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Phones

Why your iPhone and Android phone will get more expensive

The numbers don't lie.

James Martin/CNET

Remember when the only phones with over-$1,000 price tags were made of leather, ruby and sapphire crystal? Thanks to Apple and Samsung, those days are over. The iPhone XS and Galaxy Note 9's $999 starting price tags cement the thousand-dollar phone as the new normal. Level up your storage capacity and the prices only climb. If you want that iPhone XS with 512GB storage capacity, you'll pay $1,349 -- that's 35 percent more. In the UK that high-spec phone is a whopping £1,349 and AU$2,199 in Australia, and let's not even get started with the even more expensive iPhone XS Max.

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It may feel like the iPhone XS costs as much as a brick of gold.

Sarah Tew/CNET

But the problem doesn't end there. This new wave of higher prices for top-tier devices is part of a larger trend that affects the prices of most phone brands, including Google, Huawei and OnePlus

Premium models aren't the only products getting more expensive; midtier devices are nudged up, too. The iPhone XR costs 7 percent more than last year's entry-level iPhone 8, and 15 percent more than the iPhone 7. The OnePlus 6T, meanwhile, rose 3.8 percent over the OnePlus 6 phone released just six months ago, and a total of 37.6 percent over the last two years.

The data from 11 phone models from 2016 to 2018 shows a pattern of sharp price hikes that we expect to see heighten in 2019 and beyond (See your regional chart below). Apple has certainly applied the model to other electronics in its lineup, boosting its prices on its new iPad Pro and MacBook Air over previous models, and creating wide price swings between the entry-level product and the higher storage version.

These creeping prices across Apple's portfolio and the mobile category signal that costlier devices are here to stay -- and it may be our fault by buying them in droves in the first place. 

When Apple broke the $1,000 barrier for its iPhone X in 2017, critics scoffed at its exorbitant price, but it quickly outsold every other Apple device in each week since it first went on sale Nov. 3, 2017. Apple's gambit paid off as consumers accepted the higher-price models, and other manufacturers followed Apple's lead. 

The trend of increasingly costly handsets in the top tier underscores the cell phone's importance as an everything-device for communication, work, photography and entertainment. And as processing power, camera technology, battery life and internet data speeds improve generation after generation, the value people attach to a phone is sure to swell.  

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"Consumers are prepared to pay a premium for a mobile phone because it is arguably the most important product in their lives," said Ben Wood, the chief research analyst at CCS Insight.

Rising prices aren't unusual on their own. Faster, better components like processors and cameras cost more to make. The financial load of researching and developing new materials also gets folded into the final product. And inflation affects the cost of goods outside of tech, too.

But R&D spending and inflation don't tell the entire story your phone's creeping expense. By increasing the prices of their phones with each iteration, Apple, Samsung and other leaders in the industry are creating an ultra high-end segment that can make each sale more profitable -- that's important as people start holding on to their phones longer, for three years or more.

Yep, your phone costs more every year

With few exceptions, phone prices from top brands are on the rise.

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Terrific phones will cost you.

James Martin/CNET

"Although overall smartphone shipments will decline slightly in 2018, the average selling price (ASP) of a smartphone will reach $345, up 10.3 percent from the $313 ASP in 2017," IDC analyst Anthony Scarsella said in IDC's Worldwide Quarterly Mobile Phone Tracker, shared with journalists in May. Prices will jump on the high end especially, Scarsella added.

The uptick is immediately noticeable when comparing phone prices from today with the same model released just two years ago.

Apple's prices have risen at a steady rate for both its iPhone and iPhone Plus/Max lines, making the iPhone XS Max a luxury spinoff.

Samsung's Galaxy S, S Plus and Note prices are swinging upward too. Even before the Galaxy Note 9's $1,000 bombshell, the S9 Plus -- last year's iPhone Plus and iPhone X rival -- was already inching toward iPhone X prices.

