Is the party over for high-end smartphones?

By , Jun 25, 2013

iPhone 5 (three-up, profile, front, back, black and white)

Every company loves maximum profits. For years, Apple and Samsung have sold high-priced smartphones loaded with features that were eagerly snapped up by consumers in mature economies in North America and Europe. Now the two largest smartphone makers face a changing consumer profile where basic is best and inexpensive is in vogue.

Just days ago, research giant Gartner noted low-cost devices comprise the bulk of both firm’s device sales, making questions of whether to sell ‘cheap’ handsets only a distant – and irrelevant – memory. Now comes fear from Wall Street that the salad days of smartphones are over for Apple and Samsung…

Bernstein’s Toni Sacconaghi Monday on CNBC tried to explain (via Fortune) why both smartphone makers have recently been punished by investors.

Samsung’s tepid sales of its new Galaxy S4 are “perhaps not fulfilling expectations about the high end of the smartphone market.”

In other words, “the Street is thinking that if Samsung can’t sell as many high-end smartphones as expected, then neither can Apple,” writes Philip Elmer-DeWit.

Seems like a pretty good assumption.

IDC (Europe smartphones, 201305, chart 001)
Source: IDC European Quarterly Mobile Phone Tracker, May 2013.

Growth has slowed in developed nations, such as the U.S. and in Europe, as adoption of smartphones is nearly complete. Instead, the competition isn’t over whether to buy a smartphone or stick with your dumb feature phone, but whether you’ll stick with Apple or try Android.

In a way, the smartphone market in the U.S. resembles competition among cellular carriers, where the customers drift from one brand to another.

iPhone 5 presser (Phil Schiller, iPhone family prices)

“The challenge in the smartphone market is also that, as penetration move more and more to the mass market, price points are lowering and in most cases so do margins,” Gartner announced Monday.

In Samsung’s case, almost half of its smartphone sales are in the sub-$200 category.

If the rumors are true, Apple will launch a less-pricey iPhone sold contract-free to the mid-tier sub-$300 segment in developing markets.

Some watchers expect the device to actually replace Apple’s free iPhone 4/4S on-contract phones, but that’s just speculation at this point.

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  • Gorgonphone

    well saturation and lack of true ingenuity coupled with high prices will cause he market to slow but i would not say party over .. its definitely time for another revolutionary game changer though..

  • Boss

    Nope most Apple fanboys are brainwashed and will camp outside for days at any price

    • Lagax

      What means ‘brainwashed’? Fact is: when you use an apple product the ‘love’ section in your brain is active(which normally only happens if you have contact to a loved person).
      If you call that ‘brainwashed’ OK. I call it great! Because if apple makes me actually ‘love’(like ‘family-’ or ‘friend love’) a product they just nailed it. Nothing else.

      • Gorgonphone

        i agree but that does not happen when ii use IOS7 ..just saying..

      • Lagax

        Oh come on, iOS 7 is not that bad. Also it’s beta. But I agree that if they will publish the icons as they are right now that’s just disgusting.

      • Gorgonphone

        “But I agree that if they will publish the icons as they are right now that’s just disgusting.”

        ^^^exactly..

      • Indian Food

        iOS 7 has been announced for about 2 weeks now… those iPhone 4 and iPhone 5 prototypes had people laughing at how “ugly” they were and how Apple wouldn’t design a phone like that…people said that for WEEKS. When people got used to them they were the most beautiful thing on the face of the earth. iOS 7 is gorgeous – people have to get used to it.

    • Gorgonphone

      and for any old product to

    • seyss

      price is not that important (a decisive feature) for many ppl.
      I really go over a U$200 wall between not having the device to having the device

    • Liam Mulcahy

      get off idownloadblog iPhone hater

    • Chindavon

      Nope. Most Apple fanboys like quality over quantity. Anodized Aluminum over Plastic, Good/smart advertising over desperate comparison ads, plus, Mac OS that trumps Windows in every way.

