Apple Inc. is hoping to grab a bigger share of the booming Indian smartphone market with its cheapest-ever iPhone, the SE, but it may not be cheap enough.

The company is betting that the lower price tag, $400, and smaller screen size of the iPhone SE will put the latest Apple device within reach of more first-time buyers of its phones in India.

The latest Apple phonehas a four-inch screen and will cost the same as the iPhone 5S in India. Sales of smaller, four-inch iPhones like the 5S accounted for around 40% of all iPhone sales in India last year, according to International Data Corp. Globally, the smaller models accounted for 13% of Apple’s iPhone sales.

But it isn’t the small screen that is attracting them to these models, analysts say, it’s the price.

“It’s not that Indians want smaller phones, they want cheaper iPhones,” said Kiranjeet Kaur, an analyst at IDC.

Only one-in-ten Indians buy phones with a four-inch screen, and that number is decreasing every year. A smartphone is often the only computer Indians own, so they like the phone to have a larger screen to do things most people do on a laptop.

Despite the price cut, the new iPhone is still well out of the reach of most Indian smartphone buyers. “That price is 3% of the total volume in India,” said Neil Shah, who heads up research at Counterpoint Research.

Most Indians are buying phones for half the price of Apple’s latest iPhone, and picking devices with bigger screens, Mr. Shah said. Most Indians are in the market for cheap phones from Samsung Electronics Co. or local players like Micromax Informatics Ltd. and Intex Technologies India Ltd.

Some Indian iPhone 5S owners may welcome the opportunity to upgrade and use some of Apple’s latest services, such as Apple Pay and the Live Photo feature, which turns normal pictures into short movies..

But Apple would have to eat a slimmer profit margin to ensure the iPhone SE remains attractive to Indian consumers. Normally, Apple tacks on a pretty hefty price hike to account for taxes and higher costs of getting the phones to India. The iPhone 6S was sold for $960 in India when it was first introduced, compared with $650 in the U.S.

Thanks to a fierce discount war between India’s e-commerce companies, the price of an iPhone 6S has fallen to around $600.

“At around $400, it’s a pretty good deal. It’s the iPhone 6S in a smaller shell,” said IDC’s Ms. Kaur. “If it sells for any higher, then it competes with the iPhone 6S.”


(Wall Street Journal)

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