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The recent iPhone 16E launch has me thinking about Apple’s pricing strategy. They’ve raised the entry-level iPhone from $430 to $600, which is a significant jump. While most discussions center around features like the omission of MagSafe or Ultra Wideband. I see a more interesting shift happening: Apple seems to be deliberately moving away from the budget smartphone segment altogether.

#“Budget” Apple?

Apple likes to make premium products and proudly say that they won’t make “junk”. But they have made budget products before and continue to do so in certain product categories.

#iPods

During the iPod’s peak, Apple maintained a presence across all price segments. From the premium iPod Classic to the affordable iPod Shuffle, they offered options at $100, $200, and $400 price points, effectively dominating the personal music player market.

#iPads

With iPads, Apple maintains this inclusive approach. The iPad Pro sits at the premium end around $1,000, but you can still get an entry-level iPad for about $330. They clearly see value in maintaining a presence in the budget tablet market.

#Macs

Although historically Apple has strayed away from ever making budget Macs, that seems to be changing, too.

#So what about a budget iPhone?

While Apple never made a truly budget iPhone, they did make three generations of iPhone SE, which was a “budget iPhone” by Apple standards. But they seem to be abandoning that market with the iPhone 16E.

There are a few ways I can interpret this:

Firstly, it’s possible that the SE simply wasn’t profitable enough for Apple and they’re simply trying a new strategy. Apple has changed stragies before when they abandoned the mini iPhones, and rumours suggest that the plus will be discontinued soon, too.

Another possibility is that this new situation is a temporary result of Apple moving to USB-C, and that the iPhone 16E will drop by $100 a year later and be sold at $500, while an iPhone 17E will replace it at the current $600.

But I can’t shake this feeling that perhaps Apple is intentionally getting out of the budget smartphone market to avoid gaining too much market share.

It’s well known that Apple has a dominant profit share in the smartphone market. However, most antitrust and anti-monopoly regulations are generally focused on market share, not profit share. Perhaps, Apple is trying to thread the needle of trying to make as much money as possible without gaining a monopoly in terms of market share.

#Risks ahead

If I’m right about this, Apple might be taking a big risk. The smartphone market has strong network effects and intentionally giving up market share might become a self-fulfilling prophecy in the long run.

But it’s also possible that I’m completely wrong about this and Apple is just optimizing for both money and market share and we will only understand their actual strategy in hindsight.