The price of premium – High-end smartphones are getting more and more expensive
Do you remember how much the original HTC Desire cost back in 2010? Or a Galaxy S? Or an iPhone 4? We hear from many people that the prices of high-end phones have increased in recent years, but it is difficult to put a finger on it.
We decided to investigate. To be able to compare the devices properly, we have taken series from well-known brands, Apple’s iPhone of course and Samsung’s Galaxy S. At HTC, we have based ourselves on the Desire, Sensation and then the One series. At Sony we have taken the high-end models from the fall: the Xperia X10, Arc S, T, Z1, Z3 and Z5. At LG it was about the Optimus series with the 2X, 4X HD and then the G series. Nokia/Microsoft concerned the N8, Lumia 800, 920, 925, 930 and 950.
The prices
You can look at prices in different ways. The first and easiest is the manufacturer’s suggested retail price. Although it is often not what you actually pay for it, it is the guideline for the price of the device.
The average high-end phone now costs about 690 euros, compared to 508 euros in 2010. We still see the upward trend at, for example, HTC, which put its M9 on the market for 749 euros, making it its most expensive ‘flagship’ until now. Apple also went to 749 euros for its iPhone 6s, while LG went to 649 euros for its G4.
There are more trends to see. For example, Nokia’s have fallen below average and Microsoft has continued that. That has a few causes. First, Nokia wanted to be competitive, as its market share was small as of 2011; a lower price will help.
On average, the suggested retail price increases by approximately 5.6 percent per year, measured across all brands. Measured in hard euros, brands add an average of about 31.50 euros per year to the suggested retail price compared to the most important device of the previous year.
Now you can argue that although device prices are rising, manufacturers also have to deal with inflation; 690 euros now is worth less than it was five years ago.
The increase is obviously less dramatic, but it is still very visible. Corrected for inflation, manufacturers have added an average of around 130 euros in five years, with the last year in particular being negative. This is probably due to the lower euro exchange rate, as a result of which Apple, among others, has added 50 euros to the price of its iPhone.
The suggested retail price does not say everything; there is also such a thing as the price once the device is on the market. That is why we looked up what the prices were three months after release at the cheapest webshop in the Pricewatch. That produces a slightly different picture.
Of course, these data only run until 2014, because the data for 2015 are not yet known. The picture here is a lot more mixed. Apple’s phones retain their value longer, while other brands differ per device. The average has been rising for several years, but that is tens of thousands of dollars; it is now around 515 euros. The price after three months in the store increased on average by 4.1 percent, or 18.50 euros per year.
Although not all data is yet available for 2015 – the Lumia 950, for example, is not even out yet and the iPhone 6s and Xperia Z5 are only just available – an image based on the first prices can already be seen. The Galaxy S6 was just under 600 euros after three months, but with luck you could buy it with 100 euros cashback at that time, bringing it to around 500 euros. The LG G4 was about 490 euros after three months, the One M9 at 600 euros.
The why
Prices are rising on average across all brands, but why is that? We have, of course, asked the manufacturers involved. Strangely enough, these manufacturers did not really answer.
LG sent a statement back. “At LG, we believe in making premium technologies affordable. We are a producer of innovative products for the masses, not the happy few. That’s why we charge a fair price for our products.”
Of course, this does not answer the question of why prices have risen, but it nevertheless contains a solid, if somewhat hidden, clue. This is in the wording ‘to market premium technologies affordably’. It makes sense why LG would want that: sell more devices and gain market share. Despite all the efforts of recent years, LG has not become a market leader and is not close to becoming one. Those who want to sell their ‘premium technologies’ will therefore have to do something about the price to be attractive.
That ‘premium’ also plays a role, but on a different level. Various manufacturers in the list aim for ‘premium’. HTC, for example, declined to answer the question. HTC made a metal unibody smartphone with the One M7 in 2013, compared to its plastic predecessor One X. It is immediately visible in the price, which rose by 100 euros in one fell swoop. The effect was still visible after three months.
Sony does the same. The Xperia T, a plastic device that appeared in a James Bond movie, but nevertheless did not appeal to the imagination, was given a successor in the Xperia Z series with glass and metal. The suggested retail price and the actual price increased considerably as a result.
Apple has been playing that game for years and has mastered it; an iPhone starts at 700 euros and still costs around 620 euros after three months, more than any other smartphone. In the strategy used by Apple, HTC and Sony, a lower price is therefore not something to strive for, but rather to avoid. After all, a lower price quickly gives a device a cheap image. In addition, the higher price makes sense, because the materials used are more expensive.
