Apple’s latest unveiling, the iPhone 16e, marks a significant shift in the company’s approach to the budget smartphone market. For nearly a decade, Apple maintained the “SE” branding for its lower-cost iPhone models, offering consumers a more affordable way to enter the Apple ecosystem. Now, with the introduction of the iPhone 16e, the company has not only abandoned the familiar SE name but has also surprised the market with a higher-than-expected price point. At $599, the iPhone 16e costs significantly more than its predecessor, the iPhone SE, which launched at $429.
The decision to rebrand and reprice its entry-level device underscores Apple’s broader strategy to sustain the iPhone’s dominance in an increasingly competitive global market. Despite Apple’s record-breaking market valuation, which now nears $4 trillion, the iPhone remains the company’s single most important product, generating $69.1 billion in revenue in Apple’s first fiscal quarter of 2025 alone. While high-end models such as the iPhone 16 Pro and Pro Max continue to be the primary drivers of Apple’s revenue, the company recognizes the need to capture a wider audience, particularly those who may otherwise consider secondhand iPhones or Android alternatives.
Apple’s history with budget smartphones has been turbulent. The iPhone SE, introduced as a lower-cost alternative, has struggled to achieve significant market share. Data from Consumer Intelligence Research Partners (CIRP) indicates that in the last quarter of 2024, the iPhone SE accounted for only 5% of total iPhone sales in the U.S., while Counterpoint Research found that the model made up just 1% of global iPhone sales throughout the year. Similarly, Apple’s experiment with the iPhone Mini, a compact yet capable device introduced in 2020, proved unsuccessful, leading to its discontinuation after only two generations due to lackluster demand.
Now, Apple appears to be adopting a different approach—one that draws inspiration from a past success. The iPhone 16e is being positioned less as a continuation of the iPhone SE line and more as a spiritual successor to the iPhone XR. When the XR was introduced in 2018 alongside the iPhone XS, it was designed as a more affordable alternative that still retained many of the key features consumers valued. By prioritizing a larger display, longer battery life, and strong overall performance while compromising on camera hardware, Apple found a winning formula. The iPhone XR went on to become the world’s best-selling smartphone in the third quarter of 2019, according to Counterpoint Research, demonstrating that a well-balanced budget phone could achieve widespread popularity.
The iPhone 16e follows this same philosophy. It features a 6.1-inch display—the same size as the standard iPhone 16—offering a significant upgrade over the iPhone SE’s smaller 4.7-inch screen. The shift in screen size reflects broader consumer preferences, as smaller phones have seen dwindling demand in favor of larger displays. Analysts believe this change could make the iPhone 16e more appealing to a broader range of buyers. Gerrit Schneemann, a senior analyst at Counterpoint Research, emphasized this point in a statement to CNN, explaining that Apple is “giving up on that kind of smaller form factor and realizing that people are interested in a larger display, even if it means discarding the $400 entry price.”
Despite this strategic shift, concerns remain over whether the iPhone 16e’s $599 price tag will deter budget-conscious consumers. Before its announcement, Ming-Chi Kuo, a respected Apple analyst at TF International Securities, predicted that the device would likely perform slightly better than the iPhone SE. However, the increased cost places the iPhone 16e in direct competition with mid-range Android devices, which often offer compelling hardware specifications at lower prices.
Another potential challenge lies in the impact the iPhone 16e could have on sales of the standard iPhone 16. If consumers perceive the iPhone 16e as offering a similar experience at a significantly lower price, it could reduce demand for the more expensive model. Bank of America analyst Wamsi Mohan raised this concern in a note to investors, while Daniel Newman, CEO of The Futurum Group, warned that Apple must strike a careful balance. “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 the short-term sales impact, the iPhone 16e plays a critical role in Apple’s broader strategy. While flagship models continue to dominate global sales, Apple is increasingly looking to expand its customer base by offering entry-level devices that integrate seamlessly into its ecosystem. This approach is particularly important in key international markets such as China, where Apple faces growing competition from regional brands like Huawei and Xiaomi.
Moreover, the iPhone 16e is significant in Apple’s push toward artificial intelligence and digital services. The device includes Apple Intelligence, ensuring that even those who opt for a lower-cost iPhone can access the company’s AI-powered features. This move aligns with Apple’s long-term vision of shifting toward a services-based revenue model, reducing its dependence on hardware sales and focusing on monetizing its growing suite of digital offerings.
As AI becomes an increasingly critical component of modern smartphones, Apple is positioning itself to remain at the forefront of this technological shift. The inclusion of Apple Intelligence in the iPhone 16e ensures that more users will engage with the company’s AI-driven features, strengthening their reliance on Apple’s ecosystem. With competitors such as Google, Microsoft, and Samsung investing heavily in AI, Apple must ensure that its technology reaches a broad audience to maintain its competitive edge.
Daniel Newman highlighted the significance of this strategy, stating that “Apple really needs to win” when it comes to attracting Android users and budget-conscious shoppers. “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 represents more than just another addition to Apple’s product lineup; it is a calculated move designed to secure Apple’s future in a rapidly evolving smartphone landscape. As Apple continues to navigate the complexities of an increasingly competitive market, the success or failure of this device could have lasting implications for its broader strategy.
