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Why Apple Inc. Didn't Release a 128 Gigabyte iPhone SE

By Ashraf Eassa – Mar 31, 2016 at 9:30AM

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Apple opted only for versions with 16 gigabytes or 64 gigabytes of storage space for good reason.

iPhone SE. Image source: Apple. 

A number of folks on various Apple (AAPL 0.79%)-centric Web forums appear to be disappointed that the iDevice maker didn't release a variant of its new iPhone SE with 128 gigabytes of storage. In this article, I'd like to explain precisely why Apple opted not to do so, offering only versions with 16 gigabytes or 64 gigabytes of storage space.

A $599 128 gigabyte iPhone SE would wreak havoc on iPhone 6s/6s Plus sales
Many Apple customers enjoy the fact that the company now offers phones with large 4.7-inch and 5.5-inch displays, especially after the iDevice maker famously resisted the trend toward such larger-screen iPhones for years. However, there are still many (potential) Apple customers who much prefer smaller-screen devices.

Apple delivered a nice 4-inch iPhone refresh with the iPhone SE. It packs iPhone 6s-computing power and iPhone 6-class wireless connectivity technology -- representing substantial improvements vis-a-vis the aging iPhone 5s that had previously been in the company's lineup.

It's also relatively inexpensive, with the 16 gigabyte model priced at just $399 and the 64 gigabyte model coming in at $499.

At these prices, the SE may very well cannibalize the iPhone 6/6 Plus to a noticeable degree, at least among customers who care more about internal specifications and performance than on screen size/quality.

There's also risk that the iPhone SE could cannibalize the iPhone 6s/6s Plus, but this seems less likely to me; customers that are OK with spending $649-plus on a smartphone probably aren't going to bother with the "value" iPhone SE (unless they absolutely must have a 4-inch smartphone).

A $599 iPhone SE with 128 gigabytes of storage would be a potential game changer -- and not in a good way for Apple. It costs $649 for an iPhone 6 with 64 gigabytes of memory, an iPhone 6 Plus with 16 gigabytes of memory, or an iPhone 6s with 16 gigabytes of memory.

Without a $599 128 gigabyte iPhone SE there, customers will probably gravitate to the iPhone 6s since it is the newest, most feature-packed device at the $649 price point. At $599, a 128 gigabyte iPhone SE could very well become a "too good to ignore" value given the substantial amount of storage that one gets for that price.

It would not only lead to further cannibalization of the iPhone 6/6 Plus, but it could hurt sales of the iPhone 6s/6s Plus line.

Yet another reason
Another major reason that Apple didn't offer a 128 gigabyte iPhone SE is due to the simple fact that in six months, the iPhone 6s/6s Plus phones will be discounted and moved to the "mid-tier" of Apple's product lineup. As is customary, the 128 gigabyte options for these devices will likely be removed and it will only be offered in 16/64 gigabyte configurations.

Since the iPhone SE really is a smaller/budget iPhone 6s, Apple would be faced with a dilemma: Does it keep the 128 gigabyte SE in the lineup when even the mid-tier doesn't have such options? The most sensible answer in that case would be "no."

Can you imagine the customer uproar if Apple were to introduce such a model only to discontinue it six months later? It wouldn't be pretty. 

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. 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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