Apple is wagering that its iPhone SE will appeal to consumers in China and India who aren't fixated on big-screen phones.
At an event Monday, Apple unveiled the iPhone SE with a 4-inch screen, an aluminum body, a 12-megapixel camera, Apple Pay and the latest version of Wi-Fi known as 802.11ac. The new phone starts at $399 with 16GB of storage.
Recent iPhone sales have been flat, prompting Apple to try a different strategy: creating a phone that appeals to budget-conscious buyers who don't necessarily need a big screen. That strategy could play in key regions such as China and India, the world's two largest smartphone markets and areas where Apple faces competition from lower-priced phones by local vendors.
The iPhone SE's price and features make it the first phone that competes directly against devices made by China's Xiaomi and Huawei and India's Micromax, analysts told Reuters. Although big-screened phones have been a trend, some buyers are still drawn to smaller devices.
Greg Joswiak, Apple's vice president of product marketing, said at Monday's event that 4-inch phones are still popular. Apple sold 30 million 4-inch 5C and 5S iPhones last year. The 5C was discontinued in September, while Monday marked the end of the 5S. This means the iPhone SE will be the only 4-inch phone that Apple now manufactures.
"Some people simply love smaller phones," Joswiak said at the event. "We found for a lot of these customers, it's their first iPhone."
The SE "will target feature phone upgraders, first-time smartphone buyers and prepaid consumers in Asia who cannot afford, or are not familiar with, bigger-screen smartphones," Strategy Analytics analyst Neil Mawston said, according to Reuters.
Still, Apple faces challenges in both India and China.
In India, Apple has 2 percent share of the smartphone market and is overshadowed by major players such as Samsung and local companies Micromax and Intex. The iPhone SE will sell in India starting at 39,000 rupees ($584), The Times of India reported Tuesday.
By contrast, Apple is the top smartphone maker in China with 25 percent market share in urban areas, according to research firm Kantar WorldPanel ComTech. Although China has been and continues to be a key source of revenue for the iPhone maker, the Chinese smartphone market is becoming saturated, which translates into declining sales.
The company doesn't need to sell a lot of iPhone SE units in China to generate respectable revenue, though.
"In general, users in China like bigger phones," Kitty Fok, head of research firm IDC's China branch, said, according to The Wall Street Journal. "But China is a very big market. Even if in terms of percentage, smaller phones aren't a major part of the market, it's still a lot of phones."