Smartphone makers try price creep: Time to revolt

Smartphone makers try price creep: Time to revolt

Summary: Don't look now but smartphone prices are starting to creep higher. This strategy is going to be tested amid a weakening economy and an iPhone 5 that may sell at $199.99.

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Smartphone makers are pushing prices higher and it's going to be really interesting to watch what consumers do amid a weakening economy.

$299.99 at T-Mobile: Really?!?

Consider the following:

The common thread is that these devices are 4G (or allegedly so). But there are a few realities here to ponder.

Reality 1: 4G is a letdown. My Verizon LTE Mi-Fi can't handle the train and 4G cuts out repeatedly. The problem with that is the hand off to 3G is brutal. As someone who looked forward to 4G, I'm now bordering on disillusioned and frankly would have no problem buying a 3G phone.

Reality 2: $199.99 is the price point that matters. Why? Apple's iPhone is $199.99 in most cases for a 16GB version. I'm not going to spend $249 or more for a phone that has an operating system that will continue to run apps in the background no matter what (Android) and another one that's going to be outdated in a year (BlackBerry OS 7).

Reality 3: These prices fall. Today's premium $249.99 device is tomorrow's $199 buy one get one offer. Call it the early adopter tax.

Toss in the fact that component costs aren't exactly surging and this price increase looks bogus. Some of the prices increases may be justified. The Charge on Verizon packs 32 GB. Then again the latest BlackBerry Bold on Verizon only has 8GB. In either case, consumers may start treating these smartphone vendors like airlines, which try to raise prices and get rebuffed repeatedly.

It may be time for some consumer pushback to this smartphone price creep.

Topics: Hardware, Mobility, Smartphones, Verizon, Wi-Fi

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34 comments
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  • RE: Smartphone makers try price creep: Time to revolt

    From a price perspective, I've often wondered why people still pay $199 for a smart phone with a carrier and lock into a 2 year contract when you can buy pretty good unlocked smartphones in the $300 - $400 price range. After researching the pro's and con's of doing that last year, I discovered that the ONLY con to buying an unlocked phone was the price, and that the pro's were significant. And listing price as a con is even misleading because the difference in price is made up in the first year in my case, based on the apps that come free and usable with the UNLOCKED phone which the carriers lock out/remove from the carrier subsidized phones and for which the carriers then charge monthly usage fees for.

    The one thing that I can't figure out is how some smart phone producers come up with the prices for their phones. For example, the iPhone 4. I see that you can buy it through the carriers with no contract (or if you have to replace a lost or destroyed one) for $699. Apple and the carriers will tell you that it's the cost of the components that drive the price up so much. But I can buy a laptop that arguably has more components, and can certainly do more, for the same price or less. So, I'm not sure I buy Apples and AT&T's explanation of the $699 price tag.
    mgrubb@...
    • RE: Smartphone makers try price creep: Time to revolt

      @mgrubb@... Has anyone built a better phone, at any price? No. Like it or not that little display has a similar number of pixels to your laptop. Like it or not that phone's Flash storage costs about the same as the spinning disk in your laptop. It has a custom CPU (never cheap) and has no plastic in the phone's outer shell. In short, you CAN see where the money went.

      Now, you might say the value proposition doesn't stack up for you, that no matter how nice it is it's too much for a phone. OK. But who else has this kind of build quality? And how much does that cost?

      I've had Nokia phones with similar attention to detail, (8880) but that was "iPhone prices" too.

