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12 May 2016

With the iPhone SE, Apple has stumbled upon the product customers actually want

The company has disproved its own "It Phone" business model, and now it's paying the price.

By Barbara Speed

At the end of March, a new Apple phone launched without much fuss. It was the iPhone SE: a four-inch phone that looked essentially the same as the more than two-year-old iPhone 5s, but inside, it had most of the workings of the iPhone 6.

It was clearly an interim phone, designed to give consumers something to play with before the mega-launch of the iPhone 7 later this year. Most of the interest from the tech press focused on the fact that it came in a trendy rose gold finish – so 2016. The Guardian called it “too small for most people”. The Next Web called it “two years too late”. It landed with a blip, not a bang.

Fast forward a month, and something strange has happened. CEO Tim Cook said at the end of April that the supplies of the new phone were “constrained” thanks to surprisingly high demand from users. “It’s clear that [the demand] is much beyond what we thought,” he said.

This cheerful summary masks a darker reality. Apple’s quarterly sales report showed a drop in profits, attributable partly to the fact that millions of customers are choosing the cheaper SE over the more expensive iPhone 6. And what Cook is describing as “constrained” supply is actually an unprecedented lack of stock affecting customers all over the world. Even by the beginning of April, many stores were out of stock completely and customers were told to expect a three-week wait.

I upgraded to an SE at the end of April on the promise of a next day delivery  ironically, rose gold was the only colour in stock  and I’m still waiting. My phone provider hasn’t received any SE deliveries from Apple in weeks. Their last update said they’d email me in ten days to update me again, implying they have few hopes that the issue will be resolved soon. In my local shop, the mention of the model had shop assistants practically chasing me to the door, groaning: WE DON’T HAVE ANY.

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So what happened? Speaking as someone who chose the phone, and knew I would since I saw it announced, I suppose I’m surprised that anyone is surprised. Commentators have tended to describe it as the iPhone 5 with benefits, but the tech inside the phone’s body is equivalent on almost every front – camera, storage space, processing power – with the iPhone 6. And it’s cheaper. Much cheaper.

Perhaps here, rather than anywhere else, is where we can see the huge gap between providers’ expectations and customers’ priorities. I cannot be alone in seeing the SE contracts  from £26 a month  as eminently more affordable than the iPhone 6. It’s becoming more and more accepted that a 16GB phone is not large enough for the average user, yet contracts offering the larger, 64GB iPhone 6 are still hovering at around £50 a month. The SE launch was partly prompted by the continued (and, to Apple, perplexing) popularity of the four-inch phones long after the larger iPhone 6 launched. My instinct is that this interest came from those who wanted a cheaper phone, and didn’t care much about giant screens.

So what do you miss out on with the SE? With the iPhone 6, you’re paying for a slightly larger screen – which, for dedicated gamers and status-obsessed tech journalists, might be worth it. These people are also presumably unwilling to use a phone that looks like it could be an older model. Personally, I’d rather save the £20 a month.

It’s still a truism that customers want the biggest, newest, thinnest, snazziest phone on the market. But let’s think about that assumption. The iPhone 6 is underperforming sales targets, and is mostly responsible for Apple’s most recent disappointing quarter-on-quarter earnings. It’s an It Phone that people don’t especially want. And yet its smaller, unwelcomed cousin has delivered weeks of bare shelves and what sounds like a panic at Apple’s head office. 

In a way, it isn’t a surprise that Apple has this prestige-oriented outlook after all, it’s flogged £1,000+ laptops for years in a market where competitors currently start at £179. The fact that operating system upgrades often don’t work on, or simply break, older phones and laptops has forced users to consent to this cycle. But are we willing to put up with this forever? I’m not – and it looks like millions of others aren’t either. With the SE, Apple offered customers a step back, and many have taken it gladly.

I have contacted Apple about delays in the supply of the iPhone SE but haven’t yet had a response. I will update accordingly.

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