Everything You Need to Know About Apple's Low-Price iPhone Event This Morning

The iPhone SE is the first new iPhone priced near 3,000 yuan, and its target is clear: Android

“We never had a goal to sell a low-cost iPhone. Our goal is to sell a great phone and provide a great experience.” That was how Tim Cook explained his position in 2013, when Apple launched the far-from-cheap iPhone 5c.

Apple has since changed its mind. Today, at its headquarters in Cupertino, it held a launch event that lasted just one hour and produced the iPhone SE. It costs 3,288 yuan, 2,000 yuan less than the cheapest iPhone 6s, and apart from the screen its specs are almost the same.

Apple has joined the price war.

iPhone SE: 6s hardware in a 5s body

Rumors of a small-screen iPhone began with the first big-screen iPhone, the iPhone 6, and never stopped. Now the phone is here.

As expected, it has a 4-inch screen. Less expected is the name: iPhone SE. Apple did not say at the event what the letters stand for. Smaller Edition, perhaps?

The surprise is that it looks exactly like the iPhone 5s. Apart from the four colors (black, gray, gold and rose gold), every difference between the iPhone SE and the iPhone 5s is on the inside.

Its specs are close to the iPhone 6s:

• A9 processor and M9 motion coprocessor
• Apple Pay
• 12-megapixel camera
• Live Photos
• 4K video recording

In other words, except for the missing 3D Touch display, the iPhone SE matches the 6s spec for spec, and it beats the more expensive iPhone 6.

Apple stressed how much more powerful the iPhone SE is than the iPhone 5s: a CPU twice as fast and a GPU three times as fast.

The iPhone SE comes in 16GB and 64GB versions, starting at US$399. Orders open March 24 and the phone goes on sale March 31, with mainland China among the first markets.

The iPhone SE replaces the iPhone 5s outright, so the iPhone family now consists of the iPhone SE, iPhone 6, iPhone 6 Plus, iPhone 6s and iPhone 6s Plus.

Why would anyone buy a small-screen iPhone? Apple gave two reasons: some people simply love small screens, and a cheaper iPhone suits people buying their first Apple phone.

The new iPad Pro grows out of the iPad Air

Apple also unveiled a new iPad at the event: the 9.7-inch iPad Pro.

Like the earlier iPad Pro, the new model uses the A9X chip with the same performance. Storage starts at 32GB, with 128GB and 256GB versions; the three sell for 4,388, 5,388 and 6,388 yuan.

Apart from its size, the biggest change in the 9.7-inch iPad Pro is support for the Apple Pencil. It also has the connector on its side for Apple's own keyboard cover, along with four speakers and a fingerprint sensor.

The screen is also better than the Air 2's, with 40% less glare and 25% more brightness. A new feature called True Tone Display adapts the screen's color temperature to the surrounding light, the way a sheet of paper looks different under an incandescent bulb and in afternoon sunlight.

The camera goes from 8 megapixels to 12 megapixels and gains a flash, the first on any iPad. Slow-motion and time-lapse shooting and 4K video are all there. The bad news that comes with the better camera: the lens sticks out, as on the iPhone 6.

Alongside the new iPad Pro, the older 12.9-inch iPad Pro gets a new 256GB model, starting at 8,888 yuan.

The iPad Air 2 stays on sale, cut to 2,888 yuan.

The new 9.7-inch iPad Pro in effect merges the iPad Pro and iPad Air lines. There will be no more 9.7-inch iPad Air.

Throughout the event, Apple treated the PC as its rival. It first said the 9.7-inch iPad was popular, citing 200 million sold to date. Then it mocked the 6 million PCs that are more than five years old and have never been replaced. How sad, it said.

The iPad Pro's new tagline on Apple's website reads: “Your next computer. Now in two sizes.” But for all Apple's talk of the iPad Pro as a work machine, it has few productivity apps compared with the PC or the Mac. The iPad may have more than a million apps, but the awkward ones are still awkward, and the device can handle only light work.

At 9.7 inches the iPad Pro is easier to carry, but the keyboard is more cramped and the Apple Pencil has less canvas to work on.

A smaller iPad Pro may not be enough to reverse the iPad's decline.

The iPhone SE is the cheapest iPhone yet. Can a small screen still sell?

This is the cheapest new iPhone ever, and it has one job: to sell more iPhones.