      The iPhone represents the first time such build quality has appealed in the mass market, that's the revolution.
      Jeremy-UK
      • RE: Smartphone makers try price creep: Time to revolt

        @Jeremy-UK

        Why is an ipod touch about $200 then? It has most of the same components as an iphone (battery, screen, camera, case, etc). The phone has a little extra circuitry to connect to 3g & phone networks, but is that worth $400 or $500 more?
        gtvr
    • RE: Smartphone makers try price creep: Time to revolt

      @mgrubb@...
      "But I can buy a laptop that arguably has more components, and can certainly do more, for the same price or less. So, I'm not sure I buy Apples and AT&T's explanation of the $699 price tag. "

      Ok, now take that laptop and fit all of the components into something the size of a phone... now add a GPS, GSM Radio, Gyroscopes, a second camera and a hi-res touch screen... oh yeah, and make the battery last all day too... that should be easy right? and wouldn't cost a thing...
      krsanford
      • RE: Smartphone makers try price creep: Time to revolt

        @krsanford Actually yes it is easy courtesy of System-on-chips.
        jgm@...
      • RE: Smartphone makers try price creep: Time to revolt

        @krsanford I'm still trying to figure out why they are giving laptops away and a comparable desktop is twice the price without the monitor.
        compwrench
      • RE: Smartphone makers try price creep: Time to revolt

        @krsanford I agree. http://www.ommrudraksha.com/products/114-5-mukhi-rudraksha-bead.aspx
        rudraksha1
    • RE: Smartphone makers try price creep: Time to revolt

      Ok I've got one flaw to point out in this article. Android does not always run things in the background. You're confusing Android's modular and transparent innards for something else entirely.
      ZazieLavender
  • One thought ;)

    If you buy an unlocked but will keep your carrier for a couple of years, it makes more sense to go ahead and get the 2yr deal - save some cash.

    For the supposition of an across the board price increase, don't think I would go there. I have an i4 and Nexus so can always wait till I find exactly what I want.
    On the other hand, this could be a good opportunity for one OS to offer additional incentives and undercut the competition (hint hint Win... ;). )

    Either way, I hope this is very limited.
    rhonin
  • RE: Smartphone makers try price creep: Time to revolt

    Be careful what you wish for. The consumers in the US have been revolting for some time now ...
    Ronny102
    • RE: Smartphone makers try price creep: Time to revolt

      @Ronny102
      Oh yes. Oooo here come some scary internet comments.
      paul2011
  • sense of entitlement

    whine much?

    The worst thing thst ever occured to smartphones was Apple's fabricated $199 price tag. They are able to reach this price due to at&t subsidizing almost $400 of the cost.

    The costs of components increase as we strive for bigger, faster, thinner. The display makes up a good part of the device cost.

    $299 should be the "early adopter" cost and as months pass it lowers (based on demand). At the end of the day this is business and all involved are trying to make a profit.

    There is no free lunch.
    MobileAdmin
    • RE: Smartphone makers try price creep: Time to revolt

      @MobileAdmin
      You do realize that the component cost of the iPhone (and other smartphones for that matter) have been repeatedly calculated as being less than $200. Sure, there are R&D costs and such, but spread out across the number of phones sold, that's a drop in the bucket compared to the 200% profits made through an iPhone sold at full price. The only thing truly "fabricated" is the markup on these phones - but then again, Apple does need money to pay it's lawyers for all these frivolous patent infringement suits they want to run... perhaps we can thank our flawed patent system for the price of smartphones.
      NetAdmin1178
      • RE: Smartphone makers try price creep: Time to revolt

        @NetAdmin1178

        So why call out just Apple? Given Android phone OEMs get their OS from Google, they likely have a tiny fraction of the R&D that Apple has, yet they're pricing their equipment similarly.

        Bottom line is, the pricing of all platforms/models reflects what the market will bear, including what the carriers charge for voice/data plans and how much they're willing to subsidize. If the market in masse rejected the current pricing or the price creep by not buying these devices, you'd see the prices drop quickly if the margins permitted, or you'd see OEMs exiting the market entirely.
        TroyMcClure
      • RE: Smartphone makers try price creep: Time to revolt

        @NetAdmin1178

        Come on now, there's a lot more that goes into the cost of a product than the cost of the parts it is made out of......an iPhone components are only worth $200? Okay, so why don't you go buy all those components and try to assemble your own iPhone, surely that process won't incur any additional costs, right?
        Doctor Demento
      • RE: Smartphone makers try price creep: Time to revolt

        @NetAdmin1178

        Using the same logic, Android phones should run around $90. They are mostly unattractive looking, plastic, borrowed OS, disposable, depreciate, unreliable (try making a call with a Droid) and fragmented.
        JunitoNH
  • Article pontless....

