It's not just about performance any more, smartphones are reaching peak luxury lifestyle.
A few years ago, we all thought flagship smartphones were about as premium they could get. They had beautiful displays, powerful processors, and great cameras. There couldn't be anything else we'd want from a phone. Apparently, we were wrong. Apple, Samsung, and now Huawei, have proven there’s a tier beyond flagship. Now, there’s regular flagship for mere mortals - the Galaxy S9, the iPhone XR, the Mate 20 - and another, more premium tier – the Note9, iPhone XS Max, and Mate 20 Pro - for power-users, enthusiasts and, to put it quite simply, those with more money.
Welcome to the age of the ultra-premium flagship phone.
HOW DID WE GET TO THE POINT WHERE A PHONE COSTS NEARLY $2,500?
Apple may just be the king of the ultra-premium flagships with this year’s iPhone XS Max 512GB model costing a whopping $2,349. In 2016, Apple’s most expensive phone, the iPhone 7 Plus 256GB, only cost $1,588. That’s a 48% increase in price in just two years. But just how did we get here?
Samsung was actually the first brand to explore the potential of an ultra-premium phone with its Galaxy Note line. Launched in 2011, the Note stood out thanks to its large screen and bundled S Pen stylus, promising to be a powerhouse of productivity. It was marketed as a mobile office on the go, and the first Note phone sold for $998, making it one of the most expensive smartphones available at the time. Fast-forward to 2018, the Note9 512GB model has an SRP of $1,728, which is a 73% price jump.
Apple began its own ultra-premium journey around 2014 when it split the iPhone line into regular and Plus models. The first iPhone 6 Plus cost about $200 more than the regular iPhone 6 and featured a camera with optical image stabilization (not available on the regular iPhone 6), a larger screen and a bigger battery. The divide between the regular and Plus models grew in 2016, when Apple became one of the first manufacturers to add a second camera to the back of the iPhone 7 Plus. And a year after that, Apple introduced an even more premium model above the Plus, the iPhone X, which boasted the incredibly advanced TrueDepth camera system and had a launch price of $1,888 for the 256GB model.
Over the past few years, there’s been a dramatic increase in price for the very best phones. It’s simple to point to better and better specs causing an increase in prices, but the technology industry is famously governed by something called Moore’s Law: the ability for computing speeds to double every two years or so.
That’s not just processing power either, it means faster RAM, faster storage, faster network speeds, and every component getting smaller and smaller.
In fact, thanks to Moore’s Law, almost every type of tech product has become cheaper over the past decade. According to the US Bureau of Labor Statistics, the consumer price index for PC hardware and accessories has fallen 94 per cent in the past decade. This downward trend also applies to TVs and other consumer electronics. The only market where this isn’t true? Flagship smartphones, which instead have shown a strong upward trend.
It’s true that the lower end of the smartphone market follows Moore’s Law, with manufacturers like Xiaomi and OnePlus continuing to pack more and more features and high-end specs into affordable devices, but why are we not seeing the same pattern at the top?
Part of it comes down to the increasing costs of making top-end devices. The iPhone XS Max reportedly costs Apple about $605 in manufacturing costs and materials, up from the reported $405 it cost to make last year’s iPhone 8 Plus. Much of the increased cost comes from specialized components. The iPhone XS Max’s extra-large 6.5-inch OLED display costs Apple $110 per panel. But while top-end phones are becoming more expensive to manufacturer, that’s not where the real costs lie.
Last year, Apple spent US$11.58 billion on research and development, its most ever. And Apple wasn’t alone. Samsung spent US$15 billion on R&D last year, while Huawei reportedly spent US$14 billion. Research and development is by far the biggest cost for today’s ultra-premium phones.
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