Why Mobile Phones Have Such Ridiculously High Prices

We just can’t stop buying them

  • The original Motorola cell phone would cost over $10,000 today.
  • iPhone prices have steadily increased since the iPhone 6.
  • Apple and Samsung own three-quarters of the US phone market.
Yellow iPhone on the ground
Unsplash / Vựa Táo

Adjusted for inflation, 1983’s Motorola DynaTAC phone would cost $10,380 today. The cost of mobile phones dropped significantly after that, but in recent years they’ve been creeping back up, mostly because we’ll still buy them at higher prices.

The original iPhone launched for $400. The current cheapest iPhone is the iPhone 12 mini, which comes in at $729 for the 64 GB model, which really isn’t enough storage, anyway. The original Samsung Galaxy went for $599, and now the cheapest model costs $799. That’s quite a hike, and usually the prices of gadgets tend to drop, not increase. What’s going on?

“Apple and Samsung have dominated the market for years so they have the ability to charge a premium, particularly for their flagship phones,” Beth Klongpayabal, analytics manager and author of a new report on phone prices at Savings.com, told Lifewire via email. “Apple, in particular, has been considered a luxury brand by many for decades, further enabling them to do this.”

The Evolution of Phone Prices

Older mobile phones from the past
Unsplash / Nastya Dulhiier

It used to be that we’d buy our phones by heading to the carrier store and seeing what was available for an acceptable monthly fee. We never knew the prices of the handsets, nor did we care. Now, it often can be cheaper to buy a phone outright and sign up for a pay-as-you-go plan. And somehow, we’re still ok with these prices.

The 128 GB iPhone 12, the model with enough storage to be useful, is $879 plus tax. Many of us will replace our phones every couple of years, at a grand a pop. Meanwhile, the MacBook Air is similarly priced, and Windows laptops can be had for much less. And yet how many of us would consider replacing a laptop every two years?

“Consumer audio products can tend to have inflated prices, with brands like Beats charging a premium despite costing little to produce.”

According to Savings.com’s study, iPhone prices have been creeping up since 2014’s iPhone 6. That handset cost $650. And, remember, we’re looking at the least-expensive models. The most costly iPhone you can buy today is the iPhone Pro Max, which starts at $1,099 and tops out at $1,399. The Galaxy S21 Ultra 5G 512 GB is a similar $1,379.

In fact, says the study, Nokia is the only major western manufacturer not to have broken the $1,000 barrier. Overall, phone prices have been on the rise since 2012. Before that, from 1982-2011, they declined.

At the same time, the average selling price of the iPhone has remained pretty much the same, thanks to Apple expanding from one model to a range of models, at a range of prices. “The average selling price has also remained pretty constant since 2008,” says analyst and Apple specialist Horace Dediu on Twitter.

And part of the change is plain old economics. “If you factor for inflation, the $600 2007 iPhone would be $742 now,” says Dediu in another tweet

Non-Phone prices

Have other categories increased their prices over the previous decade? According to Klongpayabal, they have not. 

“Consumer audio products can tend to have inflated prices, with brands like Beats (Apple) charging a premium despite costing little to produce,” said Klongpayabal. “That said, phones seem to be the one category where prices continue to rise year after year, compared to a category like computers, where you can purchase a budget-friendly option without compromising much on capability.”

Galaxy Note 9 back panel
Unsplash / Damo T.

Why, then, are phones so expensive? Because they can be. According to IDC figures, Samsung shipped 80 million phones in the third quarter of 2020, followed by Huawei, at 52 million. Samsung shipped almost a quarter of all phones in that period. In the US, Samsung and Apple tied up over 70% of smartphone sales in 2020, and even more the year before that. Apple alone makes around half of all smartphones sold in the US.

Somehow, phone makers have managed to continuously increase prices of their cheapest handsets, while adding ever-more-expensive models at the high end. Meanwhile, we keep upgrading our pocket computers at these inflated prices, every few years. And it’s a real win for Apple and Samsung, because it doesn’t look like this trend is slowing down any time soon.

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