Analyst(s): Olivier Blanchard
Publication Date: February 28, 2025
Apple has unveiled the iPhone 16e, replacing the iPhone SE and marking a shift in its budget strategy. With Apple Intelligence, the A18 chip, and its first in-house C1 modem, Apple aims to modernize its entry-level lineup. However, a price increase to $599 and the lack of some flagship features raise questions about how it fits into Apple’s broader iPhone strategy.
What is Covered in this Article:
- Apple’s iPhone 16e launch and pricing shift, replacing the SE model with a $599 entry price.
- Apple Intelligence integration, AI-driven features, and their impact on differentiation.
- The C1 modem transition, Apple’s move away from Qualcomm, and potential risks.
- China’s market decline and Apple’s struggles amid rising competition from Huawei and Xiaomi.
- India’s premium smartphone growth, Apple’s expansion, and its role in offsetting China’s weakness.
The News: Apple has launched the iPhone 16e, replacing the iPhone SE with a more powerful, AI-capable device that aligns closely with its flagship models. Priced at $599, the iPhone 16e introduces Apple Intelligence, the A18 chip, a 48MP Fusion camera, and Apple’s first in-house cellular modem (C1) – marking a strategic shift in Apple’s entry-level iPhone lineup.
The iPhone 16e became available for pre-order on February 21, with shipments starting February 28 across 59 markets, including the US, UK, China, and India.
Key Technical Highlights:
- Processor: Apple A18 chip (6-core CPU, 4-core GPU, 16-core Neural Engine)
- Display: 6.1-inch Super Retina XDR OLED, edge-to-edge design
- Camera System: 48MP Fusion Camera with integrated 2x optical zoom telephoto
- AI Features: Apple Intelligence suite, including Clean Up in Photos, Genmoji, Writing Tools, and Visual Intelligence
- Connectivity: First Apple-designed C1 modem, replacing Qualcomm; 5G support (excluding mmWave)
- Battery Life: Up to 26 hours of video playback, significantly outlasting previous SE models
- Design & Security: Face ID replaces Touch ID; Ceramic Shield front glass and IP68 water resistance
- Charging & Ports: USB-C port (replacing Lightning); wireless charging supported
- Software: Ships with iOS 18, offering customization, privacy upgrades, and AI integrations
- Storage Options: 128GB, 256GB, and 512GB
- Color Variants: Available in matte black and white
Apple Launches the iPhone 16e: A Budget Game-Changer or an Overpriced Entry Model?
Analyst Take: Apple’s iPhone 16e signals a subtle shift in the company’s lineup strategy. For starters, by discontinuing the SE model and setting the new entry price at $599, Apple appears to be pushing its lower-end iPhones closer to its premium offerings. Second, the introduction of Apple Intelligence and the A18 chip reflects the company’s deeper focus on AI advancements. Third, the launch of Apple’s new in-house C1 modem marks a new milestone on the company’s journey of expanded supply chain independence.
The 16e’s price hike does raise some concerns, however. In price-sensitive markets, previous SE models played a key role in driving sales, and consumers accustomed to a more affordable iPhone option may balk at the higher price tag, especially with increasingly attractive Android options entering the market in 2025.
Also notable here is Apple’s shift to its own modem, which introduces potential network performance risks. And while it is fair to dismiss the need for mmWave 5G support in lower handset pricepoints, the decision to equip the iPhone 16e with limited modem solution makes the price increase all the more difficult to justify. Lastly, declining iPhone sales in China remain a major challenge for Apple, putting more pressure on the company to expand its presence in India and other emerging markets. A higher price point in this performance tier works against Apple’s competitive pricing ambitions in those key markets, and could hinder sales.
Apple’s Strategic Shift: Raising the Entry-Level Price Floor
Apple’s decision to drop the iPhone SE and replace it with the iPhone 16e at $599 is a deliberate upmarket move. For years, the SE lineup served as the go-to iPhone for budget-conscious consumers, with the last model priced at $429. With the 16e’s 40% jump in price, Apple seems to be hoping that new AI-powered features and modern design will make up for the higher cost.
And while this strategy could create margin and average selling price (ASP) uplift for Apple, the strategy is risky, especially in highly competitive and relatively price-inelastic tiers. Apple’s lower-end models’ point is to generate high-volume sales, lock users into the Apple ecosystem early, and serve as gateways to higher price options. A price jump could push enough customers to either stick with older iPhone models longer, or consider Android competitors such as Google Pixel, Samsung, Oppo, and Xiaomi. In short, while the price jump strategy might look good on paper, the real-world risk to Apple is that consumers might simply reject it. Keeping an eye on iPhone 16e sales (and any downward pricing adjustments) in the next two quarters should give us more insight into whether or not Apple made the right bet here.
The C1 Modem: Apple’s Biggest Bet in Supply Chain Independence
The C1 modem represents a major milestone in Apple’s long-running effort to reduce reliance on Qualcomm. Since acquiring Intel’s cellular division in 2019, Apple has invested considerable resources in pursuit of developing its own modem technology (thereby gaining more control over a crucial hardware component).
The effort isn’t without its risks, however. With Qualcomm continuing to be the gold standard for 5G modem-RF performance and network optimization, particularly when it comes to mmWave 5G connectivity, Apple has an enormous performance gap to overcome in a very short time. As Intel discovered before ultimately failing to deliver a competitive modem-RF solution for Apple, building world-class 5G (and eventually 6G modems) is extremely difficult and expensive.
