Smartphone Pricing - Does Price Growth Reflect Capability?

Back in 2008, when the iPhone 3G launched, Apple and O2 would sell you one for £299. Now the iPhone was severely limited in its capabilities and didn't even have much of a software catalogue to start with but, compared to its modern equivalent, did it offer value for money?

The entry-level iPhone 7 costs £599, more than twice the price. For that you get four times the storage, more RAM and a bigger, more dense screen. The camera has been upgraded  and a front camera added. There's a fingerprint sensor for logging in and a pressure sensitive screen for no real reason at all. The new phone is waterproof - although Apple won't warrant it against water damage - and it has lost its headphone jack.

In terms of hardware it doesn't feel like a significant jump in value - in fact the reverse is probably true.

When you look at the software though, it's a very different matter. Apple has added significant capability to the iPhone and third-party developers have added even more. The iPhone 7 can do so much more than the iPhone 3G. Admittedly many of those features have been lifted from other platforms, but Apple has brought them together to form a cohesive whole.

So although the jump in iPhone pricing seems steep (and not all of it comes from Apple, as the GBP has collapsed in value over the years) the iPhone still represents good value for money.

What has happened, as a result of iPhone pricing moving up, is that other OEMs have been able to drive their prices up too, able to undercut Apple's retail price but still sell a phone at a profit (even though this is a theoretical rather than actual profit for many OEMs).

So whilst we get excited about mid-range phones with flagship specs and performance, perhaps we should consider whether they are quite as good value as they appear, priced at a point which would have bought you a top level premium phone just two or three years ago.

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