Apple’s latest smartphone release, the iPhone 16e, marks a significant departure from its previous strategy in the budget phone segment. For nearly a decade, Apple has used the “SE” branding to distinguish its more affordable iPhone models, offering a cost-effective gateway into the Apple ecosystem. However, with the introduction of the iPhone 16e, the company has abandoned this long-standing branding and taken an unexpected approach by pricing the device at $599, a notable jump from the previous iPhone SE, which launched at $429.
The decision to rebrand and reprice its budget-friendly offering is a bold move that reflects Apple’s broader ambition to maintain its dominance in a rapidly evolving global smartphone market. The iPhone remains Apple’s most critical product, accounting for $69.1 billion of the company’s $124.3 billion total revenue in its first fiscal quarter of 2025. Despite Apple’s market valuation approaching $4 trillion, the company faces increasing pressure to ensure the continued success of the iPhone, especially as global smartphone sales fluctuate and competition intensifies. While flagship models such as the iPhone 16 Pro and Pro Max remain the primary revenue drivers, Apple recognizes the need to reach a wider audience—particularly those who might otherwise turn to older, secondhand iPhones or Android alternatives.
Apple’s previous efforts to cater to budget-conscious consumers have seen mixed success. The iPhone SE, originally introduced as a lower-cost alternative, failed to gain significant traction despite its attractive price point. According to data from Consumer Intelligence Research Partners (CIRP), the iPhone SE made up just 5% of U.S. iPhone sales in the final quarter of 2024, while Counterpoint Research found that it represented only 1% of global iPhone sales for the entire year. Similarly, Apple’s attempt to revive compact smartphones with the iPhone Mini resulted in lackluster demand, leading to its discontinuation after just two generations.
With the iPhone 16e, Apple appears to be taking a different approach—one that closely mirrors the strategy it used with the iPhone XR in 2018. When the iPhone XR was introduced alongside the premium iPhone XS, it was positioned as a more affordable alternative that still retained many of the key features that consumers valued. By prioritizing display size, battery life, and overall performance while cutting costs in areas such as camera hardware, Apple struck a balance that resonated with a broad audience. The iPhone XR became the best-selling smartphone globally in the third quarter of 2019, according to Counterpoint Research, proving that a well-designed mid-tier iPhone could succeed.
The iPhone 16e follows a similar formula. While many initially assumed it would be a direct successor to the iPhone SE, its design, specifications, and positioning align more closely with the iPhone XR. The most noticeable shift is its 6.1-inch display, matching the standard iPhone 16 and marking a significant increase from the iPhone SE’s 4.7-inch screen. This change reflects evolving consumer preferences, as demand for smaller smartphones has declined in favor of larger, more immersive displays. Analysts believe that this shift could help the iPhone 16e appeal to a broader segment of buyers.
Gerrit Schneemann, a senior analyst at Counterpoint Research, highlighted this trend in a statement to CNN, noting that Apple’s decision to move away from smaller form factors signals an acknowledgment of changing market dynamics. “They are giving up on that kind of smaller form factor and realizing that people are interested in a larger display,” Schneemann explained. “Even if it means discarding the $400 entry price.”
Despite its larger display and improved features, questions remain about whether the iPhone 16e’s $599 price tag will deter budget-conscious consumers. Prior to the device’s launch, Ming-Chi Kuo, a well-respected Apple analyst at TF International Securities, predicted that the iPhone 16e would likely perform slightly better than the iPhone SE. However, at this price point, the iPhone 16e is entering a fiercely competitive segment dominated by mid-range Android smartphones, many of which offer compelling hardware specifications at lower costs.
Another concern is whether the iPhone 16e could cannibalize sales of the standard iPhone 16. With a significantly lower price while still offering many of the same core features, the iPhone 16e may tempt consumers who might otherwise have opted for a more expensive model. Bank of America analyst Wamsi Mohan raised this issue in a note to investors, while Daniel Newman, CEO of The Futurum Group, emphasized the delicate balance Apple must strike with this device. “They have to be really careful to offer enough in this device that it is worth $600 to a buyer, but not offer so much that someone who would spend $1,300 or even $1,000 picks it over that,” Newman stated.
Beyond immediate sales performance, the iPhone 16e plays a crucial role in Apple’s broader strategic vision. While Apple’s flagship models continue to dominate the high-end smartphone market, the company is keenly aware of the need to expand its customer base by providing an accessible entry point into its ecosystem. This is particularly important in key international markets such as China, where Apple faces mounting competition from domestic brands like Huawei and Xiaomi.
Perhaps even more importantly, the iPhone 16e aligns with Apple’s long-term shift toward artificial intelligence and digital services. By integrating Apple Intelligence into the iPhone 16e, the company ensures that even its more affordable models include AI-powered features, reinforcing consumer engagement with its ecosystem. This approach supports Apple’s broader transition from a hardware-centric revenue model to a services-driven strategy, in which monetizing digital offerings and subscriptions plays an increasingly significant role.
As AI becomes a central pillar of modern smartphones, Apple’s decision to bring Apple Intelligence to a lower-cost device underscores its commitment to maintaining a competitive edge. By making its AI-powered features accessible to a wider audience, Apple strengthens its position in an industry where major players such as Google, Microsoft, and Samsung are aggressively investing in artificial intelligence.
Daniel Newman further elaborated on the importance of this shift, stating that “Apple really needs to win” in the battle to attract Android users and budget-conscious consumers. “Its whole AI strategy, its intelligence strategy, and its app strategy for the future is really where I think its biggest growth opportunity comes.”
The introduction of the iPhone 16e represents more than just a new addition to Apple’s product lineup—it is a calculated move designed to secure the company’s future in an increasingly competitive smartphone market. As Apple continues to navigate shifting consumer preferences, evolving technology trends, and intensifying global competition, the success of the iPhone 16e could provide crucial insights into the company’s broader strategic direction in the years to come.
