The iPhone 16e has the same processor as the more expensive iPhone 16, Apple said, with similar storage options, though a lower spec elsewhere, including fewer cameras.

Apple has been struggling to find a new product that excites consumers – sales of iPhones dropped at the end of last year.

It will be hoping that bringing enhanced AI functionality to a less expensive phone will address that – however analysts have been cautious about the sales boost such tools bring.

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Its name is clearly a nod to its iPhone SE series, which were released from 2016 to 2022, and were also lower priced.

Apple said the iPhone 16e would be available for pre-order from 21 February in 59 countries.

It will launch in the UK for £599, which is £200 less than the iPhone 16 – but more than double the price of the original iPhone SE went for when it launched in 2016.

“This now becomes one of the most affordable powerful iPhones now on the market,” industry analyst Paolo Pescatore told BBC News.

“The move should help accelerate adoption and especially its foray into AI with Apple Intelligence.”

However other experts have questioned how much value consumers put on AI – an area Apple has spent $189bn (£150bn) on in the last decade.

“All we have to show for that is the HomePod and $3,500 ski goggles,” said Cory Johnson, Epistrophy Capital Research chief market strategist, referring to Apple’s Vision Pro headset, which has not sold many units.

“AI should be right in Apple’s wheelhouse. But Apple fanboys, fangirls, and investors are right to be disappointed so far,” Mr Johnson added.

Meanwhile, tech influencer Marques Brownlee said in a post on X (formerly Twitter) that the “most lowkey interesting thing” about the iPhone 16e was its new C1 modem.

It is the first time Apple has used its own modem design for the iPhone, having previously relied on Qualcomm and Intel’s chips to provide cellular connectivity.

This also meant paying costly licensing fees to those chip giants – something Apple has previously wrangled over with Qualcomm in court.

Adopting its own modems would also help the tech giant realise a vision laid out by chief executive Tim Cook in 2009 of owning and controlling the tech powering its products.

Much of the conversation around the new handset will probably centre around its power, with Apple electing to use the same A18 chip behind its more expensive devices.

This means the 16e will be capable of playing the same games and running the same apps as other iPhones – though AI is almost certainly at the heart of this decision.

Mr Cook said in the announcement the new model featured “the performance, intelligence and privacy” Apple fans “expect” from the firm.

And he said the Apple Intelligence features on the device would “help you save time, quickly get more things done, and express yourself in new ways”.

The firm introduced its spin on the tech – Apple Intelligence – with this series of devices, which includes new tools for writing and incorporating OpenAI’s chatbot ChatGPT into Siri.

It hasn’t always gone well, with the firm at one point suspending its AI-generated news alerts after they created false headlines attributed to news organisations including the BBC.

It now presents the summaries in italics.

Apple said its new phone is “built for Apple Intelligence”, and pointed to certain features of the tech, like an easy way to clean up photos or search your image library.

Other phone manufacturers have similar features on their devices – though the iPhone 16e will be by far the cheapest way to access AI on an Apple handset.

“The iPhone 16e generates a new revenue stream for Apple, and this will be particularly noticeable in key markets like India, where iPhones are out of reach for most people,” said Forrester principal analyst Dipanjan Chatterjee.

“There is also a second-order effect of cheaper devices like the iPhone 16e, bringing new customers into the Apple ecosystem,” he added.

The tech giant also appears to aiming its new handset at owners of older models, in the hope of boosting upgrades.

A graphic on its website says “there’s never been a better time to upgrade” and allows users to compare the iPhone 16e’s specs to models dating back to 2019.

“We’ve seen a limited appetite among many of the installed base to upgrade from previous versions, but the new phone reduces the cost hurdle of joining the Apple Intelligence bandwagon,” said Mr Chatterjee.

Chief executive Tim Cook said the new features helped to drive stronger sales in the countries where they were available, such as the US.

But iPhone sales slipped about 1% overall compared with last year, to $69.1bn (£55bn).

The company is also contending with other challenges, including a sales dropin China and the possibility its US sales will be hit by tariffs threatened by President Donald Trump.

He has called for tariffs of up to 60% on products made in China, where Apple does much of its manufacturing.

But the timing and full scope of those plans, which would put a new tax on imports into the US, remains highly uncertain.

Mr Cook told investors on Thursday the company was monitoring the situation.

Apple has been gradually introducing AI features to its products, starting last year in the US.

Investors have been hoping this will re-ignite sales, which have slowed as customers hold onto their phones and other products for longer.

Mr Cook said Apple was expecting to push out the AI features to more languages in April.

However, the features have not been without controversy. The AI’s news roundup alerts came under fire earlier this month for making repeated mistakes in their summaries of news headlines – including ones from the BBC.

The feature was eventually suspended following over a week of criticism.

Meanwhile, Mr Cook said on Thursday Apple had seen a record number of purchases of new iPhones from people who already own older iPhones.

The company said overall sales rose 4% to $124.3bn, lifted by a jump in its computer sales and strong growth in its services business, which includes Apple TV, Apple News and Apple Pay.

Profits rose 7% year-on-year to $36.3bn.

Emarketer analyst Jacob Bourne said Apple was going to have to have to speed up the roll-out and start looking at new kinds of products to maintain its edge.

“The results show Apple can still execute, but the next few quarters will test whether it can balance its cautious approach with the market’s hunger for AI innovation,” he said.