Apple’s latest smartphone release, the iPhone 16e, represents a critical moment for the company as it seeks to maintain its dominance in an increasingly competitive global market. For nearly a decade, Apple’s approach to offering a budget-friendly iPhone revolved around the SE branding—a series of models designed to provide a more affordable entry point into the Apple ecosystem. However, with the introduction of the iPhone 16e, Apple has not only abandoned the SE name but has also made a bold move by pricing the device at $599, a substantial increase over the $429 price tag of its predecessor, the iPhone SE.
This pricing decision immediately raises questions about Apple’s long-term strategy. The iPhone remains Apple’s most crucial product, generating an astonishing $69.1 billion in revenue in the company’s first fiscal quarter of 2025 alone, contributing significantly to Apple’s nearly $4 trillion market valuation. While high-end models like the iPhone 16 Pro and Pro Max continue to be the primary revenue drivers, Apple understands the necessity of appealing to a broader consumer base—particularly those who might otherwise opt for older, secondhand iPhones or competing Android devices.
Apple’s track record with budget-friendly iPhones has been inconsistent. Despite its relatively low price, the iPhone SE struggled to gain traction in the market. According to data from Consumer Intelligence Research Partners (CIRP), the iPhone SE accounted for just 5% of iPhone sales in the U.S. in the last quarter of 2024, while Counterpoint Research reported that it made up only 1% of global iPhone sales for the year. Similarly, Apple’s previous attempt to offer a more compact, lower-cost option with the iPhone Mini proved to be short-lived, as it was discontinued after just two generations due to lackluster demand.
In designing the iPhone 16e, Apple appears to be taking inspiration from one of its past successes—the iPhone XR. Introduced in 2018 alongside the iPhone XS, the XR was positioned as a more affordable alternative that still retained many of the premium features that consumers valued. By focusing on essentials such as display size, battery life, and overall performance while making compromises in areas like camera hardware, Apple created a product that resonated with consumers. The strategy proved to be a success, with the iPhone XR becoming the best-selling smartphone globally in the third quarter of 2019, according to Counterpoint Research.
The iPhone 16e follows a similar approach. While it is widely viewed as a successor to the iPhone SE, its specifications and design philosophy align more closely with the iPhone XR. The device features a 6.1-inch display, identical to the standard iPhone 16, offering a notable upgrade from the iPhone SE’s much smaller 4.7-inch screen. This shift reflects changing consumer preferences, as demand for compact smartphones has steadily declined in favor of larger displays. Analysts believe this change could make the iPhone 16e a more attractive option for buyers.
Gerrit Schneemann, a senior analyst at Counterpoint Research, noted that Apple’s decision to move away from smaller form factors indicates a broader market trend. “They are giving up on that kind of smaller form factor and realizing that people are interested in a larger display,” Schneemann said in a statement to CNN. “Even if it means discarding the $400 entry price.”
However, questions remain regarding the iPhone 16e’s ability to compete at its $599 price point. Before its launch, Ming-Chi Kuo, a respected Apple analyst at TF International Securities, predicted that the iPhone 16e would likely perform slightly better than the iPhone SE. Yet, at this price, the device enters a highly competitive segment, where mid-range Android smartphones offer strong hardware specifications at lower costs.
Another concern is the potential impact on Apple’s existing iPhone lineup. If consumers view the iPhone 16e as offering a comparable experience to the standard iPhone 16 at a much lower price, it could cannibalize sales of the 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, highlighted Apple’s need to carefully balance its product offerings. “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.
Beyond immediate sales figures, the iPhone 16e plays a crucial role in Apple’s broader strategy. While flagship models continue to dominate the premium smartphone market, Apple recognizes the importance of expanding its reach to consumers who may not be willing or able to pay for a top-tier iPhone. This is especially critical in key international markets such as China, where Apple faces increasing competition from domestic brands like Huawei and Xiaomi.
The introduction of Apple Intelligence in the iPhone 16e further solidifies the device’s importance. By equipping even its budget-friendly model with AI-powered features, Apple ensures that a wider audience gains access to its latest technological advancements. This aligns with Apple’s ongoing transition toward a services-driven revenue model, shifting focus from hardware sales to monetizing its ecosystem through subscriptions and digital services.
As artificial intelligence becomes an increasingly integral part of modern smartphones, Apple is positioning itself to remain at the forefront of this evolution. By making Apple Intelligence available on the iPhone 16e, the company strengthens consumer engagement with its ecosystem, reinforcing brand loyalty while also competing with major players such as Google, Microsoft, and Samsung, all of whom are heavily investing in AI technologies.
Daniel Newman underscored the significance of this shift, stating that “Apple really needs to win” in its efforts to attract Android users and budget-conscious buyers. “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 iPhone 16e is more than just another addition to Apple’s product lineup—it represents a calculated move to secure the company’s future in an increasingly competitive smartphone market. As Apple navigates shifting consumer preferences and intensifying competition, the success of this device will be closely watched as a key indicator of the company’s strategic direction.
