An Unfolding Market

Are New Flagships Making the Case for Mid-Level Smartphones?

We never doubted the $2,000 smartphone would come, and in 2018 we wrote that devices with this steep new price tag could be just around the corner (see The $2,000 Smartphone).

The arrival of phones with folding screens, like Samsung’s Galaxy Fold and Huawei’s Mate X, isn’t just a possible start of a design shift, but a development that will also become another litmus test of consumer willingness to splurge. As many people question if phone-makers have got ahead of themselves by launching $1,000 smartphones, devices costing $2,000 are raising more questions about a mismatch between the possibility to build and the desire and ability of consumers to pay.

Both Samsung and Huawei drew a gasp from their audience when retail pricing was revealed for their flagship foldable phones. Prices are moving beyond a comfort zone even for the most seasoned industry observers. We believe these phones will be magnets to gadget-lovers, some of whom will be prepared to pay top dollar for the latest devices. However, there’s also a strong argument to suggest they’ll also be used as technology flagships by mobile operators keen to reinvigorate interest in smartphones after years of similar-looking products. It will be a positive outcome if these new cutting-edge phones encourage consumers back into mobile phone retail outlets at a time when footfall has been in decline.

There’s a dichotomy developing in the market. While smartphones costing thousands of dollars are making the headlines, major device brands are also rolling out lower-priced devices. Smartphones priced at between $400 and $700 could now be classified as mid-level priced by some people.

During the past two years, and particularly since the launch of Apple’s iPhone X, consumers’ willingness to pay has been put to the test with varied response. Although an average mobile subscriber relies on their smartphone to assist with most every-day tasks, they may see a return on switching to a new model as offering no additional value.

Subscribers can be proud, but they’re also pragmatic. We see this clearly in how they hold on to their phones for longer than ever before. Mobile users in Western markets are changing their buying patterns, and this can go further than lengthening upgrade cycles.

Smartphone brands such as Xiaomi, Huawei’s Honor, HMD Global’s Nokia and OnePlus are in the low-end phone space with devices that offer many of the same features found on the latest flagships, but at significantly lower prices. Market leader Samsung has also been dramatically expanding its mid-tier portfolio.

Over the past decade in many countries, consumers’ desire to own top-tier devices has enabled a few smartphone makers to move significant volumes of their latest models. There’s no guarantee that this will continue.

In other words, if frugality trends, products will be available to support it.