The iPhone X has received substantial attention for its $999 price tag, but competing phones are hardly cheap in comparison. The iPhone 8 Plus with 256 GB is $949, the Samsung Note 8 starts at $929 and tops the $1K mark when 128 GB or 256 GB versions are selected, and the 128 GB Google Pixel 2 XL runs just shy of $1K at $949.

Mobile phone manufacturers pushing the envelope on price point are not being impractical. These prices aren’t for everyone, but make sense because nearly bezel-less screens are relatively new to the market and are likely to inspire widespread product lust. Even if the phones offered no other advances, the impression that the screens make alone is sufficient to drive upgrades.

Despite a general trend toward higher prices, more than 200 million phones were sold annually from 2012-17.

The natural expectation might be that if consumers spend nearly $1,000 on a smartphone, they might decide to upgrade less frequently. However, price increases to date have not significantly changed purchasing habits, even as carrier subsidies came to an end. In fact, despite a general trend toward higher prices, more than 200 million phones were sold annually from 2012-17, and Mintel forecasts 208.3 million units to sell in 2018, according to Mintel’s US report on mobile phones. Even as those with an eye toward the fashionable designs of bezel-free phones spend $800 or more on a new phone in 2017-18, an even greater impetus for a new purchase will hit these tech fans in 2019-2020: phones that work with new 5G networks.

What we think

Through the end of the decade, new smartphone sales will ride on despite hitting new extremes in pricing and consumers will continue to upgrade phones roughly every 24 months. However, the money consumers are spending on smartphones will likely come out of budgets that might have been spent upgrading other tech hardware products; the upgrade cycle for laptops, tablets and possibly even televisions will become more extended.

Manufacturers with products in multiple categories are likely to see some cannibalization of sales unless they find reasons to upgrade product categories where innovation is more limited than in smartphones. Providing consumers with discounts on purchasing a suite of technology products simultaneously (eg a new tablet and a new smartphone) might help, but even these offers may be unable to spur sales in homes spending $400-$500 per year, per household member, on new phones. A more likely bet for increasing sales might lie in encouraging purchases of high-end accessories to accompany flashy new phones.

 Billy Hulkower is a Senior Analyst, Technology and Media, at Mintel. His area of expertise includes consumer electronics, digital entertainment, social networking, digital marketing, pay TV services and online video, with a particular emphasis on cellular services, and mobile hardware and software.

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