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

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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
Lisa Eadicicco Dec 12, 2019, 11:53 AM
Apple iPhone 11 Pro MaxApple iPhone 11 Pro Max
Hollis Johnson/Business Insider
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New data says that fewer than 10% of people in the United States are willing to spend $1,000 on a new smartphone.
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.
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Though industry giants like Apple, Samsung, and Google have been pricing their new smartphones at about $1,000 over the past two years, new data shows that such a cost is simply too high for most people.

Less than 10% of people in the United States are spending more than $1,000 on a new smartphone, NPD Group's recent market research found. 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 people to upgrade to new devices each year as prices increase. The market research firm Kantar Worldpanel reported in 2018 that the average life cycle of a smartphone increased by roughly two months from 2016 to 2018, indicating that people were holding on to their devices longer before upgrading.

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% year-over-year, according to the International Data Corporation.

Some of the world's most influential tech companies have shifted their smartphone launch strategies in recent years to reflect this change. 2019 saw a wave of less expensive smartphone launches, like the $750 Galaxy S10e from Samsung, the $480 Pixel 3a from Google, and the $700 iPhone 11.

Smartphones weren't always so expensive
iPhone X
Hollis Johnson
The $1,000 price point 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 $1,000 iPhone X in 2017, but before that, its flagship iPhone 7 was priced at $650, or $770 if you opted for the version with a larger screen and two cameras. (It also debuted the less expensive $700 iPhone 8 alongside the iPhone X in 2017.)

The same can be said for Samsung: While the 2016 Galaxy S7 was priced at about $650, the Galaxy S8 started at about $720 in 2017 — not quite as expensive as the iPhone X but nonetheless pricier than its predecessor.

This year, Samsung's flagship Galaxy S10 started at $1,000, while Apple's iPhone 11 Pro began at the same price.

A new strategy for Apple, Samsung, and Google
Samsung S10e
Hollis Johnson/Business Insider
As prices increased and smartphone sales slumped, companies like Apple, Samsung, and Google revised their smartphone price strategies.

Apple, for example, launched the $750 iPhone XR alongside its $1,000-plus iPhone XS and iPhone XS Max last year. And in 2019 it positioned the $700 iPhone 11 as its new flagship device, whereas the pricier $1,000-and-higher models with triple-lens cameras were designated the "Pro" versions. That alone could be interpreted as Apple's acknowledgment that a $1,000 smartphone isn't for everyone.

Samsung, too, launched a less expensive version of the Galaxy S10 this year with its $750 Galaxy S10e, a smaller version of the S10 that lacks some features like an in-screen fingerprint sensor.

In May, Google released a cheaper version of its Pixel 3 called the Pixel 3a, which starts at $480 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 told Business Insider.

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

5G could encourage people to upgrade, but for a high price
FILE PHOTO: Timotheus Hoettges, CEO of Deutsche Telekom AG, walks on stage past a 5G technology setup during the company's annual shareholder meeting in Bonn, Germany March 28, 2019. REUTERS/Wolfgang Rattay/File Photo
Reuters
The introduction of more 5G devices next year is expected to further fuel smartphone upgrades, as Cristiano Amon, president of the market-leading mobile chipmaker Qualcomm recently told Business Insider.

But considering that 5G phones are typically more expensive than non-5G models — Samsung's Galaxy S10 5G, for example, launched at $1,300 in May — people might be reluctant to adopt 5G, NPD said.

"Overall awareness and purchase intent reported by consumers is high," Brad Akyuz, the executive director and industry analyst at NPD Connected Intelligence, said in the research firm's announcement of the study. "But only a small segment of the market can afford these $1,000+ devices."

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