Apple Inc.'s iPhone SE Still in Short Supply

Image credit: Apple.

Apple's latest iPhone, the iPhone SE, is a curious device. The phone packs many of the key internals of the iPhone 6s and 6s Plus into essentially the same chassis as the nearly four-year-old iPhone 5. The iPhone SE is also quite modestly priced for an iPhone, with versions packing 16 gigabytes of storage selling for just $399 without contract and 64 gigabyte models selling for $499.

On the company's last earnings call, shortly after the launch of the iPhone SE, CEO Tim Cook said that demand "has been very strong and exceeds supply at this point." The executive did say that the company was working to "get the iPhone SE into the hands of every customer who wants one as quickly as possible."

Although supply seems to have improved, it doesn't look like Apple has reached supply/demand balance for these products yet.

So, you want an iPhone SE?

I recently visited Apple.com to check expected shipping times for various iPhone SE models. For all SIM-free, 16-gigabyte models, Apple's site says that the devices will be available to ship in "7-10 business days." The same thing goes for all SIM-free 64-gigabyte models.

In fact, it's not just the SIM-free ones that appear to be in short supply. The 7-10 business day shipping time applied to all storage configurations and colors for phones sold pre-installed with SIM cards for all of the listed carriers through Apple's website.

Nearly three months following the launch of the iPhone SE and lead times are still proving quite long, though not as long as the 2-3 week lead times previously seen. Supply has improved, but it would seem that demand continues to outpace supply.

A potential explanation

Although it would seem that demand for the iPhone SE is quite good, I can't help but believe that Apple is being extremely cautious about the quantities that it builds and ships into its distribution channels.

Recall that demand for the iPhone 6s/6s Plus proved to be weaker than Apple had hoped. As a result of this weak demand, Apple guided to a weak fiscal third quarter as it tries to significantly reduce its iPhone channel inventory.

In fact, on the company's last call, CFO Luca Maestri said that Apple's channel inventory reduction is good for "over $2 billion" worth of product. Even for a company as large as Apple, that's significant.

Apple is likely being cautious on iPhone SE builds in order to avoid having to undertake similar channel inventory reduction efforts in the future related to this product. Indeed, with new flagship iPhone models slated to arrive in just three months, the excitement among customers is likely to shift away from the iPhone SE and toward the newer phones.

The future of the iPhone SE

At this point, it would seem that the iPhone SE is a success, in no small part due to its price point. As a result, I expect that Apple will want to iterate on it going forward.

There are a lot of directions that Apple can go with a future iPhone SE. In addition to the usual internal improvements, I expect that the next generation model could have the following features:

A higher quality display (LCD, though, not OLED)
Industrial design that more closely resembles the iPhone 6/6s
Greater screen to body ratio (narrower bezels)
Improved front facing camera (I can see the current rear facing camera being "good enough" for another generation)

It'll be interesting to see what the iDevice maker has cooking for the future of the small, relatively low-cost iPhone.

The article Apple Inc.'s iPhone SE Still in Short Supply originally appeared on Fool.com.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on 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.