Apple challenges Android with a $399 iPhone and MS Surface with a smaller iPad Pro

Credit: Apple

Apple turned its attention on the success of its two biggest competitors with redesigns of existing products. Apple hopes that its idea of an entry level 4-inch iPhone, the SE priced at $399 will counter Android’s domination, especially in China and ignite new growth.

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Call a tablet a tablet and no one cares – call it a detachable tablet (an ultrabook tablet with a detachable keyboard like the Microsoft Surface Pro) garners lean-in attention where Tim Cook says that its new 9.7-inch iPad Pro is a contender to replace the 600 million PCs that are more than five years old.

Will the iPhone SE accelerate new customer acquisition for Apple?

Apple’s success has been driven by attracting quality conscious consumers with its iPhone then up-selling Macs, iPads and Apple TVs for the consumer’s home and family on the simple premise of solid designs, top build quality and simple interoperability. Continued growth depends on this, but worldwide smartphone growth is slowing in North America, Europe and China; consequently IDC predicts flat growth for Apple.

In IDC’s last mobile phone update earlier in March IDC program director Ryan Reith said, “The mature market slowdown has some grave consequences for Apple, as well as the high-end Android space, as these were the markets that absorbed the majority of the premium handsets that shipped over the past five years."

Apple was careful not to call its new iPhone the SE and not the 6se because such a designation would have eroded sales of the much more expensive iPhone 6s and 6s Plus but for all practical purposes it is a member of the 6s family. Many speculated in the months preceding today’s announcement Apple would introduce a 4-inch phone based on last year’s iPhone 6 hardware, to differentiate its entry-level phone from its flagship phones.

The iPhone SE has the same A9 processor and the same 12 megapixel iSight Camera as the iPhone 6s though Apple seems to have withheld its 3D Touch that acts like contextual right mouse button menu. Apple was also very careful to compare it to the iPhone 5s introduced in September of 2013 and not the iPhone 6s introduced in 2015. Had Apple compared it to the 6s, it would have compared very favorably.

The iPhone SE will give more price sensitive consumers pause in the mobile store, even comparing this iPhone to phones half the price because of its fantastic camera where lower cost Android phones tend are less competitive. Android phones such as the Nexus 5X will compete with the iPhone SE’s camera. The price of the 5X at $350 though is in the same bracket.

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Apple repositions the iPad Pro to compete for growth with the Microsoft Surface

A close look at the Apple iPad Pro, 12.9-inch or 9.7-inch models shows that it is a device designed as an intermediary between printing hard copy output for creatives in many different fields from entertainment, design, architecture and engineering where documents are marked up during team collaboration, returned to the CAD department and reprinted for the next collaboration cycle. Apple’s pencil recognized to almost replace lead pencils, ink pens and paper in the creative process and the true tone Retina display that reacts to the eye, hands and fingers like paper make it a perfect device for this use case.

Though serving creatives is an important market, intercepting the migration of PC users to detachable tablets represents a larger opportunity. The detachable tablet market or tablet with a keyboard market that Microsoft created with its Surface Pro is price insensitive. Buyers have demonstrated that they are willing to pay higher prices for the Microsoft brand than the typical PC buyer. A 9.7-inch iPad Pro with 128GB of memory, an Apple pencil and keyboard costs about $1,000 compared to a similarly packaged 12.3-inch Microsoft Surface Pro 4 at $950.

Now that Tim Cook and his entourage have left the stage, these products will have to keep Apple’s revenue flywheel spinning until the iPhone 7 is announced next September. Apple can be counted on to parse growing international markets like India and Malaysia into two populations, those that can afford its brand and those that can’t. Like it did in China, Apple will build stores in the most affluent areas and aim its marketing campaigns at those brand conscious consumers that can afford its products pinpoint accuracy.

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