    This reflect only your opinion, I rather pay a little bit more and have a better handset, than have an old IPhone4 that has smaller screen, it's slower, has ess memory, worst camera, if it's fall... it's gone (due the glass), iron hand controlled environment and the worst of all... the ITunes. Anyone can say this and that about Android and RIM, though the first one it's having it time a bigger slice of the market and the second one still has the biggest Enterprise customers, when Apple has mostly fanboys and entry level people. Apart from indeed Apple it's feeling intimidated due so many battles against Android pads devices, with a good reason... the smartphone battle it's lost, and in one year Android devices should have the same share in % than IPads... <br>Here worth note that IOS has 7 + years nearly double of Android, you will see in maybe more 18months/two year how it will be improved and Apple not so much, due that they are now copying Android features... <br>Apple it's good, though too expense and doesn't mean anymore better hardware.
    villacak
    • RE: Smartphone makers try price creep: Time to revolt

      @villacak
      This article is not about your hatred of the iPhone or why people buy or not buy an iPhone. This is about the cost of phones. HTC, Motorola and Samsung need to make more money on the sales of phones. Android has copied iPhone interface just like Apple has lifted a few things from Android and others. That is what happens in real world dev. What is successful gets copied no matter who started it or not. MS has been given credit for coming up the Metro UI (Tiles based UI) It's innovative but it's not currently selling well. If the Metro UI becomes popular, you will see it be copied buy others. I can see Samsung buy WebOS and use it's stacked card interface on top of the Android Core to standout among all of the Android phones out there. Because right now the Android Eco system is a commodity market. It makes the prices lower but it will kill off manufacturers sooner or later Just like the PC market.
      owlwise@...
    • RE: Smartphone makers try price creep: Time to revolt

      @villacak

      "...when Apple has mostly fanboys and entry level people."

      You do realize Apple's penetration into the Enterprise largely started with C-levels demanding their IT departments support their iPhones, right? And apparently you aren't aware that in the last quarter, Good Technology reported that iPhone activations pretty much doubled Android phone activations, as many iPads were activated as Android tablets AND phones combined, and in regard to iOS vs. Android, about 3 iOS devices were activated for every 1 Android device.

      Good Technology provides mobile device management for 49 of the Fortune 100, so it's there's some weight behind these numbers. That being said, it's hard to take your statement about fanboys and entry level employees with any seriousness.
      TroyMcClure
    • RE: Smartphone makers try price creep: Time to revolt

      @villacak

      Depending on what you look at, and how you figure things in, in the US, Android is already bigger than iPhone. world wide, the figure is lower because all the returned iPhones from the upgrades are dumped in third world markets. The same will be true of Android phones, but the effect hasn't been working as long for Android.

      iPhone is already Number Three for smart phones. Android is number two, and Rim is still Number One. Windows Phones are trying to come back from the dead, and just may pull it off. WebOS died this last weekend, so their current .0001% share might be all they get, unless someone else wants to bring back the old Palm system.

      Symbian is still out there too, though Microsoft payoff to Nokia seems likely to have killed that for the future, though, Nokia never was the only manufacturer making Symbian handsets.

      Current sales figures give Rim and iPhone almost the same volume, but it's flat, not growing. that probably indicates that both Rim and Apple have finished their growth curves.

      Android and Windows Phone 7 based systems are still growing. This battle isn't over, but it is winding down a bit.

      Overall, dumb phones are still the big winners.
      YetAnotherBob