ColdFusion - Why Are Smartphones Turning So Expensive?

Starting point is 00:00:00 You are watching Cold Fusion TV. Welcome to another Cold Fusion video. So it's clear that high-end mobile phones are slowly becoming more expensive over the years, but why? In this video, we'll take a look at some possible reasons of why. On this channel, we've already covered the fascinating stories of the very first mobile phone in 1983 and the first smartphone released in 1994. In these videos, we saw that the prices were $9,200 and $1,800.

Starting point is 00:00:39 respectively. So what we're witnessing right now isn't the first time that smartphones have been really expensive. After the 1990s however, mobile phones did fall in price around the world as we enjoyed accessible mobile communication. But as the 2000s rolled around, our phones began to do more than just communicate and with the extra functionality came higher prices. The prices really started to climb when fully capacitive touchscreen smartphones hit the market. The original iPhone in 2007 set the bar at $600, and since then, the prices of subsequent iPhones and high-end Android devices have steadily been climbing. Here's a chart by Bloomberg of all the popular smartphone prices over the years. As you can see, there's a clear upward trend, but Google's pixel line stands out as great value.

Starting point is 00:01:29 That also begs the question, are the other top brands overcharging to gain more of a profit, possibly to appease stockholders? This may be partly true, but as you'll see in this video, there are other clear reasons, as to why the prices are increasing. We'll be using mostly Samsung and Apple as examples. The Samsung Galaxy Note 8 starts at 930 US dollars and the iPhone 10 starts at 1,000 US dollars, both record-breaking prices. Unfortunately, when you include sales tax, foreign exchange rates, and trade tariffs, the prices can explode. The iPhone is 25% higher in Australia, 30% more expensive in China, 32% more expensive in the UK, and 47% percent more expensive in the UK, and 47 more expensive in Hungary, where the cheapest version of the iPhone 10 costs $1,500 US dollars.

Starting point is 00:02:17 Spending that much money on the lowest configuration of an iPhone is something that the world has never seen before. So let's dig right into it. Here are three reasons for the increases in price. Reason number one, top smartphones are costing more to make. The smartphone industry is one of the only sectors where consumers constantly expect innovation and new features. and new features every year. Manufacturers have to overcome space constraints, strive to reduce power consumption,

Starting point is 00:02:46 while providing more features and a better user experience. This all doesn't come for free. Every new innovation demands engineering knowledge, testing and calculated design choices. A simple measure of the raw cost of a phone is its bill of materials, basically a list of the components and their prices used to create the device.

Starting point is 00:03:06 Here's a chart by Android Authority showing the bill of materials for the game Galaxy S series over the years. As you can see, there's an upward trend. If we look at the sales prices of the Galaxy S series, it's the same deal. There's an upward trend in both of them. But in 2017, something interesting did happen. The S8 was the most expensive phone to make by far. It cost an estimated $307 US to make, $43 higher than the S7 and $36 higher than the S7 edge. According to Andrew Rass Wheeler of H-Rash Market, Quote, the higher total bill of materials for the Galaxy S8 seems to be part of a trend that reflects something of an arms race and features among Apple, Samsung, and other phone manufacturers, as they all try to add new and distinguishing hardware features, end quote.

Starting point is 00:03:55 So in essence, the weapons of this arms race are the phone components, and the battle is for your wallet. The bill of materials for the iPhone 10 is said to be $412, also by far the most expensive. To get the total cost of manufacturing the phones, you need to add in research and development needed for testing new features, advertising costs, manufacturing costs, administrative costs, and a push to outdo their competitor all within a one to two year products life cycle. Taking this into consideration, it becomes easy to see how prices can begin to creep up. Reason number two, smartphones are becoming more capable. It's obvious that phones are getting more powerful.

