Apple ditches budget iPhone SE for pricier new entry model with AI

Apple announced Wednesday it is replacing its entry-level iPhone SE, which debuted in 2016, with a new, much pricier model that comes with many features previously reserved for the company's more expensive handsets.

Industry watchers were expecting the simple SE to be retired or upgraded, but some Canadian tech experts say the price uptick will put iPhones, which are already more expensive than other brands, simply out of reach for budget conscious shoppers.  

"Apple's prices do tend to run on the high side," said Takara Small, a Toronto-based tech podcaster and frequent columnist for CBC Radio. "And I don't think it started or will end with this new version," she continued, noting that manufacturing costs have gone up and Apple may be trying to deliver a more profitable phone to impress stock holders. 

The new iPhone 16e is a base-level version of the current top-of-the-line iPhone 16 series that will go for $899 in Canada.

"Nine-hundred bucks, any way you look at it, is a very expensive smartphone," said Patrick O'Rourke, editor in chief of Pocket Lint, a tech website focused on smartphones, tablets, laptops and streaming services.  

The price is an increase of $320 over the iPhone SE, which is still available at $579.  

For comparison, an iPhone 15 is $999 and the current iPhone 16 is $1,129, while Samsung Galaxy phones start at $279 and Google Pixel phones start at $599. 

"I don't think particularly in the Canadian market that is hitting a very attractive price point like especially when they compare it to the Android ecosystem," O'Rourke said. 

Higher price does mean higher-end features  

The iPhone 16e is larger than the SE model, and features Face ID and Apple's artificial intelligence tool kit, called Apple Intelligence, which was released in October 2024, as well as several other bells and whistles associated with pricier iPhones.

"iPhone 16e packs in the features our users love about the iPhone 16 lineup, including breakthrough battery life, fast performance powered by the latest-generation A18 chip, an innovative two-in-one camera system, and Apple Intelligence," said Kaiann Drance, Apple's vice president of worldwide iPhone product marketing in a company news release Wednesday. 

That new microchip will enable this phone to perform AI functions like automatically summarizing text and audio, and create on-the-fly emojis as well as improve the device's virtual assistant.  

Late last month, Apple forecast strong sales growth signaling that it will recover from a dip in iPhone sales as it rolls out artificial intelligence features to more regions and languages.

The sales of SE model as a share of total revenue for iPhones has dropped from 10 per cent from its introduction in 2016 to about one per cent last year, according to Counterpoint Research.

A risky pricing strategy?

Business analysts think dropping a low-level price point in favour of a mid-level one helps Apple as a premium brand.   

"Apple can use the lower-end phone in markets where Android phones have higher share without losing too much on the higher-priced iPhones," said Gil Luria, analyst at DA Davidson, looking at the iPhone 16e sticker price.

In the Canadian market, others aren't so sure the approach will work.

O'Rourke says the iPhone 16e and 16 are just too similar to justify the price difference. 

"They both have an A-18 chip. They both have a similar-size screen. It's really the camera that's the difference," he said. suggesting that the 16e could just cut into sales of the 16 and 16 Pro models.  

"I think it's going to be interesting to see how this plays out," he said.  

Price hike could lead to sales spike for used iPhones

Alex Sebastian, co-founder and COO of Orchard, a Canadian company that resells used iPhones, says he believes the problem goes deeper than that.  

He says that for the average user there's not a big difference between phones.  

"If I gave you an iPhone 13 and you have an iPhone 16," he said, " a lot of people would not notice a material difference between those two products despite one being three years newer than the other."

Sebastian also says shoppers have started paying closer attention to the price of phones as Canada's big carriers have offered more "bring your own device" deals and been more transparent about the cost of a wireless plan versus the cost of the phone  over the term of a contract.   

And he says he thinks its possible that Apple abandoning its offer of a truly entry-level priced new phone could lead to busier market for used iPhones because "people have always felt phones are expensive."

"If the cheapest new iPhone goes up by $300, you know, that's gonna push more people to explore pre-owned as an alternative. So that's good for our business."

Given the state of the economy and inflationary pressures, Small wonders how many people will spring for Apple's new lowest-priced phone.

"Recent research found that people are holding on to their iPhones a little bit longer," she said. " And I can't see how that's not connected to the cost of living crisis."

Apple said the iPhone 16e will be available for pre-order on Friday. 

Apple to pay $95M to settle Siri eavesdropping lawsuit

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Duration 2:03

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