Smartphones are facing a highly complicated moment that certainly makes us think. As of today, smartphones are the most popular devices on the consumer market, an outstanding achievement that would have seemed impossible a few years ago.
Smartphones are generally easy to use and offer a lot of features. Besides, they have really affordable starting prices. The arrival of new manufactures onto the market and the rise of Chinese brands have shaped a very competitive sector, benefitting consumers.
We can currently find smartphones with a lot of features for reasonable prices, but high-end models have shown a clear tendency: they are increasingly expensive. This is something that major analysts say will remain the same in the short and mid term, but the situation could also extend to mid-end models.
What is happening?
The first thing to take into account when talking about prices is the cost of the materials. A phone is made of a series of components like the SoC, RAM memory, display, cameras, and the NAND flash memory that works as the storage system.
Well, the cost of a lot of the components is rising significantly, affecting the cost that vendors have to cover, which in turn impacts consumers. DRAM memory is the most perfect example, as it has gotten alarmingly expensive in recent months. OLED panels have experienced the same after Apple released the iPhone X.
If the price of components keeps rising, especially for those in high-end phones, then it is evident that those phones will be increasingly more expensive, although this is not the only reason to bear in mind.
New features to justify a higher price
Apple broke the $1,000 barrier with the iPhone X, a revolutionary phone in the brand’s lineup. The phone debuted a new design and format (19:9), popularizing the controversial notch. Additionally, the phone prompted the switch to OLED panels and the arrival of Face ID, a biometric authentication system that uses 3D sensors to provide a highly reliable facial recognition system.
Those new features translated into a significant rise in the phone’s production cost, which ended up affecting the selling price. A lot of analysts doubted the effect the psychological $1,000 barrier could have on consumers, but the results are evident: it is true that the sales of the iPhone X were not as good as Apple expected, but they are still really good.
According to experts, the good results have reassured vendors that consumers are willing to spend more money on phones with new features that can justify a rise in price. Of course, those experts have a solid foundation to claim that. For example, the Huawei P20 Pro has a triple rear camera setup and offers something specific to users, but at the same time that setup increases the phone’s production cost and selling price
Some analysts say they would not be surprised if Apple decides to sell the standard variant of the 2018 iPhone X Plus for $1,200. They think there would be an outcry on the media and social networks, but people would end up buying the phone anyway.
Companies like OnePlus have been increasing the selling price of their high-end smartphones for the last few years to the point of even doubling it. However, other companies like Xiaomi have kept prices under control by capping their profit margins.
Where is the limit?
This is a good question. How much is any user willing to pay for a high-end smartphone? Despite of how hard we try to find a universal answer, it is impossible because there is no such thing as a unique consumer profile but a lot of profiles.
Most consumers pay attention to a smartphone’s quality-price ratio, no doubt about that. However, smartphones have become a symbol of wealth, so a lot of consumers are willing to spend more money to stand out from the crowd, even if they do not plant to use the newest features of the $1,000 (or €1,000) phone they are buying.
In the end, it all comes down to the users’ budget, needs and the idea of wealth we just mentioned. Still, we are certainly aware of the fact that spending €600 or more for a smartphone has become typical, which is ultimately making people embrace the arrival of phones that are both more powerful and more expensive.