Apple iPhone 16e Is a Surprising Value and the Beginning of the Apple Modem Era
Apple was widely expected to launch a new iPhone SE, its smaller, older tech smartphone aimed at expanding the market into the mid-tier. Instead, we got something considerably more disruptive: the iPhone 16e is a regular iPhone 16 with a single 48 MP/2X telephoto camera, one fewer GPU cores, and Apple’s first-generation C1 5G sub-6 modem. It also appears to have dropped the Camera Control. However, the iPhone 16e is an iPhone 16 in every other sense but two: it has better battery life than the regular iPhone 16, and, at $599, it costs $200 less.
To be clear: the iPhone 16e has the same design, same materials, same 6.1” OLED display and ceramic shield. It has the same Apple Silicon A18 silicon, 128GB starting storage, FaceID, front camera, Action Button, wireless and USB-C charging, and satellite SOS/messaging/Find My capabilities. It runs all the same software as the iPhone 16, including Apple Intelligence with all the caveats and limitations, but also all the promise as the regular iPhone 16 because the silicon is essentially the same. It should receive the same years of iOS software support from Apple. It is launching globally, in “59 countries and regions.”
The additional battery life over the iPhone 16 is thanks to work reconfiguring the internals of the phone to fit in a larger battery. As I suspected, Apple confirmed that this redesign also improves repairability (specifically, battery and rear glass replacement is easier). Sustainability achievements are similar to the iPhone 16, including using recycled cobalt in the battery.
Cannibalization of the iPhone 16 and Older Models, Not iPhone 16 Pro
At $200 less, the iPhone 16e will absolutely cannibalize sales of the iPhone 16. It also makes buying a older iPhones with half the storage, slower processors, and shorter battery life downright silly. In my discussion with Apple ahead of launch, its marketing team seemed sanguine about the possibility of cannibalization, and there is good reason for Apple to feel this way.
The iPhone 16e hardware margins are still healthy. Using its own modem helps keep the iPhone 16e’s bill of materials down a bit, so long as you don’t include the decade of R&D and $1 billion+ in acquisitions it cost to get there. But I’m fairly certain that the internal redesign and re-use of components it buys in volume helped in cost optimization, too.
Consumers who care about cameras, display refresh rates, and performance are still going to pay up for the Pro – in many quarters, Apple’s Pro line outsells the base model. This is especially common in developed markets and where carriers offer subsidies, deliberately over-generous trade-in incentives, and/or interest-free financing over 24 – 36 months. Consumers who think an iPhone 16 is “good enough” should be thrilled with the iPhone 16e, but more Apple customers are viewing their phones as subsidized multi-year investments that they depend on daily, and find it’s worth paying more to get more. (Apple is not alone in this; Samsung is benefitting from the same trends, and, in China, Huawei.)
The iPhone 16e should pull in some upgrades from iPhone 11 and iPhone SE holdouts*. Apple provided comparison metrics on performance and battery life between the iPhone 16e and those earlier models, and the difference is frankly ridiculous; iterative improvements over many years add up. The starting storage point is also typically double that of the older phones, giving people a bit of photo storage breathing room.
This is still on the high end of mid-tier price points. The iPhone 16e is a bargain compared to the iPhone 16, but if people move up to buy the $599 iPhone 16e instead of the $429 iPhone SE, Apple’s ASPs rise overall.
Smartphones are a mature product category and Apple’s iPhone revenue may have peaked, but Services hit a new record every quarter. Apple is still monetizing premium hardware – and the iPhone 16e is a premium-priced mid-tier phone. But the iPhone is also an annuity, and getting someone into the iOS and Apple Intelligence ecosystem should be expected to pay off in the years to come.
What Does the C1 Mean for the iPhone 16e?
Apple has been trying to replace Qualcomm’s modems in the iPhone for about a decade. Modern cellular modem design has been described to me by the people who do it as a hybrid between sophisticated silicon component design, art, and RF dark magic. To date, only Qualcomm and MediaTek have been able to build 5G modems that are capable of handling all the varying frequencies, physical, efficiency, environmental, and magnetic forces that impact cellular transmission and reception.**
How good is the Apple C1? Nobody knows. Apple has undoubtedly tested it extensively – it helps that the iPhone 16e looks nearly identical to any other iPhone if you stick a fake camera square on it, so Apple engineers likely have been using it in public for months or even years at this point. However, real world experience by average users in the millions will stress test the C1 in edge cases in a way that Apple simply can’t on its own. I’m planning to test the C1 myself for a while before drawing any conclusions but I will also be keeping an eye on Reddit.
