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Technology

Inside the iPhone SE: Will Apple kill cheap Chinese smartphones?

Secrets of the new low-priced model's performance

The retail price of Apple’s latest iPhone SE, which was released in April, with the lowest storage capacity is $399.

TOKYO -- Apple released its low-cost iPhone SE last month, in an attempt to win market share from Chinese rivals. Nikkei has analyzed the SE to find out how Apple has managed to develop this low-priced model that punches much above its weight.

Apple has splurged on a core processor and some communication parts for the SE model, but other components, including its liquid crystal display and battery, are nearly the same as its iPhone 8. It can be said that the iPhone SE is "a family car equipped with a supercar's engine," as the company shifts its strategy from purely focusing on selling high-end models.

Tokyo-based research company Fomalhaut Techno Solutions conducted a teardown analysis of the iPhone SE against rival models and found the SE to be a bargain.

"The iPhone SE has nearly the same exterior, board and display as those on the iPhone 8," said Director Minatake Kashio.

Fomalhaut estimates that the component costs of a 64-gigabyte SE is $217, or 18% lower than those for the iPhone 8.

How did Apple manage to find those cost-savings? The key lies in the display. The iPhone SE has a 4.7-inch LCD panel, which is the same size and resolution as that on the iPhone 6 released in 2014. That is a stark contrast to Chinese makers, including Huawei Technologies and Oppo, which have been using organic light-emitting diode panels even on low-cost smartphones.

In addition, the iPhone SE has a battery capacity of about 1,800 milliamp hours, which refers to battery life. Comparisons cannot be easily made as battery life varies depending on other parts and operating systems, but rivals usually mount batteries of at least 3,000 mAh. Apple adopted the same-class batteries in its main iPhone 11 series released last year.

The iPhone SE allows users to watch up to 13 hours of video on a single charge, shorter than iPhone 11's 17 hours, according to Apple.

The company has also slashed camera costs too. The iPhone SE does not have compound-eye cameras, which are usually found in rival models. These cameras behave like the eyes of bees and other bugs and offer a near infinite depth of field, providing high-quality pictures.

The SE's imaging sensors, which affect the quality of pictures, are slightly smaller than those on the iPhone 11's main camera, and about the same size as those on the iPhone 8.

While the iPhone SE has better camera functions, including defocusing when shooting people, the company has done this with image processing technology rather than camera components.

But there are some areas in which Apple did not compromise. The iPhone SE carries the state-of-the-art A13 processing chips, same as those used in the iPhone 11 series, unlike rival models which are more likely to adopt cheaper processors on low-cost smartphones.

High performance processors are the key components that achieve artificial intelligence and augmented reality, areas where Apple has focused on.

Apple is also focusing on the expansion of its service businesses, including the distribution of apps. It is trying to boost its customer base by supplying high-performance processors, which allow complex apps to run smoothly, at a low price.

On the back of these cost-cutting efforts, the iPhone SE's selling price starts at $399 -- around $421 in Japan -- a significant drop compared with the $699 that both the iPhone 8 and the iPhone 11 retailed at initially.

In the face of competition from Chinese rivals such as Huawei Technologies, the iPhone SE is crucial for Apple’s bid to regain lost ground in the global market. (Photo by Ken Kobayashi)

According to Fomalhaut's estimates, the iPhone SE's cost rate stands at 54%, compared with the iPhone 8 and the iPhone 11's cost rates of 38% and 48%, respectively.

Chinese smartphone makers' low-end models are completely different from the iPhone SE. Huawei's P30 lite -- which actually retails at around $282 in Japan, including tax -- is equipped with a three-lens camera on its back.

Oppo's Reno A -- whose 64-gigabyte storage capacity model retails at just under $376 in Japan, including tax -- features a 6.4-inch big-screen display, among other things. The P30 lite and the Reno A are both inferior to the Chinese companies' flagship models in terms of computing power.

According to U.S. research firm IDC, Apple accounted for 13.9% of global smartphone shipments in terms of volume in 2019, down 1 percentage point from 2018.

In the face of increased competition from Chinese rivals, which have a competitive advantage in low-cost smartphones, and worsening consumer sentiment amid the novel coronavirus pandemic, the iPhone SE is crucial for Apple's bid to regain some lost ground in the global smartphone market.

But some Apple suppliers expressed concerns. "It makes no sense if high-end models lose ground to the less profitable iPhone SE and are not sold well," said an executive of a parts maker.

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