How Did Smartphones Ever Become So Expensive?

The latest flagship phones are more expensive than ever. But is that justified?Every year, we see better cameras, more storage and faster processing speeds.

But all of the innovation means a heck of a price, and someone has to pay. And that someone is us.

Manufacturing Costs

Certainly, top-of-the-line software and hardware features improve a smartphone’s performance. But they also come at a price. The parts that go into making an iPhone XS Max cost more than the ones that go into a first-generation iPhone 4. The same holds for battery size, display quality and camera lens capacity: you pay more for an iPhone or other smartphone with them than with only the most rudimentary specifications.

There so many reasons to explain the rise in expenditures, such as the high demand for smart phones and the challenges to keep up with the technology. Moreover, manufacturers need to consider the factors coming from the extra cost due to the inflation like higher cost to production and shipping of their products.

However, wireless carriers absorb some of these costs and spread them out via monthly payments, or sometimes via device finance agreements, which makes it difficult for many people to justify a flagship handset purchase outright. But enter the $100 or even $70 smartphones that some manufacturers offer.

Raw Materials

Every smartphone is full of metal and other expensive materials, and those raw materials keep getting more and more costly. The COVID-19 pandemic, coupled with global shelter-in-place regulations and factory closures, played a huge role in pushing manufacturing and component shortages that caused a ramp-up in raw material prices of copper, silicon, aluminium and many other materials.

Moreover, the ongoing work-at-home/study-at-home paradigm during the early COVID-19 pandemic fuelled exploding demand for semiconductor chips – necessitating vast amounts of silicon and putting tensions on extended supply chains and pricing.

Despite this, some brands such as Realme have been forced by the chip shortage to raise the market operating prices of their smartphones. This is expected through the festive season.

Advanced Technology

I do not doubt that the smartphone has sped up the process of globalisation and economic growth as companies no longer have to spend money on the variety of devices that have now been made redundant by his smartphone. Years ago, a TNW editor already calculated how many gadgets had become unnecessary now that he had a smartphone – the feature phone, MP3 player, point-and-shoot digital camera, GPS, alarm clock and handheld gaming system.

However, every single smartphone generation heralded more pixels, more memory, faster Internet connectivity and higher processing speeds. None of this comes without a hefty price tag.

Consequently, it’s no great shock that the average price for a smartphone has continued upward. The march to new innovation also demands greater investment in R&D, some of which will eventually have to be recouped. Ditto for the costs related to bringing new products to market. And because phone carriers discontinued the practice of subsidising phones for slashed prices this year, Apple and Samsung now continue to launch margins of their flagships in multiple sizes at varying price points.

Consumer Demand

Smartphones available on the market are designed in various ways to meet diverse consumer needs. At the same time, consumers have to pay more for a top-end smartphone by a renowned manufacturer.

On one hand, consumers have the choice to purchase a smartphone according to their own preferences. As a general trend, there are stylish and heavy-duty smartphones in the market now. Particularly, smartphones by I Phone and Samsung companies are considered “high-end” gadgets. They are airy, super light and updated with the most recent software. The majority of consumers nowadays are inclined to buy this kind of smartphone because it serves all of their requirements.

On the other hand, consumers have to pay more for a high-end smartphone. By way of illustration, I Phone 8 can cost around $1,000, while Samsung S8 Plus exceeds this price. This is because of the fact that there are high-quality materials used in producing these gadgets.

In conclusion, a wide range of smartphones of different styles is accessible in the market presently. At the same time, we are required to shell out more money for a high-end smartphone.

This is because a new flagship product that is introduced tends to have many new features that promote more demand, maybe because there was a devellompment in technology, or marketing or features.

The outcome is that both the minimum and the average price of ‘flagship’ phones have been rising steadily faster over time. In fact, it is rising faster than inflation, which means that smartphones indeed seem to be more expensive than they used to be.