Apple is not making reception claims about the C1, but the C1 does not support mmWave, which will give the Qualcomm-powered iPhone 16 and 16 Pro variants the edge in NFL stadiums and some downtown metropolitan areas in the U.S. and Japan. It would also greatly speed up downloads in airport lobbies if airports ever start deploying mmWave as promised.
Apple is claiming that the C1 is uniquely efficient. During my briefing, Apple said that, “the C1 is the most power efficient modem ever in an iPhone,” and that “the C1 uses 25% less energy in same use cases as the iPhone 15.” It is not clear how much more efficient the iPhone 16e will be over the iPhone 16, but Apple was clear that the iPhone 16e has a physically larger battery, so it is not clear how much of the battery improvement is due to the new modem. The C1 includes cellular, GPS, and Apple Satellite capabilities; Apple is not changing suppliers for Wi-Fi or Bluetooth, and those are not integrated onto the C1.
What Does the C1 Mean for Qualcomm?
Qualcomm has been Apple’s modem supplier since the original iPhone, though Apple has dual-sourced at times. Apple’s philosophy is to vertically integrate its supply chain as much as possible for critical components and Apple has made no secret that it was attempting to bring the modem in-house. Qualcomm has had years to diversify its business away from reliance on phones in general and Apple in particular. It has done so. At Qualcomm’s most recent Investor Day (see my coverage on X) the company highlighted its success in automotive and industrial IoT in addition to expanding into PCs and establishing a leading position in XR. Qualcomm also sells a lot of SoCs to other smartphone vendors. Qualcomm is only expecting its modems to be used in 20% of Apple’s line for the 2026 launch, at which point its current chip agreement expires. Qualcomm assumes that it will get no further Apple modem business after that point.
Any QCOM investor panicking about the C1 simply hasn’t been paying attention. Apple isn’t going to sell its modem to anyone else; if you compete against Apple you are going to need the best modem you can get, and Qualcomm is still one of only two vendors you can realistically turn to for a high-end solution. Qualcomm isn’t exactly wishing Apple the best on its modem journey – one PR rep sent me a long list of things that can go wrong for consumers and carriers if your modem isn’t very good – but Qualcomm is going to be fine without Apple.
Qualcomm has a separate technology licensing agreement with Apple that expires at the end of 2027; that should be an interesting negotiation to watch.
What Does the C1 Mean for Apple Going Forward?
If the C1 performs well and Apple iterates quickly, having its own modem provides lower bill of material costs in the short term and strategic flexibility over time. Apple may make different choices on the number of geographical SKU variants of its phones, and it could reduce costs with further integration between the C1 and future Apple Silicon SoCs.
The most tantalizing possibility is that Apple could integrate cellular connectivity into products that today don’t have it, or where cellular connections are limited to higher priced models. It is theoretically possible that future Apple Watches will all have cellular built-in by default. It is likely that future Apple Vision Pro or Apple Glasses will have cellular built in, at least for potential enterprise use cases. Apple has put cellular in the mobile-first iPad line but steadfastly resisted paying for modems for its laptops. It is my fervent wish that Macs will get integrated cellular modems. The C1 makes this dream possible.
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*Yes, iPhone SE owners will have to learn how to live without a home button. Such is progress. Apple’s representative suggested that the Action Button could be programmed to mimic this to an extent, something that anyone still using a home button will absolutely never do.
**Samsung’s Exynos is close, but its performance in the Pixel 9 family still lags behind Qualcomm, and Samsung chose to use Qualcomm for its own Galaxy S25 flagships globally instead of its own parts. Building on its strong IP position, I suspect that Huawei’s modems are very good. However, I have not recently tested Huawei smartphones; Huawei stopped sending review units to U.S.-based analysts for geopolitical reasons.