MW The iPhone 16e has one big drawback

By Quentin Fottrell

The new device has all the bells and whistles we have come to expect

Apple has done it again.

The iPhone 16e, announced Wednesday, has a powerful A18 chip and Apple C1, the first cellular modem designed by Apple, and it has foregone the home button in favor of face I.D. The new device also has the usual satellite features - including emergency SOS, roadside assistance - and a powerful video and camera. It has all the bells and whistles we have come to expect.

But there is a major drawback: The high price points for iPhones are a big win for shareholders, but what about consumers? Apple describes the iPhone 16e as "a new addition to the iPhone 16 lineup that offers powerful capabilities at a more affordable price." Even for die-hard Apple aficionados, it's hard to describe a $600 phone as "affordable" with a straight face.

The high price points for iPhones are a big win for shareholders, but what about consumers?

It's a tough ask. As Forrester Research analyst Dipanjan Chatterjee noted: "The problem with a lower-end product in a luxury portfolio is that you want it to be good but not so good as to cannibalize the crown jewels." So can Apple offer a high-end product that appeals to lower-income Americans and emerging markets such as India, Southeast Asia and Africa?

That's debatable. It's given us a product designed to dazzle and defy in both functionality and price. The new iPhone 16e has a starting price of $599, even though many analysts expected a starting price of closer to $500. It's $170 pricier than the iPhone SE in 2022 - a 40% increase that leaves cash-strapped iPhone fans with egg on their face, an injurious result given the cost of eggs these days.

Affordability is relative

When analysts and tech geeks call the iPhone 16e "low cost" or "budget-friendly," and when Apple itself describes it as "affordable" in its marketing materials, I can't help feeling like I'm being lied to. Affordable for whom? Let's take a moment for a reality check: $600 is roughly half the weekly income for the average American, while the average household spends $270 a week on groceries.

The funniest - and the most mind-boggling - headline of the week goes to this Australian financial publication, which announced: "Apple launches low-cost AI phone for the cost-of-living crunch." Having a problem making your rent? Do you balk at the price of eggs these days? Never fear. Here's a $600 iPhone to address your cost-of-living crisis.

The funniest headline of the week: "Apple launches low-cost AI phone for the cost-of-living crunch."

What constitutes a "low-cost" iPhone is relative. It's more expensive than the $200 Samsung (KR:005930) Galaxy A15 5G, which occupies the No. 5 spot on the bestselling smartphones in the U.S. (The other four spots are taken by Apple.) But it's cheaper than the iPhone 16 Pro Max, which costs $1,199, equivalent to nearly a month's rent for the average American.

Apple $(AAPL)$ already did something dramatic (for Apple). Last month, it actually offered iPhone discounts in China, one of the world's most populous countries, after Apple reported that the Greater China fourth-quarter revenue missed expectations by about $1 billion. That was a bold move given that shareholders and consumers expect premium pricing from Apple.

Apple's 'balancing act'

Chatterjee is at least realistic about the price. He said the iPhone gets "a little more accessible" for people who don't want to settle for anything less than an iPhone (in other words, an Android). "The embrace of a lower-end product and its rationalization within the core portfolio is standard in the mass luxury playbook," he wrote, citing BMW (XE:BMW) and Audi (TW:2459) as examples.

"The iPhone 16e is designed to limit such flight from higher-margin phones," Chatterjee added. But he sees this as a delicate balancing act. "For example, if it's photography and video a buyer is after, then the camera on the 16e is never going to meet the needs of a 'pro-sumer.' And if it's all about symbolic status, the single camera lens will immediately signal where the 16e resides in the social hierarchy of iPhones."

The American consumer, meanwhile, appears to have a love-hate relationship with the iPhone pricing.

The American consumer, meanwhile, appears to have a love-hate relationship with the iPhone pricing. More than 60% of respondents in WalletHub's annual iPhone survey last year said they won't buy a new iPhone due to inflation, and 90% said they believe iPhones are overpriced. But people continue to buy them or, more precisely, people with money continue to buy them.

Of course, there's good reason it costs more than the iPhone SE: The iPhone 16e contains the company's first custom-made modem chip, which if adopted for other iPhones, could go someway in releasing Apple from its dependence on Qualcomm $(QCOM)$, the world's biggest supplier of mobile-phone chips, which also makes chips for Android competitors and Microsoft $(MSFT)$ laptops.

Tariffs may add 10% to prices

In fact, CNET columnist Mike Sorrentino wrote that the iPhone 16e has a lot of bang for its buck compared with similarly priced Androids. "New Android phones costing $500 or less have large 120Hz refresh rate displays, 50-megapixel main cameras and support for wireless charging. Meanwhile, the iPhone SE languished, with a dated design," he said.

"This makes a new, 2025 entry-level iPhone not only welcome but also necessary for Apple's success this year," he added. "It should allow Apple to re-enter markets like the EU with a lower-priced iPhone option while providing a device that feels new enough for cost-conscious shoppers who want to get a longer-lasting smartphone before an inevitable creep in prices."

Apple did something dramatic (for Apple). Last month, it actually offered iPhone discounts in China.

About that inevitable creep: iPhone prices are only going in one direction. In a note Wednesday, BofA analyst Wamsi Mohan warned that Apple may have to hike its prices by another 10% due to the rake of tariffs planned by the Trump administration. Apple, for now, is still reliant on manufacturers in China. "We assume that 100% of devices sold in the U.S. will be subject to a 10% tariff," Mohan wrote.

For iPhone users like me, who have for too long held on to a cracked, old iPhone 12, it could be tempting, but it's also a disappointing price for millions of Americans who can't afford to spend $600 on an iPhone and/or would like to move on from their dusty old Android. And for Apple fans who can't afford these prices? It's back to the sad secondhand market for a used iPhone.

-Quentin Fottrell

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February 21, 2025 05:23 ET (10:23 GMT)

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