Apple just put its AI within reach of a lot more people. The move could be what it needs to reinvigorate sales of iPhones after several years of struggles.
The new iPhone 16e — the cheapest of the iPhone 16 lineup — makes Apple Intelligence available for a fraction of the cost of its older cousins.
Apple announced the new device on Wednesday after CEO Tim Cook teased a new “member of the family” in the week leading up to the launch. Starting at $599, the iPhone 16e is half the price of the $1199 iPhone 16 Pro Max.
With pressure on iPhone sales mounting, this launch represents its strategy to “compete more aggressively” with rival entry-level smartphones, Jacob Bourne, an analyst at Business Insider’s sister company EMARKETER, said.
“It’s about expanding its ecosystem reach at a crucial moment when it’s rolling out Apple Intelligence and revamping Siri,” Bourne added.
As Apple enters its AI era with Apple Intelligence previously only available on its priciest models, the new iPhone 16e gives more consumers a chance to test the new tech. Although the software has yet to move the needle for iPhone sales, lowering the price would encourage people to hop on the bandwagon, Forrester analyst Dipanjan Chatterjee said.
“Apple’s brand of accessible luxury gets a little more accessible for people who don’t want to settle for anything less than the real thing,” he told BI.
Revenue missed analyst estimates in Apple’s first quarter for fiscal year 2025. A more affordable iPhone will be especially crucial in key regions, like India, “where iPhones are out of reach for most people” and Android competition is fierce, Chatterjee said.
Some “leakage” from the sale of pricier models in the iPhone 16 lineup is to be expected, but Chatterjee said he doesn’t expect it to “cannibalize the crown jewels” — the Pro and Pro Max models.
“This is about growing its market share, which becomes increasingly vital as Apple shifts toward a services-led growth strategy that depends on exposure,” Bourne said.
Apple’s services business, which includes paid subscriptions, is performing well. It grew revenue 14% year over year to reach a record $26.3 billion in Q1 FY25. Preorders for the iPhone 16e start Friday and it’ll be available for purchase on February 28.
The iPhone 16e is the “on-ramp” for customers who want the status symbol of an iPhone without spending up to $1000, Chatterjee said.
The iPhone 16e has a 6.1-inch display — the same size as the $799 iPhone 16. For hardware, it has Apple’s own in-house cellular modem and the A18 processor, and a USB-C charging port.
Last week, the iPhone 14 and SE models were the last phones with the Lightning port available on Apple’s website, but it looks like the site has been updated to offer only USB-C compatible models. Bloomberg’s Mark Gurman reported that the models were discontinued — signaling the end of an era of new phones without Apple Intelligence or USB-C chargers.
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