After years of declining smartphone prices worldwide, it looked like the hottest technology had quickly become a commodity. A slump that took decades in computers seemed to have happened to phones in just a few years.
Perhaps most troubling was China, the biggest market and traditionally one of the fastest growing. Not only were Chinese settling for cheaper phones; by the beginning of this year, they were buying fewer of them for the first time since the modern smartphone was invented.
While China is no longer the mobile industry’s unstoppable growth machine, it could become the next profit frontier. From October last year to March, the average price of a smartphone sold in China jumped dramatically, data from market researcher International Data Corp (IDC) showed. It went from US$192 in the third quarter of last year to US$239 in the fourth and then US$263 in the first quarter of this year.
The unexpected change can be attributed primarily to Apple, IDC analyst Bryan Ma said. The company added more expensive models with bigger screens that were so popular, they actually moved the huge Chinese market substantially and helped Apple rocket into first place there.
“The most recent increases are a reflection of the popularity of the iPhone 6 and 6 Plus,” Ma said, citing IDC data.
The results are an important validation for Apple CEO Tim Cook, who was being pressured by analysts and shareholders to lower prices and create cheaper models to adapt to what seemed like a permanent change in the industry. A less expensive plastic model, the iPhone 5C, fell flat. It did not take long for Cook to discover the real solution to Apple’s growth concerns: bigger screens. Shareholders saw evidence of Cook’s triumph in the company’s earnings from recent quarters.
Beyond Apple, the numbers are important because they blow up the idea that the Chinese are not willing to pay a premium for what they perceive to be a superior phone. After joining in the race to the bottom on pricing, Samsung Electronics went fancy with its latest smartphones, the Galaxy S6 and S6 Edge, and that is already starting to pay off.
The companies that do not seem to be paying attention, it turns out, are those based in China. Lenovo (聯想), Huawei (華為) and Xiaomi (小米) keep trying to one-down each other on price.
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