      • Mohammed Sahib

        Well, not every way.

    • Taf Khan

      Wrong… Why camp like an idiot. You just purchase from Apple online the moment the stock shows after the product refresh. Simple.

    • Patrick

      of course, apple is loved by many people and the non-plastic iPhone is worth standing outside, we are not brainwashed but we love our iPhone’s, you might not understand, most android users don’t understand

  • Chindavon

    Well…when you saturate the market year after year, this is what you get. Too many of them. Too many of them sitting on shelves. Too many models, sizes, etc. Don’t even bother with the “Choice” argument. I’m not saying move in a snail pace like Apple, but C’mon. Look what’s out there.

    • Gorgonphone

      i blame samsung and android for all the saturation of the market with POS BS phones

      • Chindavon

        It’s coo if you’ve got jungle fever for them. All those extended S4 models are useless. Zoom? Okay you get optical zoom and the trade-off is a disgusting 540 x 960 pixels and makes you look like you stuffed a sock in your pants for compensation. How about the S4 active. Ruugged, durable, and another useless model. It’s got a built in case. Big deal. Most people will put their own protective case on it. Water proof. Uh, you can get a waterproof case for your phone too. Useless SKUs that sit on the shelf because no one cares.

      • Gorgonphone

        exact;y… samsung does that so they can say they are selling 10000000000000000000000000000000 phones a year…lol

  • Rowan09

    We must also blame the carriers they got greed as usual. AT&T just got rid of the early upgrade option. When I got the first iPhone, I was able to get the early upgrade price when the 3G came out, but later AT&T told me I had to wait a year plus for the early upgrade option. I’m waiting for contract to be up in November and I’ll go month by month.

  • Taf Khan

    The thing about SMART phones is they are getting faster every year but the fact remains that we still haven’t seen the true potential of the current spec before another is released. Taking gaming for example, many of the games released on the latest apple CPU are no different to the previous CPU. The question ultimately has to be… What is to be gained by the user from upgrading. Is the user experience enhanced, if so how?? Is it just a change of hardware design? New design doesn’t always equal better.

    • Gorgonphone

      sooo true…
      i am ready for my phone and ipad to run OSX ad do 90% of what my computer does

      • Taf Khan

        Consumer demands is what should drive development. And as we all demand different things how about we are given more choices. Different boot up options would be good. And imagine buying a device with no OS installed from the manufacturer where you can choose to download the OS after the sale.

      • Gorgonphone

        that would be great as hell… so we choose you hardware and then put IOS or android on it ?! but then no hardware would e perfectly matched to the OS and we would all have android like issues

      • Taf Khan

        Well for boot up options you could have novice, intermediate and advanced, maybe to suit you it could be ios or OSX.

        In terms OS download after sales, the testing of an OS a device supports should be carried out by the Manufacturer. The device should clearly state which OS’s are supported. Imagine buying a device and then being able to choose or even switch. Maybe one manufacturer will get the ball rolling (c’mon Nokia, it maybe your only chance) Would make things interesting.

  • Laga Mahesa

    “the Street is thinking that if Samsung can’t sell as many high-end smartphones as expected, then neither can Apple,” writes Philip Elmer-DeWit.

    Beyond the US longevity is a major factor. Long term OS support and superb build quality vs uncertain, late updates and plastic housings at similar prices? My devices see years of use. With iOS 7 my 3GS will no longer be current but I’ll still keep using it – if not as a phone, then as a remote or an IP camera.

  • MarcPhilippeB

    Several factors play a role here:

    - slow recorvery of the markets and ongoing recession in Europe; huge youth unemployment problem in southern european countries (Spain, Italy, Greece)
    - at the moment we see only incremental updates across the line, including Samsung and Apple, both hardware and software.
    - as many people already own a quite capable high end device, most of them aren’t willing to update when their still in a contract or even update at all

    it will be interesting to see if iOS 7 with the iPhone 5s will give new momentum to the market.