Have We Seen Peak Prices for Smartphones?
February 25 2018 - 4:20PM
Dow Jones News
By Dan Gallagher
When it comes to smartphones, upselling may have found its
limit.
Last year's big, new redesigned smartphones from Apple Inc. and
Samsung featured prices notably higher than their predecessors.
Apple's iPhone X -- billed heavily as the"smartphone of the future"
-- took that game to new heights by starting at $1,000. But that
strategy has its limitations.
Both companies indeed reported stronger revenues from their
respective smartphone businesses during 2017. But unit sales were
largely flat with the year before, indicating that many consumers
weren't sold enough on the latest enhancements to cough up the
extra dough.
Samsung, for its part, seems to be trying a slightly different
tack this time: The company unveiled its new top-of-the-line Galaxy
S9 smartphone Sunday at the Mobile World Congress trade show in
Barcelona, Spain. The device features the same eye-catching design
of last year's Galaxy, including a curved edge-to-edge display,
along with notable enhancements to the phone's camera and some
other internal improvements. One thing Samsung doesn't appear to be
changing is the price, which will be in the mid-to-high $700s,
depending on the carrier. The Galaxy S9 goes on sale next
month.
Keeping prices level could help Samsung to get more of its users
to buy its latest devices. The same could hold true for Apple if it
chooses to follow a similar strategy with its new iPhones expected
later this year. Apple and Samsung both face growing competition
globally from Chinese companies such as Huawei and Xiaomi. But
combined, the two giants still account for more than one-third of
the world's smartphone sales, giving them a significant impact
across the globe.
That impact was felt last year. According to IDC, about 1.472
billion smartphones sold globally in 2017, a very slight decline
from the 1.473 billion sold the year before. That was still the
first decline ever by an industry that had averaged about 26%
growth over the previous five years.
That decline came during a year of major enhancements offered up
by Apple, Samsung and other device makers. Market-research firm
Gartner also reported a 5.6% fall in smartphone unit sales during
the typically strong fourth quarter, with analyst Anshul Gupta
noting that "high expectations and few incremental benefits" helped
weaken demand during the period.
Today's high-end smartphone market is officially a mature one.
That means the market depends far more on upgrades than it does on
new customers. And those upgrades will happen less frequently as
higher prices keep customers holding on to their phones longer --
especially when annual enhancements don't change much about the
basic form and function of top-end devices. Upselling only works
when there is something significant to sell.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
February 25, 2018 16:05 ET (21:05 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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