We're just not that into paying $1,000 for a phone anymore.
Smartphone makers, led by Samsung and Apple, have been jacking up prices over the last few years. Consumers, however, have been pushing back. And now there's new data that shows it's harder than ever to compete in the ultrapremium tier of phones.
Apple and Samsung this week reported earnings for the June quarter that didn't convey much optimism in the high-end phone market. In Apple's case, iPhone sales dropped 12% from the previous year, and its overall net income tumbled 13%. Analysts believe the iPhone XR, the company's cheapest new model at $749, has become more popular than Apple's $999 iPhone XS and $1,099 iPhone XS Max. At the same time, people are holding off on purchases as they wait for the iPhone 11 to arrive in September.
Samsung's overall handset sales, meanwhile, rose about 7% to 24.3 trillion won (about $20 billion) -- and the company increased its lead in the global smartphone market share by two percentage points to 22%, according to Strategy Analytics. But the gain was largely because of Samsung's cheaper A Series devices. Its mobile operating profit was 42% less than a year ago, and revenue from Samsung's flagship Galaxy S lineup, which starts at $750 for the S10E, dropped because of "weak sales momentum for the Galaxy S10 and stagnant demand for premium products," Samsung said.
If you've exercised any semblance of fiscal responsibility, these results shouldn't shock you. Phone prices have been increasing, and people are upgrading less often. If someone's buying a $1,000 phone with all the bells and whistles they can imagine, they tend to hold onto it longer than before. In the US, consumers now upgrade to a new model about every three years instead of every two. At the same time, software updates make old phones feel new, hardware designs aren't changing much from year to year, and less expensive devices are getting features previously found only in pricey flagship phones.
For many people, that's good enough.
"Innovation is more on the software side than the hardware side," Creative Strategies analyst Carolina Milanesi said. "The life span of the device lengthens because you're getting so much more from it."
Cheaper phones for the win
Phones may be getting more expensive, but that doesn't mean we're buying. For Apple and Samsung, their less expensive flagship devices are now attractive for many people.
CNET's Scott Stein dubbed the iPhone XR "the best iPhone for the price" and said it delivers "most of the advantages of the iPhone XS for hundreds less." And CNET's Jessica Dolcourt called the Galaxy S10E "a dream come true for value shoppers who love small phones."