Yes, as crazy as that sounds, but according to Kenta Yamaguchi’s piece on ASCII that’s exactly what is happening. The point of his story is that starting today, second brand carriers Y! mobile and UQ Mobile are selling iPhone SE instead of iPhone 8. Until yesterday they only offered the budget Apple Pay Suica capable iPhone 7 and normally they would offer iPhone 8, but iPhone 8 is nowhere to be seen in the budget lineup. Instead they are offering iPhone SE only 4 months after it went on sale at first tier carriers.
Yamaguchi san says the SE is so popular that major carriers are bitching it will slowdown the 5G migration in Japan…while still selling as many iPhone SE units as they can. 5G will just have to wait until Apple comes up with a budget 5G Touch ID iPhone SE.
MacRumors and other sites are reporting the Counterpoint Research note that indicates iPhone SE sales will be the ‘bright spot’ in Apple’s Q3 2020 quarter. I have alway said that iPhone SE will do well and it will be an especially bright spot in Japan because: (1) it’s the only Touch ID model in the Face ID sucks with face mask era and everybody in Japan is wearing face masks, (2) the easy entry point SE upgrade from pre-iPhone 7 brings those users into the Apple Pay Japan orbit as Japan goes cashless, there’s a regular flow of first time SE ‘I’m on Apple Pay Suica now’ tweets.
The analysis matches up with Japanese SE user comments but, surprisingly, does not mention the iPhone SE Touch ID upside:
Apple’s iPhone SE sales are “unlikely” to cannibalize sales of the 2020 iPhone 12 models because iPhone SE purchasers are “more pragmatic” about price, less concerned with 5G connectivity, and the smaller display is “not considered a hindrance.”
In the current ‘who knows what’s happening today’ environment with talk of another soft lockdown to combat rising 2nd wave COVID infections, iPhone users in Japan will remain hyper pragmatic and face masks will continue to be de rigueur.
For that reason I don’t think iPhone 12 will do very well here and high end iPhone sales will be sluggish until Apple delivers a version of Face ID that works seamlessly with face masks, or something else like in-display Touch ID. 5G won’t move the sales needle. For the time being iPhone SE will carry water for the entire iPhone line in Japan. We’ll find out the full story at the Q3 2020 earnings call on July 30.
Everything changed the moment the Japanese Government requested school closure to prevent the spread of COVID-19 on February 27, 2020. In Japan, as in the rest of the world, social distance, face masks and rigorous hand washing are now mandatory daily routine. Anything we touch is suspect. This includes money. This is why the COVID-19 crisis will rearrange the contactless payments landscape in Japan very quickly. Nobody wants to risk becoming sick from handling money or tapping public touch screens when they can pay without touching anything.
Fortunately for Apple they made a very smart move with the new iPhone SE that incorporates the A13 Bionic with Touch ID. For customers in Japan iPhone SE with Touch ID Apple Pay is the device that perfectly fits current conditions offering the best Apple Pay and Suica experience with Express Transit power reserve plus other good features, at a budget price. For many in Japan, and likely everywhere, Apple Pay use with face masks is a very important decision factor for purchasing a new device. It will likely be a factor in Apple’s bottom line the rest of the fiscal year.
Unfortunately most tech reviewers are still living in the past era of 3 months ago. This is understandable, but good reviewers should take everything into account. That’s why we read them. That’s why I was disappointed when John Gruber, who usually writes great stuff, completely blew it for me with his iPhone SE analysis/review/think piece that does not mention the face mask Face ID vs Touch ID issue at all. That’s the baseline purchasing decision point now. If Gruber needs to think about the issue, fine, but Face ID vs Touch ID in the face mask era is a huge factor buying any iPhone now and he didn’t cover it, any iPhone SE review that doesn’t cover that is worthless.
I must point out here that Touch ID works just fine while wearing a face mask, and Face ID doesn’t work at all. That’s been a consideration for medical professionals and citizens of countries with a culture of face-mask-wearing ever since Apple introduced Face ID with the iPhone X in 2017. Now it’s a consideration for literally billions of us around the world. That’s not enough to even vaguely make me, personally, consider switching to the SE as my personal phone. But your mileage may vary, especially if the nature of your work requires you to wear a face mask all day, not just while out of the house on brief excursions. (But such jobs might also require gloves.)
