1. Comment
April 30, 2020

Smartphone market will become budget conscious in Covid-19 downturn

By GlobalData Thematic Research

The last few years have seen smartphone prices skyrocket. Top quality Apple and Samsung flagship phones cost upwards of $1,000. However, consumers have gradually shied away from paying top dollar for flagship smartphones year after year. In their minds, successive phone iterations do not offer enough uniqueness and innovative features to justify the high-prices. As a result, consumers are not upgrading their phones as often as carriers would like. Users are now holding on to their phones up to an average of four years and more.

Manufacturers are feeling the pinch. In Q4 2019, Samsung, which refreshes its premium Galaxy brand of flagship phones annually, saw a 42% drop in operating profit year-over-year due to weak sales momentum for the Galaxy S10 series and stagnating demand for premium flagships. The savior for Samsung’s smartphone sales was its more affordable Galaxy A series of phones.

Mid-range smartphone or junior flagship

Carriers and OEMs are turning to an overlooked category to entice customers into buying phones more often: the affordable mid-range. The last one year has seen the rise of junior flagships. These are mid-range smartphones that typically cost from $300 to $600 and trade on their brand name. They can include key features of premium phones at half the price, such as Google’s Pixel 3a series and the OnePlus 6T. Apple is the newest entrant to join this category with its new iPhone SE, released on 24 April 2020. The $400 SE hits a sweet spot of high-end specs and a low price with some key features found in the flagship iPhone 11—most notably the A13 Bionic processor, which also improves camera quality and will allow customers to run Apple’s services well without slowing speeds.

The Covid-19 effect on smartphone sales

Carrier retail store closures and lockdowns due to Covid-19 will only accelerate this market move to mid-range phones. Consumer spending will remain subdued even after lockdowns are eased, as ripple effects of the pandemic become clearer. In this scenario expensive flagship smartphones are directly in the line of fire. Samsung has already seen significant discounting of its newest Galaxy S20 series as Covid-19 lockdowns have affected sales.

Carriers will have to get aggressive to jumpstart smartphone sales. Cheaper phones are more likely to appeal to consumers struggling with the economic after-effects of the pandemic. Carriers and manufacturers alike, have a much better chance of riding out the imminent recession with mid-range, affordable phones, than premium flagships.

Topics in this article: