(Reuters) – Apple Inc (AAPL.O) on Wednesday released a smaller iPhone priced at $399, cutting the starting price for the company’s smartphone line in a move to broaden its appeal to budget-conscious customers as the coronavirus hobbles the global economy.
FILE PHOTO: People queue outside an Apple store as the new iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max go on sale, in Hangzhou, Zhejiang province, China September 20, 2019. REUTERS/Stringer
The lower-cost model could also attract more consumers to Apple services, a growing driver of revenue. Shares of Apple fell 1.1%, less than the 2.8% decline of the S&P 500 index.
The iPhone SE, available April 24, is the second generation of a previous value model. It will start at $50 less than what was previously the cheapest iPhone available, the $449 iPhone 8, which will be retired. The SE comes with a 4.7-inch display and the same processor chip as Apple’s most advanced phone, the 11 Pro. The SE lacks 5G capability and Apple’s facial recognition system to unlock the device, instead relying on a fingerprint sensor similar to older models.
The announcement comes as the United States and much of the world is reeling from the novel coronavirus, although U.S. political leaders have begun to talk about ending stay-at-home orders and restarting the economy, hoping record deaths and falling hospitalizations represent a peak.
Every previous iPhone has been unveiled in a polished presentation in front of fans, but large events remain banned in Apple’s home base of Santa Clara County, California, where public officials ordered the first lockdowns in the United States to slow the spread of the novel coronavirus.
Apple’s cheaper phone reflects the coronavirus-driven economic downturn and job loss.
The cheaper phone enters a cut-throat market for value phones, especially in China, where Apple derives about 17% of sales. While the new iPhone adds features such as wireless charging and a high-end camera, it lacks connectivity for 5G, the next generation of mobile data networks. In China, rivals such as Xiaomi Corp (1810.HK) last month announced models with 5G features starting at about $425.
With wavering hardware sales, Apple has been investing in subscription services such as its Apple TV+ streaming television service, Apple Music and iCloud. The new SE will come bundled with a one free year of the streaming television service, similar to Apple’s flagship devices released last fall.
Apple said in January that it had 1.5 billion active installed devices and 480 million subscribers to both its own and third-party paid services, compared with 1.4 billion devices and 360 million subscribers a year earlier.
The company also set out a goal to reach 600 million paid subscribers by the end of calendar 2020.
The coronavirus has created a volatile start to the year. Sales in China, the first nation hit by the virus, plunged, then rebounded as the country began to reopen. Sales of 500,000 phones in February rose to 2.5 million phones in March, according to government sales data there.
Apple will begin selling the new model online while its stores around the world are closed, except those within its greater China sales region. Apple will start taking orders for the phone on its website on Friday, with delivery of devices expected to start April 24.
Apple gets about 31% of its sales from its elegant stores and website, with 69% coming from partners such as mobile carriers and other retailers. Apple said partners would decide whether to sell the phones in their physical stores. Many of Apple’s resellers are trying to guide customers toward online sales. Major partners such as Best Buy Inc (BBY.N) have reduced their hours, and AT&T Inc (T.N) has closed about 40% of its U.S. retail stores.
Reporting by Stephen Nellis in San Francisco; Editing by Lisa Shumaker and Peter Henderson