Just how popular will Apple’s smaller iPhone be?

Pre-orders for Apple's new iPhone SE opened Thursday, but how much of an impact will the smaller, 4-inch device have on the markets? UBS Hardware Analyst Steven Milunovich stopped by CNBC's "Squawk Alley" with an optimistic forecast of the product's future.

"We think the new SE is gonna be fairly successful," he said. "We're expecting about 12 million units to be shipping here and you have to remember that a third to even 40 percent of the installed base is still on a 4-inch format."

According to Milunovich, the SE is unique because "it's the first time Apple's really had new technology at this low a price point, $400 or $500. Moreover, it's aimed at moving up the "installed base" of 200 million people who are still using smaller screens as well as emerging markets. However, he admitted that it was a disappointment that the installed base is not moving up as quickly this year as analysts had predicted.

The SE is smaller than the iPhone 6 or 6S. The company is calling it "the most powerful 4-inch phone ever." The cost of the phone is priced at $399.