Why are cell phones so expensive?

My current cell phone is more expensive than my first car was. Yes, okay it was a very crappy car, but still. An iPhone 11 can cost around SEK 8,000 and if you want a Samsung Galaxy Note20 Ultra 5G, you can pick out approximately SEK 14,000. So why are cell phones so expensive?

Although one of the explanations is obviously that mobile phone manufacturers want to be able to earn a buck or two, there are actually mitigating circumstances as to why a smartphone costs as it does today.

Qualcomm

Qualcomm are the ones who manufacture the chip with the processor that is inside, basically, every single Android. The company has no real competitor, which means that they can charge what they want for their chips. The lack of real competition also means that they can decide quite a lot over the mobile manufacturers. An example of this is that now Qualcomm is forcing all mobile manufacturers to buy their new 5G chip, even if they are not going to make a 5G phone.

In addition to this, Qualcomm has a set of guidelines on what is required from mobile manufacturers. There, Qualcomm writes that manufacturers must have a lot of space inside the phone. This means that the mobiles from 2020 have generally become larger. And when a phone gets bigger, everything else falls like dominoes. A larger phone requires a larger display. A larger display requires a larger battery. If the manufacturer wants to be able to use the 5G capacity that they had to buy from the beginning, they must also put modules for radio frequency, around the entire phone. All this obviously costs a lot.

qualcomm snapdragon

We get more for our money

One of the reasons why mobile phones are gradually rising in price is that they are also gradually getting better. It may sound obvious but people often forget this when buying new phones. Had mobile phone manufacturers released similar phones, with only marginally updated technology, year after year, we would probably have expected the prices of phones to stabilize.

But that is not the case. Year after year, we get new smart solutions, better cameras, nicer designs, faster processors, better materials. This costs more. Then one must not forget the cost of developing the new technology. Developing a new, smart, feature can require a lot of investment. Something that must then be distributed to the number of phones you expect to sell.

You have the same phone longer

In the past, it was more common to buy your phone together with a subscription. Then people often chose a binding period of two years and when the time was over they got a new subscription and got a new phone at the same time. Today, more people tend to buy their phones and have a standalone subscription. Something that has contributed to us not buying new phones as often. In addition, the increased quality of the phones has contributed to them actually lasting longer. The batteries are a bit more viable and the software stays up to date longer. This makes it more difficult to sell phones as the market is quite saturated. This is a contributing factor to the rising price as fewer phones sold means that manufacturers need to charge more per phone sold.

As it becomes more and more expensive to buy the newest and hottest technology, it also becomes cheaper to buy standard phones. The average cost of a smartphone in the US has gone from $ 348 in 2011 to $ 214 in 2019. Because phones have become so good today, you do not have to buy the very best and newest to get a good phone.

So why are phones so expensive?

The whole market for mobile phones is quite complex. There are a lot of rules about safety and technology that must be followed, at the same time as the demands for new cool features are increasing from consumers. This is definitely a contributing factor to why smartphones today can be perceived as very expensive. But considering what you get, maybe it’s not that bad after all.

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By Elin Gunnarsson
Content Manager
In a time of "it must happen now" it is of the utmost importance to have the right communication solutions.

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