Moto new machine must sell 9999 yuan? Why smart phones sell more expensive

If you initially thought the rising phone prices were just a perception, data from GFK confirms it. By 2017, the average selling price of smartphones continued to climb sharply. The trend is quite evident.

Data shows that by the third quarter of 2017, the average smartphone price hit a record high. In that quarter, global smartphone shipments reached about 367 million units, up 3% year-on-year, but sales growth was as high as 10%. This indicates that while shipments increased slightly, sales rose more significantly — meaning the average price of smartphones went up.

Globally, smartphone prices also rose by 6% in the third quarter. With the launch of high-end models like the iPhone X, the annual increase is expected to reach around 5.7%. In China, smartphone shipments grew by only 5%, but sales jumped 20%, with an average price increase of 14%. Similarly, in Western Europe, smartphone sales saw an 11% rise in shipments.

With the maturing of the mobile phone industry, one might expect prices to be lower. However, the opposite is happening — the cost of flagship devices is climbing. For example, the iPhone X, Samsung Galaxy Note 8, Huawei Mate 10 Pro, and even Xiaomi’s latest MIX 2 have all crossed the 4,000 yuan threshold. Why are smartphones becoming so expensive?

Profit Motivation and Brand Image

First, profit is a major driver. If you still believe that the smartphone market is in a "Blue Ocean" phase, where manufacturers sell phones with good intentions, then you're still naive. Commercial companies operate with the goal of making profits. Apple, Samsung, and Huawei have all seen increased revenue by raising the prices of their flagship models. At the launch of the Huawei Mate 10, Yu Chengdong stated that higher pricing led to significant revenue growth beyond just shipment volume.

Analysts suggest that if consumers accept these higher prices, Apple and Samsung will widen their lead over hundreds of competitors. Many smaller brands struggle to break even. According to Strategy Analytics, the smartphone industry's profits are almost entirely captured by Apple and Samsung, with Apple taking 79% and Samsung 15%.

Additionally, for smaller manufacturers, increasing prices helps build brand image. Take Xiaomi, for example. Known for its high value-for-money products, Xiaomi has often been perceived as low-end. Even its premium MIX series, while well-designed, hasn't fully changed this perception. Raising the price of higher-end models can help elevate the brand’s image.

Rising Supply Chain Costs

Objectively, the sharp increase in supply chain costs has also driven up smartphone prices. One of the most expensive components is the screen. This year, the demand for "full-screen" designs has pushed screen costs from 80% to over 90% of the total device cost. According to a senior executive in the supply chain, the screen cost for flagship models has increased by 10-20%, with individual components costing an extra $10. Additionally, production yields are lower, leading to higher overall costs.

While LCD screens are being replaced by OLEDs, the market is dominated by Korean manufacturers, and OLEDs remain costly and in short supply. This makes screen price increases unavoidable.

In addition, memory and storage prices have risen by over 20% in the past year, and the trend continues. Camera components are also expected to see price hikes. These factors contribute to the rising cost of smartphones.

Consumer Behavior vs. Manufacturer Optimism

A survey by Barclay found that only 11% of smartphone users would spend over $1,000 on a new phone, with the average acceptable price around $580 (about 4,000 yuan). In China, people are even less willing to pay high prices, with 2,000 yuan still the standard for most buyers.

Despite this, the Chinese smartphone market has seen a shift toward "consumer upgrade." Phones priced above 2,500 yuan are now popular, and best-sellers increasingly fall into this category. More people are focusing on performance and camera quality, and mid-range phones are no longer the top choice.

Consumers today are willing to spend more to meet their growing needs. After all, smartphones have become essential in the mobile internet era. People are always ready to upgrade, even if it means paying more. However, due to rising costs, the same price now buys less, and higher-priced models don’t always attract strong demand. The poor sales of the iPhone 8 in China are a clear example — even with Apple’s strong brand appeal, many people are hesitant to pay the full price.

Other external factors include the removal of subsidies by carriers and the introduction of monthly payment plans, though these have limited impact on domestic users.

As smartphone prices continue to rise, it may ultimately harm consumers. While Apple and Samsung maintain their high-end image, they risk creating a sense of distance from customers. For Xiaomi and other domestic brands, rising costs are a challenge, but also an opportunity if they can manage supply chain pressures. However, for now, the rising costs are a bitter reality that only they truly understand.

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