The Smartphone Price Gap

When Apple’s iPhone sales started showing signs of stagnation recently, one of the most cited reasons for the slowdown was the iPhone’s steep price tag compared to the competition. And while it’s probably right to assume that a lower price would boost iPhone sales, the question is: why should the iPhone’s price suddenly be more of a problem than it used to be? After all, it has always been more expensive than most Android phones, but that didn’t stop Apple from outperforming the market many times over the past few years.

First of all, the smartphone market has changed. In highly developed regions such as North America and Europe, the market is pretty much saturated – most people who want a smartphone, already have one. Much of today’s smartphone growth comes from emerging markets, where price is much more of an issue. At the same time, the price gap between iPhones and Android phones has widened considerably over the years. As our chart, based on data from KPCB, illustrates, the difference in average selling prices grew from $218 in 2008 to $443 in 2016. While high-end Android phones, such as Samsung’s top-of-the-line devices still cost about as much as an iPhone, there is a large number of manufacturers (mostly from China) who sell Android smartphones for a fraction of the iPhone’s price these days.