It’s clear that high-end mobile phones are slowly becoming more expensive over the years but why? We’ve already covered the fascinating stories of the very first mobile phone in 1983 and the first smartphone released in 1994. We saw that the prices were $9200 and $1800 respectively.
So what we’re witnessing right now isn’t the first time that smartphones have been really expensive after the 1990’s. However mobile phones did fall in price around the world as we enjoyed accessible mobile communication but as the 2000’s rolled around our phones began to do more than just communicate and with the extra functionality came higher prices. The prices really started to climb when fully capacitive touchscreen smartphones hit the market.
The original iPhone in 2007 set the bar at $600 and since then the prices of subsequent iPhones and high-end Android devices have steadily been climbing.
Here’s a chart by Bloomberg of all the popular smartphone prices over the years. As you can see there’s a clear upward trend but Google’s pixel line stands out as a great value. This also begs the question are the other top brands overcharging to gain more of a profit which may be partly true. But as you’ll see in this article, there are other clear reasons as to why the prices are increasing?
We’ll be using mostly Samsung and Apple as examples.
The Samsung Galaxy Note 8 starts at 930 US Dollars and the iPhone X starts at 1,000 US Dollars both record-breaking prices. Unfortunately, when you include sales tax, foreign exchange rates, and trade tariffs, the prices can explode. The iPhone is 25% higher in Australia, 30% more expensive in China, 32% more expensive in the UK and 47% more expensive in Hungary where the cheapest version of the iPhone X costs 1500 US Dollars spending. This much money on the lowest configuration of an iPhone is something that the world has never seen before.
So let’s dig right into it. Here are three reasons for the increases in price.
Reason #1 – More Production Cost
Top smartphones are costing more to make. The smartphone industry is one of the only sectors where consumers constantly expect innovation and new features every year. So, manufacturers have to overcome space constraints, strive to reduce power consumption while providing more features and a better user experience. This all doesn’t come for free every, new innovation demands engineering knowledge, testing, and calculated design.
Here’s a chart by Android Authority showing the bill of materials for the Galaxy S series over the years. As you can see there’s an upward trend if we look at the sales prices of the Galaxy S series is the same deal. There’s an upward trend in both of them but in 2017 something interesting did happen. The S8 was the most expensive phone to make by far it cost an estimated $307 to make $43 higher than the S7 and $36 higher than the S7 edge.
The build materials for the iPhone X is said to be $412. Also by far the most expensive to get the total cost of manufacturing the phones you need to add in research and development needed for testing new features, advertising costs, manufacturing costs, administrative costs, and a pushed out to do their competitor all within a one to two years. Product’s lifecycle taking this into consideration it becomes easy to see how prices can begin to creep up reason.
Reason #2 – Smartphones are becoming more capable
It’s obvious that phones are getting more powerful. Today’s top smartphones in some respect have as much grunt as a laptop. From just a few years ago, in fact, the Qualcomm Snapdragon 835 chip which is used in most high-end smartphones by Samsung HTC, LG Sony, and Nokia is so powerful that it’s now being used in full Windows 10 PCs. A field normally dominated by Intel and AMD.
Asus, Lenovo, and HP have all signed up to use the new mobile chip in their computers. This machine is running Windows 10 on a Qualcomm Snapdragon processor. You can see this is running 64-bit Windows 10 Enterprise Edition with four gigabytes of RAM. I’ll pull up the task manager so you can see the full power of the Qualcomm Snapdragon processor with its four cores in action.
It shows that the convergence between the PC and mobile computing is getting closer but these new powerful chips have capabilities for features such as augmented reality and virtual reality. All of this as well as new concepts like the iPhones neural engine to help with recognizing speech and images as well as dual camera setups to allow for more options during photos and videos.
All our incentives for people to pay a higher price for their mobile device these extra capabilities.
Reason #3 – Supply and Demand
It all comes down to supply and demand as long as people are willing to pay high prices for mobile phones and all of these new features, the manufacturers can sell them at these high prices.
In addition, there are numerous studies that have revealed that psychological dependence on smartphones is quite widespread and within that group, there’s a segment of people that always want up-to-date technology. It’s just part of their personality. Nobody actually has to upgrade their phones every one or two years but millions of people do. Because of this reason high prices can be sustained but the question is if manufacturers keep increasing the price what is the threshold at which the customers say no brand perception also has a part to plan on the demand side if a person is fond of the Apple or Samsung brand they’re more likely to see the cost is worth it?
It’s not all bad though, there’s a growing number of alternative options some of the mid-range phones really aren’t that bad anymore. The Chinese brand Huawei now the world’s second-largest smartphone manufacturer can provide much cheaper alternatives. The same goes for Xiaomi, Google’s Pixel and Oppo.
Further to this, if the goal of your phone is just to get the job done a two-year-old high-end phone is still decent.
One final note to take away is that the actual average price of smartphones is actually going down across all of the worlds except for the United States. One interpretation of this data is that although the highest models are going up in price the rest of the market is getting more efficient at sourcing parts and the manufacturing process. So, they’re able to pass those savings on to the consumer.
As you’ve seen the high-end models are always trying new things and innovation is generally expensive.
In conclusion, smartphones have definitely come a long way since 1994 and the capabilities have just exploded over the past decade. The cost of having the very best in mobile technology is going up but when we demand so much from our devices it’s no surprise.
So what do you guys think do you agree or disagree with the reasons listed. What’s the price threshold for you when it comes to buying a new phone?