Smartphone makers clearly expect customers to keep digging deeper into their pockets. But those pockets are already feeling empty.
Samsung provided the first official look at the upcoming season in hand-held devices on Thursday with the unveiling of the Galaxy Note 9. The latest offering in the company’s super-sized section of smartphones has the typical enhancements one expects in an annual upgrade—a faster processor, more memory and better battery life. The most notable new addition was adding a remote control function to the stylus that comes with the device.
For this, Samsung expects its customers to pay a starting price of $999, which is about 5% more than the starting price of last year’s Galaxy Note model. And last year’s starting price was 8% to 12% higher than the previous year’s iteration. Samsung is hardly alone in this regard;
has been boosting the prices on its smartphones as well, with last year’s iPhone X the first to hit the eye-popping $999 mark. Apple’s average selling price for the iPhone in the first six months of this year jumped nearly 15% over the same period last year.
But smartphone buyers may already be tiring of the game. In their second quarter earnings call last month, Samsung executives noted that rising smartphone price tags were “drawing market resistance.” That was after the company posted a sharp drop in sales for its mobile division, which it attributed in part to weaker-than-expected demand for its flagship Galaxy S9.
Samsung and Apple together have long accounted for a little more than one-third of all smartphones sold globally. But they are facing a growing challenge from Chinese brands, which are bringing their own high-end phones to the market at lower prices. Huawei, China’s largest smartphone vendor, overtook Apple in global unit sales for the first time during the June quarter.
Given how customers reacted to its higher priced Galaxy S9, the new Note 9 could face the same pressure on sales. And Apple will be hard-pressed to repeat the same pricing trick that has helped the company boost iPhone revenue this year. New iPhones are expected next month, and Wall Street expects the company to at least keep its average selling price above $750 for the coming year compared with $652 for the fiscal year ended September 2017.
IDC now expects smartphone sales to contract globally this year following their first decline last year. In a market where sales are falling and competition is increasing, raising prices won’t get you very far.
Write to Dan Gallagher at email@example.com