US phone prices from 2016-2018


2016 (starting price) 2017 (starting price) 2018 (starting price) % change of highest price from 2016 to current model
iPhone (cheapest) iPhone 7: $649 iPhone 8: $699 iPhone XR: $749 15.4%
iPhone X N/A iPhone X: $999 iPhone XS: $999 0%
iPhone Plus/Max iPhone 7 Plus: $769 iPhone 8 Plus: $799 iPhone XS Max: $1,099 42.9%
Samsung Galaxy Galaxy S7: $650-695 Galaxy S8: $720-$750 Galaxy S9: $720-$800 15.1%
Samsung Galaxy Plus S7 Edge: $750-795 Galaxy S8 Plus: $785-$850 Galaxy S9 Plus: $840-$930 17%
Samsung Galaxy Note Note 7: $834-880 Note 8: $930-960 Note 9: $1,000 13.6%
OnePlus OnePlus 3: $399 OnePlus 5: $479 / OnePlus 5T: $499 OnePlus 6: $529 / OnePlus 6T: $549 37.6%
LG G series LG G5: $576-689 LG G6: $600-720 LG G7: $750-790 14.7%
LG V series LG V20: $672-829 LG V30: $800-912 LG V40: $900-$980 18.2%
Google Pixel Pixel: $649 Pixel 2: $649 Pixel 3: $799 23.10%
Google Pixel Plus Pixel XL: $769 Pixel 2 XL: $849 Pixel 3 XL: $899 16.9%

UK phone prices from 2016-2018


2016 (starting price) 2017 (starting price) 2018 (starting price) % change from 2016 to current model
iPhone iPhone 7: £599 iPhone 8: £699 iPhone XR: £749 25%
iPhone X N/A iPhone X: £999 iPhone XS: £999 0%
iPhone Plus iPhone 7 Plus: £719 iPhone 8 Plus: £799 iPhone XS Max: £1,099 52.9%
Samsung Galaxy Galaxy S7: £569 Galaxy S8: £689 Galaxy S9: £739 29.9%
Samsung Galaxy Plus S7 Edge: £639 Galaxy S8 Plus: £779 Galaxy S9 Plus: £869 36%
Samsung Galaxy Note Note 7: £700 Note 8: £869 Note 9: £899 28%
Google Pixel Pixel: £599 Pixel 2: £629 Pixel 3: £739 23.4%
Google Pixel XL Pixel XL: £719 Pixel 2 XL: £799 Pixel 3 XL: £869 20.9%
LG G series LG G5: £539 LG G6: £649 LG G7: £599 11.1%
LG V series N/A LG V30: £800 LG V40 ThinQ: N/A
OnePlus OnePlus 3: £329 OnePlus 5: £449 OnePlus 6: £469 / OnePlus 6T: £499 51.7%

We see the most shocking escalation from OnePlus, whose price jumps up each time a new model arrives. OnePlus is currently on track for two variations per year: The OnePlus 6 debuted in June for $529 and the OnePlus 6T launched in October for $549. Again, the OnePlus 6T costs 37.6 percent more than the 2016 model in the US. The phone became 51.7 percent more expensive in the past two years if you paid in British pounds.

"As reliance on smartphones has increased drastically over a short amount of time, the increase in quality and components across the industry required to meet high performance demands has also risen," a OnePlus representative said.

lg-g7-caracteristicas

The LG G7 price is rising at a consistent rate in the US and AU, but costs less in the UK than the LG G6. Tarriffs may be one cause.

Juan Garzon/CNET

According to LG, "Key factors include the cost of components, competitor pricing, carrier incentives, tariffs, etc.," Ken Hong, LG's senior director of global communications, said in an email. 

"Fact is, these input costs are rising so we're forced to follow suit," Hong said, adding that introducing more variants like the LG V35 has the positive effect of lowering the price of the previous model, in this case the LG V30.

CNET reached out to all manufacturers mentioned in this story for comment.

Interestingly, the Pixel 2 and Pixel 2 XL cost the same as the Pixel and Pixel XL. However, Google raised the Pixel 3 price 23 percent, without adding a second camera on the back and making minimal design changes. Google has pushed up the price to match the competition.

But making phones is more expensive now, right?