Starting point is 00:04:37 Today's top smartphones in some respect have as much grunt as a laptop from just a few years ago. In fact, the Qualcomm Snapdragon 835 chip, which is used in most high-end smartphones by Samsung, HTC, LG, Sony and Nokia, is so powerful that it's now being used in full Windows 10 PCs, a field normally dominated by Intel and AMD. Asis, Lenovo and HP have all signed up to use the new mobile chip in their computers. This machine is running Windows 10 on a Qualcomm Snapdragon processor. You can see this is running 64-bit Windows 10 Enterprise Edition with 4 gigabytes of RAM. I'll pull up the task manager so you can see the full power of the Qualcomm Snapdragon processor with its four cores in action.

Starting point is 00:05:24 This is Adobe's Photoshop, running great on a Qualcomm processor. We made zero changes to the app. It runs perfectly. I'll select Arrackenable. I'll select a radial blur filter on the Ninja Cat, just to show you that this is real Photoshop with all the functionality you would expect. Another tough performance test on any PC is playing a game.

Starting point is 00:05:49 Here we have the popular Windows 10 game, World of Tanks Blitz. As you can see, it runs great, super smooth. This is pretty remarkable to see, as it shows that the convergence between the PC and mobile computing is getting closer than ever before, something that I did talk about in some of my earliest videos. With these new powerful chips comes capabilities for features such as augmented reality and virtual reality. All of this, as well as newer concepts like the iPhone's neural engine to help with recognizing speech and images, as well as dual camera setups to allow for more options during photos and videos,

Starting point is 00:06:27 all are incentives for people to pay a higher price for their mobile device. These extra capabilities feed into the third reason. Reason number three, supply and demand. At the end of the day, it all comes down to supply and demand. As long as people are willing to pay high prices for mobile power and all of these new features, the manufacturers can sell them at these high prices. In addition, there are numerous studies that have revealed that psychological dependence on smartphones is quite widespread, and within that group, there's a segment of people that always want up-to-date technology.

Starting point is 00:07:01 It's just part of their personality. Nobody actually has to upgrade their phones every one or two years, but millions of people do. Because of this reason, high prices can be sustained. But the question is, if manufacturers keep increasing the price, what is the threshold at which the customers say no? Brand perception also has a part to play on the demand side. If a person is fond of the Apple or Samsung brand, they're more likely to see the cost is worth it. It's not all bad, though. There's a growing number of alternative options.

Starting point is 00:07:35 Some of the mid-range phones really aren't that bad anymore. The Chinese brand Huawei, now the world's second largest smartphone manufacturer, can provide much cheaper alternatives. The same goes for Xiaomi, Google's pixel lineup, and Opo. Further to this, if the goal of your phone is just to get the job done, a two-year-old high-end phone is still decent. One final note to take away is that the actual average price of smartphones is actually going down across all of the world except for the United States.

Starting point is 00:08:03 States. One interpretation of this data is that although the highest models are going up in price, the rest of the market is getting more efficient at sourcing parts and their manufacturing process, so they're able to pass those savings onto the consumer. As you've seen, the high-end models are always trying new things and paving the way, and innovation is generally expensive. In conclusion, smartphones have definitely come a long way since 1994, and their capabilities have just exploded over the past decade. The cost of having the very best in mobile technology is going up but when we demand so much from our devices it's no surprise. So what do you guys think? Do you agree or disagree with the reasons listed in this video?

Starting point is 00:08:43 What's the price threshold for you when it comes to buying a new phone? Anyway, that's it. I hope you enjoyed this video. Feel free to subscribe to this channel if you just stumbled across it. Also, I know that some of you have been asking if I have any merch for sale and the answer is now yes but it's only for a limited run. For the next 15 days you'll be able to get your hands on some Cold Fusion clothing in a couple of designs. So if you want to help support the channel and get some CF threads, the links will be in the description below. This has been to go-go you've been watching Cold Fusion and I'll catch you again soon for the next video. Cheers guys, have a good one.

Starting point is 00:09:17 Cold Fusion, it's new thinking.

ColdFusion - Why Are Smartphones Turning So Expensive?

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