Smartphone race to pricing bottom underway, says IDC

Smartphone race to pricing bottom underway, says IDC

Summary: Smartphone units are set to surge through 2017, but average selling prices will also steadily decline. Thank Android.

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Smartphone units are expected to hit about 1.7 billion units by 2017, but average selling prices are set to steadily decline, according to IDC data.

IDC projected that global smartphone units will pass the 1 billion mark in 2013, up 39.3 percent from 2012.

Smartphones, which are increasingly replacing feature and dumb phones, are expanding into emerging markets at lower price points courtesy of Android. Android has allowed more manufacturers to enter the market, but those device makers are also looking at ever-shrinking profit margins---unless you're Apple.

The average selling price projections tell the tale. In 2013, IDC sees average selling prices of about $337, down 12.8 percent from 2012. In 2007, smartphone average selling prices will be $265.

These projections are one reason that Apple's iPhone 5s and 5c launches drew critics at first. The 5c was supposed to be Apple's emerging markets play, but the company preserved pricing and profit margins instead. It remains to be seen if Apple's move will look like a strategic blunder in the years ahead.

Here's a look at IDC's volume and price forecasts. The one thing that sticks out is that IDC is betting that North America average selling prices for smartphones actually increase over the next five years. That bet is likely to be wrong since I'd expect consumers to push back and go to cheaper devices even with the two-year contract model pushed by carriers.

idc smartphone ASPs

 

Topics: Mobility, Smartphones

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6 comments
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  • This is good news.

    After having spent $1,800 on three smart phones over a 12 month period I had to ask myself "Why? Why did I do this?" I found it ridiculous I have spent so much on three phones.
    ye
    • 3 phones in 12 months

      Possibly spend less if you're gonna buy that many??

      This really is nothing todo with android itself - thats just to get the clicks a comin' it could be windows phone or ios, or ibuntu or firefox, it really doesn't matter which OS it is, so long as the OEMs are competing with each other.

      The smartphone market has just mirrored the pc market - well there Re essentially just pc's nowadays aren't they? - and margins have collapsed. Just like the pc market conpanies now make profits by shipping in the millions not the thousands - fail to do so and you go under.

      I have often heard non technical people say that someone elses phone costs 'about fifty quid' to make - reality is now you are paying as little as the conpany can afford to let you have it for... In the case of amazon and tesco where they have services to sell you, you get it for cheaper.

      Apple run hugh margins, but thats the same as their pc model, you can pretty much just exclude them from the topic. It's standard practice in tech - just last week we learned that sony make just $18 on each ps4 as they go to war with microsoft - and in their instance they are basically selling the same hardware with different software.

      It's good for us, but can not always be so.... Take a strol down pc world; laptops are sold by ghz n cores, money is saved on screens, cheap plastic and speakers and poor pherial devices... In an war were every cent counts, be careful of those that seem just a little too good to be true...
      MarknWill
      • I'm aware of this.

        "This really is nothing todo with android itself..."

        The three phones in question: HTC 8x (Windows Phone), iPhone 5, and my current HTC One.
        ye
      • Commoditization...

        ...is a good thing, regardless of the disadvantages. You are never left without high end(high margin) gear(macs,vaios,xps-es,razer,zenbooks,carbons etc.). The thing is that commoditization puts pressure on the high margins of companies like Apple, Sony and others. FOr example, ever since the advent of high res displays in 1000$ ultrabooks Apple has cut 200$ from both its rMBP models. This is a good thing for mac users. Otherwise you would've been charged through the nose by Apple and Sony.
        Ghest
  • Underway?

    It's already there...
    ForeverCookie
  • Three phones: Moto X, Nexus 5, Moto G

    Which you can get off contract for $299, $349, $179 respectively. (Well at Republic you can get the Moto X for that anyway.)

    Last year I had to go used on a $250 GS2 and a $300 GS3 off eBay. I just can't see spending 5-6 bills on a smartphone. Next year it looks like we won't have to go with a used phone.
    ArtInvent