Phones, like all electronics, are composed of parts sourced from various suppliers, and if the cost of those parts goes up, it's a sure bet the cost of the phones will, too.

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More sophisticated components, like the Qualcomm Snapdragon 845 chip, may nudge phone prices up.

Jessica Dolcourt/CNET

Demand for more storage over the past few years has triggered price hikes, pushing up the cost of memory and prompting suppliers to invest in building more factories to meet the demand, according to Wood. 

Adding more sophisticated cameras like the iPhone XS' 3D depth sensing front-facing camera, or more lenses, like the Huawei Mate 20 Pro's three rear shooters, costs more too. And so do materials like glass or ceramic for a phone's backing, or sturdy aerospace-grade aluminum for the frame.

You can bet that the first phone to debut a diamond glass screen or the new, smudge-resistant Vibrant Satin Corning Gorilla Glass won't be cheap. It's also expensive for companies like Samsung to build a whole new manufacturing process for elements like curved glass and flexible OLED displays.

Yet while the cost of all these components -- called the Bill of Materials, or BOM -- can partially explain why high-end phones cost more each year, many experts say that phonemakers are padding their profits.

"I certainly accept that some elements of the cost came from the components and the manufacturing process… but not to that order of magnitude," Wood said on a phone call in July. "I also believe that Apple made a strategic decision to increase the price of the flagship iPhone to maximize the returns on a really amazing portfolio."

Carolina Milanesi, an analyst with Creative Strategies, agrees.

"There is certainly more going into these phones than ever before," she said in an email. "The BOM is certainly growing for these devices, but I do think that there is a premium margin applied by the brands to their flagship products because they are status symbols."

Where's the price ceiling?

Apple and Samsung's $1,000 phones are clearly just the beginning, and analysts think buyers will give in.

"As long as the phones are our main go-to computing device throughout the day, buyers will be willing to spend more," Milanesi said.

Wood agrees.

"Apple continues to break all the rules when it comes to consumer electronics pricing," said Wood. "Once again it's increasing the price of its flagship device. It comes at a time when rivals like Samsung are under huge pressure, and it simply confirms the premium that people are prepared to pay for Apple products."

With today's iPhone XS, Galaxy Note 9 and Huawei Mate 20 Pro nudging prices skyward, other players have reason to follow suit. Even midtier models (again, the iPhone XR and OnePlus 6T) can get away with raising their price tags so long as the devices cost relatively less. For example, the OnePlus 6T at $549 still costs nearly half of what you'd shell out for the iPhone XS, a relative value that many find easy enough to swallow for a "cheaper" phone with high-end parts.

"When Apple announced the iPhone X for a thousand bucks... they did the whole industry a favor," Wood said. "That gave all the other manufacturers some breathing space and I can imagine there was a certain delight in the corridors of Samsung and Huawei and others."

In other words, while Apple might pocket the most profit, its audacious iPhone X price tag helps competitors make more money per phone, too.

Don't worry, midrange phones are still affordable

High prices on top-tier phones may not mean that the cost of every phone will rise.

motorola-moto-g6-0871

The "cheap" Moto G prices have held steady these last few years.

Josh Miller/CNET

We continue to see fierce competition in the middle and low end where phones like the Motorola Moto G6 and E5 families turn out excellent budget handsets for just about the same price each year: $250, £219 or AU$399 in the case of the Moto G6.

Huawei's Honor brand also notably produces midprice, midtier devices that strike a balance between value and cost, often while hewing to popular designs and features, like slim bezels and dual, portrait-mode cameras that people crave. Xiaomi, Nokia, Oppo, Asus and other brands also help fill the gap worldwide by quietly cranking out basic, affordable phones for cost-sensitive buyers.

So while the shiniest, most powerful devices are still locked on a path to their highest prices yet, there's still a strong demand for midrange and entry-level phones aimed at people with tighter budgets or more basic needs.

If a $1,000 phone sounds too outrageous, you may need to find beauty in a more modest phone, or get over the sticker shock and accept that the days of a $600 flagship phone are long behind us.

This story was first published Aug. 5, 2018 and most recently updated Nov. 11, 2018.

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