Metal smartphones are simply more expensive to make. That’s largely because it takes longer for the phone to be ready. A telephone made of plastic, for example polycarbonate, is relatively easy to make. The material is molded into a certain shape in the factory and then it is ready. One of the clearest indications that everyone can see that this is simple and cheap can be seen with Chinese webshops. There are plastic backs and covers for popular smartphones for sometimes less than a euro on the digital shelves.
The processing of metal is different. In addition, more steps are required to arrive at the final product, including cutting, polishing and processing the metal, so that it has the correct size to the micron. For example, HTC claims that it must allocate three hundred hours for production per copy of the One M9. Xiaomi has shown the production process of the metal case of its Mi4 in a video.
In addition to metal and glass, manufacturers have resorted to various materials. For example, LG has placed a layer of leather over the plastic for certain variants of its G4, while Motorola has been selling the Moto X since last year with backs made of leather or, for example, bamboo.
The use of new materials is time-consuming and expensive for a manufacturer, because in addition to the production process, the new materials also have to be tested for temperature, for example. Of course, if a material expands and contracts at normal temperatures to such an extent that the backing breaks, it’s a bad idea to use it.
In addition to the design, manufacturers have started using other components. Basebands have received support for 4g, more sensors have been added to the devices and cameras have become a lot more important and more advanced.
Manufacturers do not give an exact overview of how much they pay for which parts, but estimates are made for some phones by specialist companies. IHS is one such company and sometimes makes its estimates public by posting them online. It has done this for the iPhone 4 in 2010 and the iPhone 6s that has just been released.
The camera has indeed become more expensive, but the price of flash memory has plummeted. Instead of $ 27, according to IHS, Apple now only has to pay $ 5.5. In total, the parts of the iPhone 6s cost a few tens more than those of the iPhone 4 at the time, but with the Apple smartphone that is in any case not the main reason for the price increase and because many components correspond to those of competing devices , the same development will be visible at other manufacturers.
A smartphone is more than its materials and components. High-end smartphones are also expensive because they have to make money. In 2010, the smartphone market was still new and manufacturers wanted to achieve a higher market share in addition to higher sales. Nokia was clear about its peak, and it was not clear who would become big in the long run and who would stay small. Moreover, Android was just fresh on the market and the future was also uncertain in terms of software: would Symbian remain large, would Windows Mobile take a large market share as Windows Phone and what would happen to BlackBerry?
The cards have now largely been shuffled. Samsung and Apple are the undisputed two largest manufacturers, with the rest far behind. In terms of software, it’s Android that beats the clock, while iOS also has a stable market share and the rest is trying to find a place as a niche product. Once the cards are shuffled, everyone can start thinking about making a profit.
The rapidly falling prices make it clear that manufacturers have a lot of margin on high-end smartphones. Due to the lawsuit against Samsung, Apple had to disclose documents that showed that the margin on iPhones is no less than fifty percent. Other manufacturers probably make less profit, but any profit is welcome. The profit from Android smartphones has not turned out to be a fat pot. Many manufacturers regularly write red numbers and if there is a profit, it is often minimal. LG took the crown this year in a negative sense, by only making a profit of 13 cents per smartphone delivered.
Although there is a lot of profit on high-end smartphones, sales are too low to make billions in profits. Manufacturers don’t often disclose figures on specific models, but Samsung hasn’t boasted record figures for its Galaxy S models for a few years now, while sales figures also show that cheap smartphones are doing better. However, a high-end smartphone does have an attention value. Manufacturers want to show what they are capable of, after which cheaper models, for example, get the design or some of the features to make them look more luxurious. Samsung has done that with its mini line of Galaxy S smartphones, while other manufacturers have had or continue to have similar product ranges.
Conclusion
It may feel a bit unfair; for the most important devices of many brands you pay more in the store than you did about five years ago. An average of 180 euros was added to the recommended prices in those five years; after three months in the shops, about 75 euros remained.
There is also another side of the coin. Where cheap smartphones were mainly useful as a coaster five years ago, they are now excellent alternatives for people who demand less from their device. Those with a budget of 200 euros already have a choice of various excellent devices and with a budget of 400 euros there are even ‘cheaper high-end smartphones’ such as the OnePlus 2 and Moto X Play, along with the most expensive models from last year. year.
If anything is clear now that wasn’t clear in 2010, it’s that there are many millions of people willing to pay the price manufacturers charge to own a smartphone. It has become clear that many people use their smartphone all day every day. Such a device may cost a bit, many users reason. After all, it is not only about the cost, but also about the value.