If Apple manages to get this right, the company could be rewarded with billions in savings on licensing fees, stronger vertical integration, and better hardware-software optimization – similar to the advantage that Apple Silicon has given Macs. But if Apple fails to catch up to Qualcomm – or worse, fields substandard modems in iPhones – the risk to its device ecosystem will be inconsistent connectivity, poor user experience, devaluation of the iPhone’s value proposition, and brand erosion.
Opportunity trumping risk, Apple is pressing forward with its plans to phase out Qualcomm modems entirely. Rumors suggest that a second-generation Apple modem could debut in Pro iPhone models by 2026, but that timeline seems a bit optimistic. For starters, Apple soft-launching its new in-house modem with the iPhone 16e signals that it isn’t quite ready to release a premium tier 5G modem yet. Second, the absence of 5G mmWave support in the C1 is somewhat of a red flag.
Some pundits will argue that mmWave support isn’t relevant, let alone important to a modem intended to sit in a budget-tier 5G capable phone. That would be a fair point except for the proliferation of mmWave support in lower price tiers in recent years. Apple downplaying the merits of 5G mmWave is nothing new, but the reality of the market is that if some budget-tier 5G capable Android phones support mmWave, equivalently-priced iPhones should as well (and probably deliver a better experience since they bear the Apple badge). The C1 failing to offer a mmWave support option for operators who want to offer that service to customers is a red flag, and could also act as an additional adoption hurdle for the iPhone 16e.
Apple Intelligence: AI as a Differentiator or Just Catching Up?
Apple is positioning AI as a core feature of the iPhone 16e, introducing Apple Intelligence tools like Genmoji, Clean Up in Photos, Writing Tools, and Visual Intelligence. This is part of a larger industry push toward AI-driven software, in which companies use intelligent features to differentiate their products beyond just hardware upgrades. The problem here is that very little about this feels all that differentiated, especially given how far along the Android ecosystem is with AI integration into both its cloud-based AI capabilities, and acceleration of on-device AI features, including natural language agentic AI.
To make matters worse, Apple’s AI rollout has been slow and somewhat fragmented. For now, Apple Intelligence is only available in English-speaking markets, which limits its global appeal. This is especially troublesome for the iPhone 16e, given its potential appeal in markets where English isn’t the primary language. As a validation point, Apple CEO Tim Cook mentioned in Apple’s Q1 FY 2025 earnings call that regions with AI integration saw stronger iPhone 16 adoption, but expansion beyond those areas remains uncertain at present.
One potential turning point could be Apple’s partnership with Alibaba, which suggests that AI services in China may be coming in the future, but no official timeline has been announced. This also doesn’t address other international markets such as Europe, the rest of APAC, Africa, and Latin America.
While Apple is heavily marketing AI as a game-changer, the reality is that its staggered rollout, limited availability, and relative absence of differentiation against Android keep Apple Intelligence from being the major selling point that Apple would like it to be – at least for now.
China’s Weakness and India’s Opportunity
Another point of note is that Apple’s Greater China revenue dropped 11% year-on-year (YoY) in Q1 FY 2025. Tim Cook attributed part of the decline to channel inventory reductions, but the bigger issue to keep an eye on is Apple’s eroding market share, as Huawei and Xiaomi continue to gain ground in the premium smartphone segment.
The flip side of that challenge is that Apple is shifting its focus toward India, where demand for premium smartphones is rising fast. Cook highlighted that the iPhone was India’s best-selling smartphone in Q1 FY 2025. To build on that momentum, Apple is expanding its retail footprint, with four new Apple Stores in the works. This move reinforces Apple’s long-term commitment to the region, and could work as a hedge against competitive headwinds in the China market.
The iPhone 16e’s positioning does make sense for India’s growing middle class. And while more expensive than past SE models, it remains cheaper than Apple’s flagship devices, making it an attractive entry point for those looking to enter the iPhone ecosystem. The question is whether or not, given its significant price increase and underwhelming upgrades, the iPhone 16e will be a more attractive option to those consumers than a more linear upgrade to the iPhone SE would have been, let alone reason enough to make the switch from increasingly high-performance budget tier Android phones?
Final Thoughts
The iPhone 16e signals a strategic shift for Apple, raising the entry-level price while introducing AI-driven software and in-house modem technology. However, the $599 price point may push some budget-conscious buyers toward older iPhone models or Android alternatives. Additionally, Apple’s new C1 modem’s real-world performance remains an open question.
Apple Intelligence – though promising – still lags behind competitors and is rolling out slowly, limiting its short-term appeal as a must-have feature. Meanwhile, China’s sales decline continues to be a major challenge, making India’s expanding premium market a critical focus for sustaining iPhone growth.
Ultimately, the success of the iPhone 16e will depend on how well Apple executes its broader strategy, balancing higher pricing, AI expansion, and modem integration while navigating an increasingly competitive smartphone market.
What to Watch:
- Apple’s higher entry price for the iPhone 16e could push budget-conscious consumers toward older iPhones or Android alternatives, such as the Pixel 7a and Samsung Galaxy A55, impacting adoption.
- The C1 modem’s real-world performance remains uncertain, and any connectivity issues could force Apple to delay its modem transition, extending reliance on Qualcomm beyond 2026.
- Apple Intelligence’s limited availability and slower feature rollout may prevent it from being a major upgrade driver, especially as Samsung and Google continue expanding AI capabilities at scale.
- Market response to AI-driven iPhones will determine whether Apple Intelligence can drive long-term differentiation, or if AI remains a baseline feature rather than a competitive edge.
See the complete press release on Apple’s iPhone 16e launch on the Apple website.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Image Credit: Apple Inc.
Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
