Why Apple is moving into the lower-cost smartphone and laptop markets

This week, Apple unveiled a lower-end iPhone and MacBook, each starting at $599. The move signals an effort by a company known for premium devices to push deeper into price-sensitive markets, where it has historically lagged.

“Apple lost basically a generation of customers to Google Chromebook, and think they need to get that back,” said Michael Levin of Consumer Intelligence Research Partners, which has followed Apple for years. “Recall, Apple used to dominate the educational market, which for many years created loyal customers for decades thereafter. That’s why we see Mac computers in wide use among adults and businesspeople relative to life 30+ years ago, when it was a little more of a novelty. So, a low price point today with features that appeal more to younger folks would help with that effort.”

Meanwhile, global smartphone shipments are headed for their steepest drop on record, pressured by rising component costs that are pushing up prices. Android manufacturers, which rely more heavily on lower-income consumers and operate on thinner margins, are especially exposed.

That dynamic could play to Apple’s advantage.

As The Wall Street Journal wrote, Apple’s scale gives it unusual leverage over its supply chain. And with industry-leading margins, it can afford to hold prices steady even while adding value. The new iPhone 17e costs the same as last year’s 16e but offers double the storage, while the Neo is Apple’s cheapest MacBook yet. Apple can also absorb margin pressure at the low end and make up for it elsewhere in its lineup.

Apple’s laptop and desktop lineup is “still heavily dependent on North America and Europe, as well as developed markets in Asia,” according to Jay Chou, a research manager at IDC.

“The MacBook Neo could provide opportunities to grow beyond developed markets and into the hands of budget-conscious buyers more broadly.

The company already dominates in its strongest markets. Last quarter, Apple held 69% of smartphone market share in US, Counterpoint Research found, though its global share was closer to 25%. That suggests there may be room to grow internationally — especially among consumers who want an iPhone but balk at flagship prices.

The demand is visible in the secondary market: Apple accounts for more than half of global used and refurbished smartphone sales. In other words, many consumers want iPhones; they just don’t want — or can’t afford — to buy them new.

As new smartphone sales decline this year, Counterpoint expects used device sales — and used Apple sales — to rise by just as much.

If consumers upgrade, Apple wins. If they trade down, Apple may still win.