Shift Towards Premium Smartphones Impacts Budget Market

According to data from Omdia, the proportion of smartphones priced under $200 is projected to drop to 25.6 percent by 2027, down from 40.6 percent last year. Conversely, the segment of smartphones priced at $800 or more is expected to rise to 28.4 percent, up from 21.1 percent. By 2027, devices in the higher price category are anticipated to outnumber those under $200 for the first time.

This trend is especially noticeable in the ultra-low-priced segment. The share of smartphones under $100 is forecasted to decline to 3.0 percent by 2027, down from 12.6 percent last year. Additionally, phones priced between $100 and $199 are expected to decrease from 28.0 percent to 22.6 percent; while those priced between $200 and $699 are likely to maintain around 40 to 41 percent market share.

Despite rising prices, global smartphone shipments are anticipated to fall to 1.097 billion units this year, marking a 12 percent decrease from the previous year. However, total market revenue is projected to increase by 12 percent to $651.6 billion, with the average selling price rising 27 percent to $594.

Rising component prices are attributed to the decline in budget phones. A South Korean telecom industry representative noted that increases in memory prices are limiting cost-cutting opportunities for manufacturers, ultimately worsening profitability for low-priced units. For instance, memory accounted for about 60 percent of the total component costs for smartphones priced under $400 in the first quarter; this figure surpassed 64 percent for devices under $99, indicating a greater cost burden for cheaper products.

Consequently, manufacturers are pivoting away from ultra-low-priced options in favor of mid- to high-end models, which are less susceptible to cost pressures. Shipments of smartphones priced at $400 or below are expected to decline by over 22 percent this year, while those priced above $400 are forecasted to grow by 5.7 percent.

Despite the overall decline in budget phones, demand for more affordable models remains. In South Korea, practical smartphones targeting children or as supplementary devices are still being launched. Carriers like SK Telecom and KT have introduced models priced between 400,000 and 500,000 won, such as the 'Galaxy Wide9' and 'Galaxy Jump5'.

While entry-level smartphones are losing market presence, high-end models continue to gain traction. Devices priced under $100, which represented 12.5 percent of the market last year, are expected to account for only 3 percent by 2027. In contrast, smartphones priced at $800 or more are projected to rise from the low 20 percent range to nearly 30 percent.

This shift is also prompting changes in manufacturers' strategies, with the latest technology and features being prioritized for premium models. Jusy Hong, a senior research director at Omdia, stated that manufacturers are shifting their focus towards sustainable growth and improved profitability rather than merely increasing shipment volumes. The retail landscape in South Korea shows signs of diminishing interest in budget phones, although demand has not entirely disappeared.