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SAN FRANCISCO — When Apple decided to go small — in size and price — with the iPhone SE, it was a grab for first-time buyers in markets such as China and India.
The strategy, at first blush, appears to have paid off big: iPhone SE sales could hit 30 million units in their initial year of availability, compared with a forecast of 10 million to 20 million, according to a report Monday from market researcher Nomura, one of the first on the 4-inch, $399 phone since it debuted March 31.
But the success of the SE may be at the expense of iPhone 6S.
“The SE strength, overall demand weakness and our anecdotal work implies the SE is stealing 6S demand in developed markets," Nomura analyst Jeffrey Kvaal said in the report, based on research of suppliers and channel inventory. "We believe the SE is reaching its intended market, first-time buyers in China."
Roughly half of iPhone SE sales are from the U.S. and China, the report said, which bodes well for Apple's overseas strategy. Apple CEO Tim Cook recently concluded a high-profile business trip through China and India to drum up business amid its first year-over-year decline in quarterly sales since 2003.
Apple goes retro with $399 iPhone SE, smaller iPad Pro
The report underscores general softness in the smartphone market and the necessity to focus on the low end to corral nascent users, said Crawford Del Prete, chief research officer at market researcher IDC.
Worldwide smartphone unit shipments slipped 3%, to 335 million, in the first three months of 2016, the first such year-over-year decline, according to Strategy Analytics, which tracks smartphone sales.
Smartphone makers "have to address low-price points," Del Prete said. "There is too much competition in what is becoming a churn market.  We have a (market) share war in the U.S."
The bigger question is whether iPhone 7 — Apple's latest entry in the market, expected in September — will reverse the first sales decline in iPhone's 10-year history. Sales plunged 16% to 51.2 million in the recently completed fiscal second quarter.
Apple reports first drop in iPhone sales ever
Nomura isn't so sure: It predicts Apple will "take a conservative view on production to avoid excess channel inventory" with iPhone 7.
More than anything, Apple is a victim of the success of blockbuster iPhone 6 sales, said Daniel Ives, senior vice president of finance and corporate development at Synchronoss Technologies, a mobile cloud vendor.
“Apple is going through growing pains that other large technology companies have gone through over the past few decades,” Ives said. “A big focus of the industry now is around the software and services in the smartphone ecosystem and expanding the product footprint into new growth categories.”
Follow USA TODAY San Francisco Bureau Chief Jon Swartz @jswartz on Twitter.
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