Apple is launching its iPhone SE 2 during the height of the COVID-19 pandemic. Lots of things can go wrong for the smartphone maker.
Apple (NASDAQ:AAPL) will make its iPhone SE 2 available in stores on Apr. 24. Last week, President Donald Trump talked about plans to reopen America after 30 days of lockdown. While the U.S. may take some time to resume, Apple’s other important market, China, is open.
But even when the lockdown ends, Apple will enter a market where many people are jobless, and consumer spending is low. People will be in constant fear of another lockdown or job losses if coronavirus cases increase.
In such times, upgrading a phone would be the last thing on a consumer’s shopping list. Apple understands that, so it has launched a $399 iPhone SE 2, which is an iPhone 11 in the body of the iPhone 8. The new iPhone doesn’t burn a hole in the pocket and brings more people in the Apple ecosystem.
The iPhone SE launch comes two months after Apple CEO Tim Cook acknowledged that the coronavirus outbreak in China would impact both the supply and demand of the iPhone.
Cook didn’t specify the magnitude of the impact but said that the company would not be able to meet its fiscal Q2 2020 revenue guidance of $63 billion. Apple earns 55% of its revenue from iPhones, and global supply constraints suggest the impact would be significant.
Apple originally planned to launch iPhone SE in March. The device is finally here, suggesting that iPhone supplies are gradually stabilizing as life in China returns to normal.
Apple was struggling to boost iPhone revenue before the pandemic. It faced intense competition from Android phones that offered premium features for a lower price.
In 2019, Apple reduced the entry-level iPhone 11 price, which increased its smartphone revenue by 7.4% year-over-year in fiscal Q1. The next item on the list was bringing back its mid-range iPhone SE.
Apple first launched the iPhone SE in March 2016. The idea was to take some components and design of its existing and previous iPhones and re-arrange them into a more affordable variant. The iPhone SE was not as popular as Apple’s other smartphones.
Apple is increasingly focusing on its service segment to boost revenue. With the new iPhone SE 2, Apple could effectively target a broader mid-range smartphone market. As more people come under the Apple ecosystem, it will be able to offer services like Apple TV Plus and Apple Pay to a broader audience.
To lure people into buying iPhone SE, Apple is also offering a one-year subscription of Apple TV Plus for free.
These initiatives are likely to prove effective in the long run — provided that economic activity returns to normal. In the medium term, Apple’s sales will be impacted by the COVID-19 pandemic, which has disrupted the work life of billions of people worldwide.
The sales of iPhone SE will be reflected in the company’s fiscal Q3 2020 earnings. Its upcoming fiscal Q2 2020 earnings call on Apr. 30 will likely reflect the highest impact of the coronavirus pandemic.