Apple's most awkward problem right now is that iPhone growth has stopped. According to the earnings report released early this year, Apple sold 74.77 million iPhones in the last three months of 2015, almost the same as a year earlier, right after the iPhone 6 launched.

Smartphone growth has stalled worldwide. Gartner's latest report puts global smartphone sales growth at its lowest in two years, under 5%.

Since 2015, the iPhone's share of the Chinese market has held at around 25%; the 6s did not lift it much. Apple needs to find a way to take share from Android.

The iPhone SE, starting at 3,288 yuan, is Apple's new answer. It may remind you of the iPhone 5c from 2013, a cheaper new iPhone that didn't sell.

But the iPhone SE is not a successor to the 5c. It offers better performance than the 5c at a lower price.

The iPhone 5c was never pitched as a low-price phone. It launched at 4,488 yuan, with weaker specs than the iPhone 5s, which sold for 5,288 yuan at the time. The iPhone SE performs almost the same as the iPhone 6s but costs 3,288 yuan, making it the cheapest new iPhone ever.

You could read this as Apple joining the smartphone price war, now selling value for money to push iPhone sales.

Beyond Android users, Cook also wants to win over people still using the 5s. When Apple reported earnings early this year, Cook said 40% of iPhone users had not yet upgraded to a big-screen iPhone.

The same holds in China. A ranking by Umeng, based on app tracking, shows that 21% of iPhone users have an iPhone 6, while the iPhone 6 Plus and iPhone 5s tie for second at 15% each.

But the iPhone SE faces plenty of challenges:

Does anyone still want a small screen?

Phone buyers have learned to prefer big screens. Two years ago the iPhone 6 broke Apple's sales records: Apple sold 74.4 million iPhones in the fourth quarter of 2014, nearly a third more than a year earlier.

Cook said today that 30 million people bought 4-inch iPhones in 2015. He did not say that Apple sold 230 million iPhones over the past year, which means only one in eight iPhone buyers chose a small-screen model.

The most popular apps need bigger screens

Many of today's new internet users go online only through their phones. PCs and Macs are becoming office tools. For these users the phone is their TV, their e-reader and their portable game console, and for all of those uses a bigger screen is better.

The trend is just as clear in China. According to the China Internet Network Information Center, video, news and games rank near the top of the apps Chinese internet users use most, and all of them work better on a big screen.

Without its premium halo, is the Apple logo still worth it?

One fact can't be ignored: people who buy Apple products are, to some degree, buying the brand.

That is one reason the iPhone 5c failed. It was plainly the lesser choice, with lower specs and a colorful plastic body that made it look cheap. Apple never released sales figures, but estimates put sales of this cheaper member of the iPhone 5 family at about 24 million units in the year after it went on sale in September 2013.

The iPhone SE is much better value than the 5c, but it is still the “cheap iPhone,” which makes it a poor choice for people who buy an iPhone for its premium image. And because it looks exactly like the iPhone 5s, you may buy one and feel you never changed phones at all.

Analysts don't expect the iPhone SE to revive iPhone sales either. KGI Securities said earlier that, since the phone offers no “revolutionary breakthrough,” it had cut its sales forecast from 18-20 million units to 10-12 million. The investment bank RBC forecasts even fewer, about 10 million.

You might ask why Apple didn't skip the small-screen SE and make a phone with weaker hardware but a screen of 4.7 inches or more: a low-end iPhone 6.

The answer is that Apple puts app developers first, and a new phone with weaker hardware would only make their work harder. We've seen the same choice with the Apple Watch: from the 2,000-yuan Sport to the 120,000-yuan Edition, every model has the same internals. Apple doesn't want to burden developers.

What remains to be seen is how far Apple will go on price. At the current pace of cuts, the SE may still be on sale in 2017 at 2,488 yuan.

Finally, a few other announcements

In the hour-long event, Apple also covered other topics, such as its work in health care.

ResearchKit, launched earlier, collects data in partnership with medical researchers to help prevent disease, track treatment and improve patients' quality of life. Users can use ResearchKit to monitor their conditions and watch for potential illnesses.

Apple also introduced CareKit, a new framework for medical apps. It can tailor care plans to each patient's condition; the first app will be for people with Parkinson's disease.

Apple also cut the Apple Watch price by 300 yuan, so it now starts at 2,288 yuan. New nylon bands will go on sale as well, in a range of brighter colors.

Cover and inline images: Visual China Group