anything else in its price range aside from Google’s Pixel 3a. Unless you are Google, why would you specifically draw attention to an area where the iPhone SE is exceptionally competitive?
Make accessories. Vendors must make sure that there are cases and key accessories for their phones, even if they have to make first- party versions. Worse comes to worse, accessories can always be bundled with the phone to increase perceived value.
Mid-tier does not have to mean huge. Consumers have shown a decided preference for large displays, so that is all that Android vendors are making. However, human hand size has not increased in the time that smartphones have been on the market, and there are plenty of consumers who do want smaller phones. Why isn’t Samsung reusing all the tooling for the Galaxy S9 and producing a mid-tier phone with that form factor? It would trounce the iPhone SE on display size in roughly the same width case, unlike the Galaxy A51, which is 5mm wider.
Next year, promote 5G. Vendors targeting Korea and China with sub-$500 5G phones should start comparing their phones to the 4G-only iPhone SE right now: sometimes CPU and GPU speed matters, but other times, the network is more important. In other geographies, 5G rollouts won’t materially matter to most consumers until 2021, but by then, there will be second and third generation mid-tier 5G phones, and the iPhone SE will almost certainly be the same product Apple is selling today.
…and for Apple:
Show benchmarks. The iPhone SE has a faster processor than many laptops. That’s powerful; Apple should make the value clear to consumers.
Advertise updates. Apple does a great job of highlighting its long-term support and OS upgrade rate at press conferences, but consumers don’t necessarily get the message. They need to.
Promote iMessage. Apple has run ads about Animoji, but not about iMessage as a differentiated platform. U.S. teens know how important group iMessage chats are and the social ostracizing that comes with green bubbles, but many of their parents don’t.
Small can be premium. The 2016 iPhone SE was beloved for its size. While that form factor would not be competitive today, Apple is rumored to be building a premium Face ID iPhone with a 5.4” display. Apple rumors are not always true, but if this one is not, it should be.
To discuss the implications of this report on your business, product, or investment strategies, contact Avi at avi@techsponential.com or +1 (201) 677-8284.