A culture of face mask wearing eh? While not a snub, it sure feels flippantly dismissive. The footnote escape is a classic way of avoiding serious discussion, or taking the time to investigate the issue deeply for the benefit of his readers, or how it plays out here on regarding iPhone design and technology. iPhone SE is the most important product Apple is releasing this year. The reasons behind it’s unfortunate success deserve proper review and analysis.
All the top US tech iPhone SE reviews are similar and don’t go deep on it, in other words have fun with Face ID Apple Pay with face masks folks. Meanwhile here in Tokyo, stores are refusing entry for customers without face masks.
Touch ID that removes the Face ID face mask problem in markets like China and Japan, this issue has been constant blind spot in the western tech press, until now.
A13 Bionic for superior battery performance and Express Card with power reserve
Cheaper battery friendly Haptic Touch instead of the more expensive battery hungry iPhone 8 3D Touch.
And the budget price. The iPhone market position in Japan stalled with iPhone XS/XR as government pressure took away carrier rebates that had driven iPhone sales. The Japan market, like markets everywhere, was ripe for an updated entry level iPhone, but the Touch ID plus A13 Bionic combination is especially potent right now because of the face mask situation in the COVID-19 crisis, and social distancing driving people away from hard cash towards contactless payment use. Touch ID is still the best and stress free experience for using Apple Pay on iPhone. The secret sauce is A13 Bionic that delivers superior Suica Express Transit performance along with power reserve, and much more.
So what kind of user is the new iPhone SE aimed at? The Apple Store trade-in page suggests a big divide at the iPhone 7 Plus point, there is more resale demand for Apple Pay Japan compatible devices.
The challenge for Apple and carriers in Japan is getting pre-Apple Pay Japan iPhone users to upgrade. Many iPhone 6/6S users took the opportunity to get a cheap battery upgrade from Apple during the iPhone performance throttling brouhaha. A big reason why these users have been hesitant to upgrade is the Face ID with face mask issue. This is the dominate issue now for Face ID iPhone users, my own observation is that many people in Japan just turn it off and use passcodes.
Now that iPhone SE solves that problem with top tier Apple Pay Japan features and performance it will be very interesting to see how it plays out. We are already seeing signs that contactless payment use is growing in Japan because of COVID-19 social distance issues. As Tomo Hagiwara of Aquabit Spirals puts it…unfortunate success, behavioral transformation in action. This could be the most important Apple product launch in 2020.
I’ve always said the iPhone SE2 hits the iPhone sweet spot in Asia, especially now. An affordable entry level device with face mask friendly Touch ID and Bionic powered Secure Element + global NFC: Express Cards with power reserve and Background NFC tag reading. It was almost a year ago when Jennifer Bailey unveiled NFC Tag Apple Pay. Steve Moser of MacRumors tweeted the essential features: tap and Apple Pay without an app or signing up for an account. Apple has not said a word since.
I think part of the problem for Apple is pictured in the slides accompanying Moser’s tweet, the ‘Pay with Apple Pay in app’ one. The allure of background NFC tag reading is that it’s almost ‘Express card lite’; as long as the screen is on, even locked, iPhone natively reads a NFC tag and does something like activate loaded and ready Apple Pay. The trouble is, only Bionic chip iPhone models do this. Non-Bionic iPhone models have to use an app to read NFC tags. Think quick, would you fire up an app, sign in, and read a NFC tag just to buy cheap coffee? Probably not.
My take is the entry level non-Bionic iPhone 8 is holding up NFC Tag Apple Pay. Apple Pay needs the entire iPhone lineup to be Bionic and app free, an entry level A13 Bionic iPhone SE2 solves this problem. It’s a perfect iPhone for the Japanese market in these face mask mandatory times where Face ID doesn’t work, and a nice match for the recently announced JCB NFC tag payment service that uses SmartPlate software. It probably won’t doesn’t have a U1 chip that would let iPhone SE2 have a longer service life as UWB Touchless joins NFC in iOS 14 Apple Pay. Nevertheless the iPhone SE2 with Bionic NFC will be more than ample, it will do very well.
Update: one thing I forgot to mention is the Sign in with Apple requirement that goes hand in hand with Background NFC tag reading. The current deadline is June 30.
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