On March 24, Apple (NASDAQ:AAPL) began taking pre-orders for the latest member of its iPhone, the iPhone SE. The device packs virtually all of the performance and camera capabilities of the flagship iPhone 6s into a compact 4-inch device that's a dead ringer for the iPhone 5s launched back in 2013.
According to a report from CNBC, pre-orders of the iPhone SE in China, a market that Tim Cook has said will eventually become Apple's largest, have hit around 3.4 million units. In my mind, that's quite an impressive showing. Here's why.
These are probably incremental sales
I would guess that the majority of these pre-orders were to folks who didn't want to pay for/couldn't afford to pay up for the larger-screen iPhone 6s/6s Plus devices that launched back in Sept. 2015. If that assumption is correct, then -- assuming an average selling price of $450 (50/50 split between the $399 16GB model and $499 64GB model) -- this works out to incremental revenue of approximately $1.5 billion.
Given that the iPhone SE likely required truly minimal research and development spending (all major components recycled from the iPhone 6/6s series) to create, this would appear to be quite a good showing for the iDevice maker.
It's not just China where the SE is likely doing well
Although the report from CNBC talks specifically about China, there are some early signs that demand might be robust here in the United States as well. When I went to pre-order my iPhone SE (64 gigabyte, unlocked, Rose Gold), Apple indicated that the device would arrive on 3/31.
However, all of the 64 gigabyte unlocked models that I'm seeing on Apple's online store show that via the fastest shipping method, a device ordered today will arrive between April 11 and April 14.
It could very well be that Apple simply didn't build a lot of these ahead of the launch, but I wouldn't be surprised if it were the case that a significant portion of the iPhone installed base was simply holding off upgrading from older phones until a newer, smaller model arrived.
Will we get a press release talking about how sales went?
Traditionally after Apple puts an iPhone up for sale, it will follow the initial couple of days of orders with a press release talking about how many units of the new models it sold in that period.
With the SE, I don't think Apple will issue a press release giving sales figures. However, I do think that if demand for the SE turns out to be strong, and as long as those sales are generally incremental rather than cannibalistic, this could be reflected in the guidance that Apple issues next month for the June quarter.
The SE is a good product, no surprise if it does well
At the end of the day, I think that the iPhone SE is a very solid product that ultimately allows Apple to attack price points that it wasn't able to really address previously. A $400/$500 phone that's virtually on par with its flagships aside from the display and a few other minor things (Wi-Fi/cellular speeds, Touch ID speed, etc.) represents a very interesting value proposition, one that could help Apple gain share and, ultimately, bolster iPhone revenue.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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