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Apple's (AAPL) Low-Cost iPhones Likely to Debut In March

Zacks Equity Research

Apple AAPL suppliers are reportedly slated to begin manufacturing its unannounced affordable iPhone variant in February ahead of a public debut in March, per a Bloomberg report.

The price and name of the new device is unknown though the model is reportedly rumored to be iPhone SE’s latest generation.

Dubbed as iPhone SE 2, the new phone will be Apple's first iPhone in 2020, with additional iPhone models slated for release in the fall of 2020 with higher-end all-glass designs like the current flagship iPhones, 5G technology and rear 3D cameras.

Notably, a report by Japanese blog Macotakara assumes that iPhone SE 2 would be launched as iPhone 9 in early 2020, stating that Apple skipped iPhone 9 in the naming series.

Apple Inc. Price and Consensus

 

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Speculated Details of the Low-Cost Model

Per the report, Hon Hai, Pegatron and Wistron have been tapped to assemble the next-generation affordable iPhone, which is expected to be similar in design to iPhone 8, offering a 4.7-inch LCD display with a Touch ID Home button instead of Face ID.

Additionally, a single-lens rear camera equipped with a modern A13 chip and 3GB RAM is also anticipated.

Given the $399 pricing of the original iPhone SE, which was also projected as a more affordable iPhone option, the new low-cost device could potentially be sold at the same price point, making it Apple's most affordable iPhone.

Low Cost Phone to Boost the Top Line

The anticipated launch of iPhone SE2 is expected to aid Apple’s top line in fiscal 2020.

Notably, iPhone revenues accounted for 52.1% of total revenues in fourth-quarter fiscal 2019. Despite iPhone sales declining 9.2% from the year-ago quarter to $33.36 billion, customer response was good for iPhone 11, 11 Pro and 11 Pro Max, which were launched in the latter part of the quarter.

The low-price parity is likely to drive sales of the upcoming iPhone SE2, similar to its precedent, which sold about 30 million units in its launch year (2016) and another 10 million between 2017 and 2018, cited by Yuanta Investment Consulting, per NIKKEI Asian Review.

Moreover, the integration of 5G support is likely to be a boon for the company, with the global adoption of 5G poised to take off by 2021. Per an IDC report, 190 million 5G smartphones are to be shipped in 2020, accounting for 14% of total estimated smartphone shipments.

Apple’s Quest to Win Emerging Smartphone Market

Apple is likely to increase market share in emerging markets such as China and India through a cheaper device.

Another $399 device akin to iPhone SE is expected to aid the company in targeting the lucrative mid-range smartphone segment, dominated by aggressively-priced Android alternatives like Xiomi RedMi, Nokia, Lenovo LNVGY and its Motorola available at less than $200 in India.

Moreover, the tech giant is also expected to better compete with China's string of smartphone vendors such as Vivo, Oppo, Xiaomi, Huawai and even Samsung SSNLF with their newly designed A-Series smartphone line.

Additionally, the upcoming launches of Samsung’s Galaxy Note 10 5G and Alphabet’s GOOGL Google Pixel 4 are expected to pose stiff competition for the upcoming iPhone handsets.

Notably, per a Gartner report, Apple had a market share of 10.5% in third-quarter 2019 whereas Samsung and Huawei had market share of 20.4% and 17%, respectively.

Nevertheless, Apple shipped roughly 3.2 million phones in China last month and the sale of iPhones in China increased 18% year over year, per a Reuters report. This is likely to create favorable sales momentum for iPhone SE2’s launch, expected in March.

Moreover, a low-cost model is also expected to help achieve Apple’s shipment target of more than 200 million units in 2020, per Bloomberg. Notably, IDC expects the global smartphone market to grow 1.5% year over year in 2020, with shipment volumes of more than 1.4 billion.

Zacks Rank

Apple currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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