Why Apple saved its cheapest iPhone

  • The iPhone X will start at $999, while the iPhone 8 and iPhone 8 Plus will start at $699 and $799, respectively. Compare that to Apple's last new phones: The iPhone 7 started at $649 when it was released.
  • But at the time it was released, the iPhone SE was also a milestone: the lowest starting price of any of its new phones, at $399.
  • Apple also opted to save its cheapest phone on Tuesday.

Apple announced a $999 iPhone on Tuesday, a move many said pushed the limits of how much someone would pay for a phone compared to where else that money could be spent.

The iPhone X ("ten") is way more expensive than the last new flagship phone from Apple: The iPhone 7 started at $649 when it was released.

The X is a big change from previous phones, with a bright screen that stretches across the entire face and some high-powered internals. Apple is also offering the iPhone 8 and iPhone 8 Plus, which are relatively minor updates. They're expensive as well, starting at $699 and $799.

But Apple is actually being more forgiving to your wallet than you think.

While slapping a premium price tag on these new phones, the tech giant also decided to save its cheapest phone on Tuesday, the iPhone SE, which now starts at $349.

The two pricing extremes leave a huge $650 list price spectrum for iPhones.

Why Apple saved its cheapest iPhone

At $399, the iPhone SE already had the lowest starting price of any new Apple phone when it was released last year. According to displays at Apple's release event and on the company's website, it will remain on the market starting at $349.

Prior to Tuesday's launch event, Bernstein analyst Toni Sacconaghi predicted that Apple would keep the iPhone SE and iPhone 6 in circulation — that would have been the highest number of iPhone models that Apple has ever sold at the same time.

iPhone SE during an Apple special event at the Apple headquarters on March 21, 2016 in Cupertino, California.
Justin Sullivan | Getty Images
iPhone SE during an Apple special event at the Apple headquarters on March 21, 2016 in Cupertino, California.

But Apple ended up chopping the 6 in favor of the 6s and SE.

Apple could have saved any sixth-generation iPhone, but it chose to keep a smaller, simpler phone in the lineup. That means that the company isn't just stretching the high end of smartphone prices — it's betting on expanding the entire price spectrum of its products. Apple also released its cheapest new iPad this year.

While the iPhone SE is rarely discussed on Wall Street and lacks the bells and whistles to impress tech enthusiasts, it's been been highly strategic for Apple's business in a few ways.

For instance, the lower-priced iPhone SE saved Apple from a grim earnings outlook last summer when the cheaper phone helped it sell more phones than Wall Street expected.

And the assembly of the iPhone SE in India has helped the company break into the retail market there and access a huge population.

The move could reaffirm Apple's commitment in markets like China and India, where it faces steep local pricing competition.

Apple's commitment to these countries is also shown in how it's handling the rollout of the high-end iPhone X, which will ship weeks later than the cheaper models because of supply constraints.

Apple could have done what it did with the iPhone 6, and rolled out all the new phones to the U.S. first, then waited on China. But instead, it's delaying the entire worldwide launch so it can ship the X everywhere.

In other words, India and China are markets worth catering to, even if that means offering more price points and later release dates.

Still, not everyone agrees that Apple's $999 iPhone X is going to make it in China.

"This price point is really making it clear that this is a first-world product," said Kim Forrest of Fort Pitt Capital Group on CNBC's "Closing Bell" on Tuesday. "And moving into China is probably not going to happen, like a lot of the Apple bulls have been counting on. So you have a replacement market at this point."