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Tech & Science Evidence is mounting that people are fed up with the sky-high cost of smartphones, and it's sparking a massive change in the industry

19:51  12 december  2019
19:51  12 december  2019 Source:   businessinsider.com.au

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  • New data says that fewer than 10% of consumers in the United States are willing to spend $US1,000 on a new smartphone.
  • The report comes as smartphone prices have gradually increased in recent years.
  • As smartphone prices have gotten higher and shipments across the industry have stalled, companies like Apple,Samsung, and Google have altered their strategy by launching more affordable smartphones.
  • Visit Business Insider's homepage for more stories.

Although industry giants like Apple, Samsung, and Google have been pricing their new smartphones at around $US1,000 over the past two years, new data shows that such a cost is simply too high for most people.

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Less than 10% of consumers in the United States are spending more than $US1,000 on a new smartphone, according to market research from NPD Group. The firm gathered the data using its Mobile Phone Tracking tool, which uses advertising technology to monitor active devices in the US.

The study is the latest evidence suggesting that tech companies have had a hard time convincing consumers to upgrade to new devices each year as prices increased. Market research firm Kantar Worldpanel reported in 2018 that the average life cycle of a smartphone increased by roughly two months between 2016 and 2018, indicating that consumers had been holding onto their devices for longer periods of time before upgrading.

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Global smartphone shipments in general have also been struggling; the industry suffered seven consecutive quarterly declines until the third quarter of 2019, when shipments rose by 0.8%, according to the International Data Corporation.

Some of the world's most influential tech companies, like Apple, Samsung, and Google, have shifted their smartphone launch strategies in recent years to reflect this change. 2019 saw a wave of less-expensive smartphone launches, like the $US750 Galaxy S10e from Samsung, the $US480 Pixel 3a from Google, and the $US700 iPhone 11.

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The $US1,000 price point only became the norm for flagship smartphones relatively recently as phones gained advanced features like facial recognition, nearly borderless screens, and triple-lens cameras. Apple launched the $US1,000 iPhone X in 2017, but before that, its flagship iPhone 7 was priced at $US650, or $US770 if you opted for the version with a larger screen and two cameras. (It also debuted the less expensive $US700 iPhone 8 alongside the iPhone X in 2017.)

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The same can be said for Samsung: while the 2016-era Galaxy S7 was priced at around $US650, the Galaxy S8 started at around $US720 in 2017 - not quite as expensive as the iPhone X but pricier than its predecessor nonetheless. This year, Samsung's flagship Galaxy S10 started at $US1,000 while Apple's iPhone 11 Pro began at the same price.

A new strategy for Apple, Samsung, and Google

a close up of a cell phone: The Samsung Galaxy S10e. The Samsung Galaxy S10e.

As prices increased and smartphone sales slumped, companies like Apple, Samsung, and Google revised their smartphone price strategies. Apple, for example, launched the less expensive $US750 iPhone XR alongside its $US1,000+ iPhone XS and iPhone XS Max last year. And in 2019, it positioned the less expensive $US700 iPhone 11 as its new flagship device, whereas the pricier $US1,000-and-higher models with triple-lens cameras were designated as the "Pro" versions. That alone could be interpreted as an acknowledgement that Apple realised a $US1,000 smartphone wasn't for everyone.

Samsung, too, launched a less expensive version of the Galaxy S10 this year with its $US750 Galaxy S10e, a smaller version of the S10 that lacks some features like an in-screen fingerprint sensor.

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In May, Google released a cheaper version of its Pixel 3 called the Pixel 3a, which starts at just $US480 and comes with several of the same features as the 2018 Pixel 3. "When we saw this happening, we participated again in premium smartphones but said we need to offer an alternative," Mario Queiroz, who was Google's general manager and vice president of product management for Pixel before recently moving into a new role at the company, previously said to Business Insider.

Launching more than one flagship smartphone isn't new for companies like Apple, Samsung, and Google. But whereas firms like Apple and Samsung would usually launch two smartphone models in different screen sizes before 2017, in more recent years they have shifted toward debuting even more devices at various price points, appealing to consumers with differing budgets.

5G could encourage people to upgrade, but for a high price

  Evidence is mounting that people are fed up with the sky-high cost of smartphones, and it's sparking a massive change in the industry

Next year, the introduction of more 5G devices is expected to further fuel smartphone upgrades, as Cristiano Amon, president of the market-leading mobile chipmaker Qualcomm recently said to Business Insider. But considering today's 5G phones are typically more expensive than non-5G models, there's a chance consumers may be reluctant to adopt 5G, NPD points out. Samsung's Galaxy S10 5G, for example, launched at $US1,300 in May.

"Overall awareness and purchase intent is high," Brad Akyuz, executive director and industry analyst at NPD Connected Intelligence, wrote in the research firm's announcement of the study. "But only a small segment of the market can afford these $US1,000+ devices."

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