Apple’s latest move in the smartphone market has sparked discussions across the tech industry, particularly with the unveiling of the iPhone 16e. The device’s debut marked a significant shift for Apple, as it abandoned the long-standing “SE” branding in favor of a fresh approach. However, the most surprising aspect of the launch was its pricing strategy. At $599, the iPhone 16e is positioned considerably higher than its predecessor, the iPhone SE, which was available at a more budget-friendly $429.
The introduction of the iPhone 16e is a pivotal moment for Apple as it strives to expand its iPhone lineup and reinforce the appeal of its flagship product, which has been the backbone of the company’s financial success for nearly two decades. With Apple boasting a staggering market capitalization nearing $4 trillion, the iPhone remains its primary revenue driver. In the first fiscal quarter of 2025 alone, iPhone sales generated $69.1 billion out of the company’s total revenue of $124.3 billion.
Apple’s venture into the budget smartphone sector has yielded mixed results in the past, with previous attempts such as the iPhone SE failing to capture a significant market share. Data from Consumer Intelligence Research Partners (CIRP) indicates that the iPhone SE accounted for only 5% of U.S. iPhone sales in the quarter ending December 31, 2024. On a global scale, Counterpoint Research reports that the SE represented just 1% of total iPhone sales last year. Meanwhile, Apple’s attempt at a compact yet affordable offering with the iPhone Mini in 2020 saw little success, ultimately leading to its discontinuation after just two generations.
Given this track record, skepticism surrounds the iPhone 16e’s ability to succeed, especially with its price point inching closer to Apple’s standard models. However, there is a compelling case to be made for why this device might defy expectations. Apple appears to be reviving a strategy that previously proved effective—one reminiscent of the iPhone XR, a model that prioritized display size, battery longevity, and overall performance while making concessions in camera technology to keep costs down.
A Shift in Apple’s Budget Smartphone Strategy
While many perceive the iPhone 16e as the successor to the iPhone SE, Apple’s strategy with this device more closely aligns with the approach taken with the iPhone XR. The iPhone 16e’s launch coincides with Apple’s typical release window for SE models, and notably, the company removed the iPhone SE from its online store following the announcement. However, in terms of design philosophy, the iPhone 16e is more of a spiritual successor to the XR.
The iPhone XR, introduced in 2018 alongside the iPhone XS, was designed for consumers who sought an iPhone with premium features at a more affordable price point. Apple employed a similar approach with the iPhone 16e, opting to focus on key aspects such as a larger screen and longer battery life while making trade-offs in camera hardware to maintain a lower cost.
The success of the iPhone XR is well-documented. According to Counterpoint Research, it was the best-selling smartphone worldwide in the third quarter of 2019. While Apple did not release a direct successor to the XR the following year, its design and pricing approach were largely carried over to the iPhone 11, which saw substantial commercial success.
With the iPhone 16e, Apple is again betting on a device that retains essential features while forgoing some premium aspects to appeal to a broader audience. Analysts believe this strategy could work, particularly due to the device’s larger screen size. The iPhone 16e sports a 6.1-inch display—matching that of the standard iPhone 16—whereas the iPhone SE featured a significantly smaller 4.7-inch screen.
Gerrit Schneemann, a senior analyst at Counterpoint Research, noted that Apple appears to be moving away from compact smartphones, acknowledging that consumer preferences have shifted toward larger displays. “(Apple is) giving up on that kind of smaller form factor and realizing that people are interested in a larger display,” Schneemann told CNN. “Even if it means discarding the $400 entry price.”
Before the iPhone 16e’s official unveiling, well-known Apple analyst Ming-Chi Kuo of TF International Securities predicted that the new budget model would perform “slightly better” than its predecessor, the iPhone SE. However, challenges remain, particularly in convincing consumers that the device’s $599 price tag offers sufficient value compared to rival Android smartphones.
Additionally, there is concern about potential cannibalization within Apple’s own lineup. Some analysts, including Bank of America’s Wamsi Mohan, have raised the question of whether the iPhone 16e might impact sales of the standard iPhone 16. Technology research firm The Futurum Group’s CEO, Daniel Newman, echoed these sentiments, emphasizing the delicate balance Apple must strike.
“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 that would spend $1,300 or even $1,000 picks it over that,” Newman explained to CNN.
The Bigger Picture: Why the iPhone 16e Matters for Apple
Apple’s flagship iPhones, particularly the Pro and Pro Max models, often command the most attention, and for good reason. According to data from market research firm Kantar, these high-end variants are consistently the best-selling models worldwide, a trend that contributes to Apple’s ability to maintain a high average selling price for its iPhones—a key factor in keeping investors satisfied.
However, the iPhone 16e represents an opportunity for Apple to capture a different segment of the market. The device could appeal to consumers who might otherwise opt for an older, secondhand iPhone or switch to an Android device. This is particularly important in China, where Apple faces intensifying competition from local manufacturers such as Huawei and Xiaomi.
More importantly, the iPhone 16e plays a critical role in Apple’s broader ecosystem strategy. As the company looks to reduce its dependence on hardware sales and expand its services division, making its software and ecosystem accessible to a wider audience becomes crucial. The iPhone 16e’s inclusion of Apple Intelligence—the company’s suite of AI-driven features—could be a key factor in driving adoption. By equipping the 16e with these tools, Apple ensures that even users who are unwilling to pay $800 or more for a flagship model can still engage with its latest software innovations.
This move is especially significant given the fierce competition in artificial intelligence. Rivals such as Google, Microsoft, and Samsung are aggressively investing in AI technologies, and Apple must position itself as a leader in this space to maintain its competitive edge. Expanding access to Apple Intelligence through the iPhone 16e could help solidify Apple’s foothold in the AI landscape.
“Apple really needs to win,” Newman emphasized. “Its whole AI strategy and its intelligence strategy and its app strategy for the future is really where I think its biggest growth opportunity comes.”
As Apple navigates an increasingly complex and competitive smartphone market, the iPhone 16e serves as a crucial test of its ability to innovate and adapt. If successful, it could redefine Apple’s approach to budget-friendly smartphones, reinforce its dominance in the mobile space, and play a pivotal role in shaping its future beyond hardware sales.
