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5G phones: Why they're so expensive and when cheap models are coming

Despite hurdles, the wheels are in motion to make the world's fastest 5G phones easier to afford.

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We all know that 5G phones are expensive. The ability to connect to ultrafast networks is seen as a premium nice-to-have, but not need-to-have feature that raises the price of any phone by hundreds. High prices will deter billions of people from switching over from 4G phones to faster 5G. Affordable 5G phones for all are on the horizon, but good 5G budget phones are still years away.

5G phones are so expensive because the devices and the wireless networks they use cost billions to build. That price trickles down to you. There are a handful of 5G phones that cost less than $1,000, but they trade off features for price and many don't sell widely. Take, for example, the Xiaomi Mi 9 Pro. At $520, it sets an early blueprint for cheap 5G phones, but its limited availability keeps it from coming to US customers. 

By contrast, the cheapest 5G handset you can get in the US costs $840, with prices skyrocketing to $1,300 for phones like the Galaxy Note 10 Plus 5G. Samsung's Galaxy Fold 5G costs over $2,000. (The new $1,500 Motorola Razr is 4G-only.) 

With 5G at such a premium, it'll take years for the benefits to become widespread at every tier. Here's what the roadmap looks like to get cheaper 5G phones for all.

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Samsung's cheapest 5G phone, the Galaxy A90 5G, still costs over $800 for a midrange device.

Chris Monroe/CNET

"We do see 5G devices becoming quite mainstream," said Durga Malladi, senior vice president and general manager of Qualcomm's 4G and 5G chip business, which plays a role in the cost of building a 5G phone. "We can see the price trajectory going in the right direction."

The high price is a stumbling block to a technology that offers huge benefits. 5G is poised to make data transfer speeds 10 to 100 times faster than they are today, with almost no connection lag. 5G represents a leap forward in the kind of things we'll be able to do on our phones, from ultrahigh video resolution to real-time 3D gaming, which is why phone-makers are pushing hard to make it so. (Here's when 5G will actually start affecting your life.)

Cheaper 5G phones are coming, but it'll take a combination of factors to make the phones as inexpensive as good budget and midrange 4G handsets are today.

Cheaper chips that work with more carriers

One reason why 5G phones cost so much is that the chips cost more, too. Without a 5G-ready chip that can talk to the carrier network, your phone can never reach those lightning speeds. 

Right now, these 5G chips are tailor-made to each carrier's particular wireless spectrum. So even if you buy the Galaxy S10 5G for AT&T, 5G data won't necessarily work on T-Mobile, Verizon or Sprint. Making 5G phones more or less bespoke to each carrier requires extra time and expense to develop, test and deploy. 

Another wrinkle is that most of the chips aren't integrated yet -- the modem inside the device that makes the actual connection to the network is on a separate chip from everything else. A separate modem means one more element that the phone-makers have to buy.

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Separating the modem also takes up more space inside the phone's cavity, which means less room for the battery. That's why you see this dual 5G-chip combination in larger phones that have more room for a large battery, to keep power reserves as full as possible while using battery-hungry 5G.

Change is on the way

Separate 5G chipsets and modems may not be the norm for long. Qualcomm is working on a way to integrate the two into a single unit. The world's largest mobile chipmaker also plans to eventually make 5G available on multiple carrier bands. Both these changes will simplify what it takes to build a 5G phone, which in turn should make them cheaper to make and maintain.

Competition will also help lower the price, especially if players like MediaTek, known for undercutting Qualcomm on processors and modems, can target the 5G midrange chipset market abroad. Qualcomm itself is also committed to making a midrange 5G processor for cheaper phones.

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The Xiaomi Mi Mix 3 5G sets the course for how sub-$600 5G phones could be.

Juan Garzon/CNET

Samsung and Huawei are other chipset rivals that make processors in-house. As a heavy hitter in 5G networking equipment, Huawei has the advantage when it comes to producing cheaper 5G chips, especially for the world's largest market, China.

The ongoing question, of course, is when we start seeing these cheaper 5G phones emerge.

"As 5G modems start to get integrated into core mobile processors, which vendors like Qualcomm are expected to do in 2020, then that will enable lower-cost 5G phones, but many of those won't be available until the end of next year or into 2021," said Bob O'Donnell, an analyst at market research firm Technalysis.

Mind the trade-off

5G is synonymous with incredible speeds, but -- at least initially -- cheaper 5G phones will have to make some deep compromises to hit a cheaper price. Expect these budget 5G phones to get slower-than-peak 5G speeds, have a lower-powered camera, scaled-back graphics and shorter battery life than more souped-up models.

Over time, some of those features will get better. This happened with 4G, and it will happen with 5G again.

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The Oppo Reno 5G looks good and costs under $1,000.

Ian Knighton/CNET

But making a budget 5G phone for the sake of it isn't the right approach, said Qualcomm's Malladi, since you'll need a basic set of features to make the 5G experience worthwhile, like enough battery capacity to support faster speeds, and processors fast enough to take advantage of the increased data you'll draw down. 

For example, if 5G speeds lead to killer AR apps, but your phone isn't powerful enough to render those AR graphics without major lag time, you won't be very happy with your phone.

"If you put out a $399 5G phone [today], you're going to have to sacrifice a lot of the elements that people value," Francoise Laflamme, Motorola's chief strategy and marketing officer, told CNET in August

We may start seeing those less expensive 5G phones in the first half of 2020, but don't hold your breath for good, cheap 5G phones to replace 4G phones quite yet.

Originally published earlier this week.