Smartphone prices plummet

Smartphones have become so popular in the past couple of years that they generated US$293.9 billion in sales for 2012 alone.

However, the American research firm International Data Corporation (IDC) revealed that since the start of 2012, the average price of smartphones dropped to US$375 from US$450. Does this recent price drop in high-end smartphones also indicate their waning popularity?

What can be said for sure is that the plunging prices have already affected the profit margins and revenue growth of Apple and Samsung. This could further impact floundering companies like BlackBerry and Nokia, who rely on new models to revive their sales.

Nonetheless, the trend could benefit emerging market players such as Huawei and Lenovo, who focus on low-end units.

“The days of great growth in the high-end of the market are gone,” said ABI Research analyst Michael Morgan.

The drop in smartphone prices is similar to what occurred in the personal computer market in the 1990s, explained Emachines CEO Stephen Dukker. During that time, millions of consumers who wanted to browse the web for the very first time bought affordable PCs from low-cost providers such as Emachines. Ultimately, this squeezed PC prices from US$1,898 in 1996 to just US$1,026 by 2002, noted IDC.

Moreover, the big players are already feeling the effect of lower prices. Samsung lost over US$25 billion in market capitalisation in June, as experts slashed sales projections for the company’s flagship Galaxy S4.

“The market is becoming less about speeds and feeds and more about price,” added IDC analyst Kevin Restivo.

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