You thought paying $1,000 for an iPhone was a lot? It may be just the beginning.
Paying a thousand bucks for a phone is no longer laughable. In fact, it’s probably the new normal.
When Apple broke the $1,000 barrier for its iPhone X last September, critics scoffed at its exorbitant price. They doubted people would reach so deeply into their wallets for a phone that outpriced two other perfectly good iPhones, the iPhone 8 and iPhone 8 Plus. The critics were wrong. Apple CEO Tim Cook said in July that the iPhone X had outsold every other Apple device in each week since it went on sale Nov. 3,2017.
With strong iPhone X sales, Apple proved that mainstream buyers are willing to pay almost as much, if not more, for their cell phones as they would for a powerful laptop. And with rumors of an even pricier 2018 iPhone X Plus-style phone coming down the pike this September, Apple’s moves to usher in the era of the $1,000 phone may just be getting underway.
Apple isn’t alone in boosting mobile phone prices ever higher. Creeping prices on high-end handsets from Samsung, Huawei and even « value » darling OnePlus signal that price hikes are here to stay.
In just two years, the cost of Samsung’s Galaxy phone for US buyers has spiked 15.1 percent from the Galaxy S7 in 2016 to this year’s Galaxy S9, while the Huawei P series has climbed 33 percent since 2016 — and that doesn’t even account for the existence of a » Pro » model.
But the largest leap of all belongs to the OnePlus phones, whose price tag since 2016 has soared 32.6 percent in the US and 42.6 percent in the UK. (See your region’s chart below.)
The trend of increasingly costly handsets in the top tier underscores the cell phone’s importance as an everything-device for communication, work, photography and entertainment. And as processing power, camera technology, battery life and internet data speeds improve generation after generation, the value people attach to a phone is sure to swell.
« Consumers are prepared to pay a premium for a mobile phone because it is arguably the most important product in their lives, » said Ben Wood, the chief research analyst at CCS Insight.
Rising prices aren’t unusual on their own. Faster, better components like processors and cameras cost more to make. The financial load of researching and developing new materials also gets folded into the final product. And inflation affects the cost of goods outside of tech, too.
But R&D spending and inflation don’t tell the entire story your phone’s creeping expense. By increasing the prices of their phones with each iteration, Apple, Samsung and other leaders in the industry are creating an ultra high-end segment that can make each sale more profitable — that’s important as people start holding on to their phones longer, for three years or more.
With few exceptions, phone prices from top brands are on the rise.
« Although overall smartphone shipments will decline slightly in 2018, the average selling price (ASP) of a smartphone will reach $345, up 10.3% from the $313 ASP in 2017, » IDC analyst Anthony Scarsella said in IDC’s Worldwide Quarterly Mobile Phone Tracker, shared with journalists in May. Prices will jump on the high end especially, Scarsella added.
The uptick is immediately noticeable when comparing phone prices from today with the same model released just two years ago.
Apple’s prices have risen at a steady rate for both its iPhone and iPhone Plus lines, making the iPhone X — by far its most expensive phone ever — a luxury spinoff.
Samsung’s Galaxy S, S Plus, and Note prices are swinging upward too, with the S9 Plus — an iPhone Plus and iPhone X rival — inching toward iPhone X prices.
We see the most shocking escalation from OnePlus, whose price jumps up each time a new model arrives. OnePlus is currently on track for two variations per year. For example, the OnePlus 6 debuted in June, and the OnePlus 6T could appear in November. Considering the brand’s upward trajectory, we can expect the OnePlus 6T to include a few more features for a higher cost than the OnePlus 6.
« As reliance on smartphones has increased drastically over a short amount of time, the increase in quality and components across the industry required to meet high performance demands has also risen, » a OnePlus representative said.
Over at LG, « Key factors include the cost of components, competitor pricing, carrier incentives, tariffs, etc., » Ken Hong, LG’s senior director of global communications, said in an email. « Fact is, these input costs are rising so we’re forced to follow suit, » adding that introducing more variants like the LG V35 has the positive effect of lowering the price of the previous model, in this case the LG V30.
(CNET reached out to all manufacturers mentioned in this story for comment.)
Interestingly, Google has kept its prices steady with the second generation Pixel 2 and Pixel 2 XL. However, if the Pixel 3 we expect in October finally takes on the dual rear camera, all-screen, no bezel look that defines current smartphone design, Google could justify pushing up the price to match everyone else’s.
Samsung is aware of its role in ballooning handset prices. In an earnings call this week, the brand promised to keep its forthcoming Note 9 » reasonably priced » when Samsung announces the phone on Aug. 9.2017’s Note 8 sold for around $950 in the US, £869 in the UK, and AU$I,499 in Australia, already pricing them at the top of the market.
With new tech on deck for the Note 9’s S Pen stylus and Apple teeing up its next crop of iPhones, most likely for September, it’d be unwise to expect phones like these to drop below their current prices.
Phones, like all electronics, are composed of parts sourced from various suppliers, and if the cost of those parts goes up, it’s a sure bet the cost of the phones will, too.
Demand for more storage over the past few years has triggered price hikes, pushing up the cost of memory and prompting suppliers to invest in building more factories to meet the demand, according to Wood.
Adding more sophisticated cameras like the iPhone X’s 3D depth sensing front-facing camera, or more lenses, like the Huawei P20 Pro’s three rear shooters, costs more too. And so do materials like glass or ceramic for a phone’s backing, or sturdy aerospace-grade aluminum for the frame.
You can bet that the first phone to debut a diamond glass screen or the new, smudge-resistant Vibrant Satin Corning Gorilla Glass won’t be cheap. It’s also expensive for companies like Samsung to build a whole new manufacturing process for elements like curved glass and flexible OLED displays.
Yet while the cost of all these components — called the Bill of Materials, or BOM — can partially explain why high-end phones cost more each year, many experts say that phonemakers are padding their profits.
« I certainly accept that some elements of the cost came from the components and the manufacturing process… but not to that order of magnitude, » Wood said on a phone call in July. « I also believe that Apple made a strategic decision to increase the price of the flagship iPhone to maximize the returns on a really amazing portfolio. »
Carolina Milanesi, an analyst with Creative Strategies, agrees.
« There is certainly more going into these phones than ever before, » she said in an email. « The BOM is certainly growing for these devices, but I do think that there is a premium margin applied by the brands to their flagship products because they are status symbols.
