Apple and Samsung struggle to sell us super-pricey smartphones
We're just not that into paying $1,000 for a phone anymore.
The iPhone XR and the Galaxy S10E cost less than their flagship siblings.
Smartphone makers, led by Samsung and Apple , have been jacking up prices over the last few years. Consumers, however, have been pushing back. And now there's new data that shows it's harder than ever to compete in the ultrapremium tier of phones.
Apple and Samsung this week reported earnings for the June quarter that didn't convey much optimism in the high-end phone market. In Apple's case, iPhone sales dropped 12% from the previous year, and its overall net income tumbled 13%. Analysts believe the iPhone XR, the company's cheapest new model at $749, has become more popular than Apple's $999 iPhone XS and $1,099 iPhone XS Max. At the same time, people are holding off on purchases as they wait for the iPhone 11 to arrive in September.
Samsung's overall handset sales, meanwhile, rose about 7% to 24.3 trillion won (about $20 billion) -- and the company increased its lead in the global smartphone market share by two percentage points to 22%, according to Strategy Analytics. But the gain was largely because of Samsung's cheaper A Series devices. Its mobile operating profit was 42% less than a year ago, and revenue from Samsung's flagship Galaxy S lineup, which starts at $750 for the S10E, dropped because of "weak sales momentum for the Galaxy S10 and stagnant demand for premium products," Samsung said.
If you've exercised any semblance of fiscal responsibility, these results shouldn't shock you. Phone prices have been increasing, and people are upgrading less often. If someone's buying a $1,000 phone with all the bells and whistles they can imagine, they tend to hold onto it longer than before. In the US, consumers now upgrade to a new model about every three years instead of every two. At the same time, software updates make old phones feel new, hardware designs aren't changing much from year to year, and less expensive devices are getting features previously found only in pricey flagship phones.
For many people, that's good enough.
"Innovation is more on the software side than the hardware side," Creative Strategies analyst Carolina Milanesi said. "The life span of the device lengthens because you're getting so much more from it."
Cheaper phones for the win
Phones may be getting more expensive, but that doesn't mean we're buying. For Apple and Samsung, their less expensive flagship devices are now attractive for many people.
CNET's Scott Stein dubbed the iPhone XR "the best iPhone for the price" and said it delivers "most of the advantages of the iPhone XS for hundreds less." And CNET's Jessica Dolcourt called the Galaxy S10E "a dream come true for value shoppers who love small phones."
The two devices, both the cheapest versions of their flagship lineups, are proving to be popular with buyers. Canalys said the iPhone XR was the "silver lining" in Apple's otherwise weak June quarter iPhone sales. The research firm estimated that the device accounted for about 38% of Apple's shipments in May. And Apple CEO Tim Cook said the company benefited from in-store trade-in and financing programs.
But it's not just the discounted versions of flagships that are more popular than their pricey siblings. In the case of Samsung, it's the company's Galaxy A lineup that's attracting buyers. As Samsung noted, its overall smartphone shipments increased from the first to second quarter because of "strong sales of the new Galaxy A Series, including the Galaxy A50 and A70."
Many of those devices have features similar to those found in Samsung's pricier phones, and some even have characteristics not found in the Galaxy S and Note lines.
For only $350, customers can buy the Galaxy A50 for Verizon and other US networks. The device includes a 6.4-inch display and three cameras on the back. Both those features are also found in the Galaxy S10 Plus , which starts at $1,000.
The Galaxy A80 became the first, and so far only, Samsung phone to sport a rotating, pop-up camera when it launched in April. The phone's sole camera array automatically flips around when toggled into selfie mode and contains a 48-megapixel main camera, an 8-megapixel ultrawide and a time-of-flight sensor that can be used for facial recognition. The A80 also has an "intelligent battery" that learns your daily routine and app usage patterns to optimize your phone's power consumption. No Samsung flagship devices have the swivel camera, but the battery smarts appear in the Galaxy S10.
The Galaxy Note 10, which Samsung will introduce next week at an event in New York, isn't expected to be a huge leap from its predecessor but should appeal to the Note's die-hard fans. It's unclear just how many will shell out $1,000 or more to upgrade. It probably won't have a pop-up camera.
Commentary: What the Note 10 has to do to impress us.
Samsung also plans to finally release the tweaked Galaxy Fold -- the first foldable phone from a major electronics company -- in September after fixing the problems that plagued early reviewers' units. It's also going to boost its "5G smartphone lineup to take the lead in the new market."
None of those devices will come cheap, but Samsung's counting on them to help revitalize phone sales. The reality, though, is the company's cheaper phones just may win the day.
"The new devices, from the A10 to the A80, accounted for more than 50% of Samsung's shipments in Q2," Canalys noted. They're "expected to drive volume growth for Samsung for the rest of the year."