Why are Smartphones so Expensive?

by Dave Michels

Most things in life get more expensive over time – wages, cost of living, real estate, art, etc. But technology reliably gets less expensive.

I am not talking about appreciation or depreciation – clearly technology depreciates. But, new tech is generally faster, better, and cheaper than the older tech it replaces.

Except for smartphones. The new iPhone is expected to be over $1k. The new Android flagship phones are all over $800.

When the iPhone was launched a decade ago, Steve Ballmer famously dismissed it because it was “$500 fully subsidized! The most expensive phone in the world.”

Of course, today’s smartphones are far more complex than yesterday’s – more sensors, processing, and memory. But that’s not the issue. Technology always gets faster, better and cheaper.

Smartphones are more expensive because the market will bear it. The goal in business is to price things as high as feasible, and the invisible hand will take care of the rest.

My current phone is a Motorola Pure Edition – about 20 months old. I like it, and there’s no particular feature I feel it’s missing. It has served me well, yet I’m in in the market to replace it. Its problem is battery life – it can no longer get through the whole day. I think that’s the number one reason people replace phones.

I know I’m not supposed to piss on the grave of legends, but Steve Jobs made a huge mistake with non-replaceable batteries. Well, mistake is relative – it was a smart move for Apple.

The folks at Apple are very good at building obsolescence into their products, but the non replaceable battery was their pis de la resistance. They turned some of the most sophisticated computer hardware devices into a consumable. Usually computers become obsolete due to upgrades. For example, the original iPhone is no longer supported by AT&T – they say it’s no longer compatible with the network. But the battery is guaranteed to fail after about two years. Even if the phone still has the tech specs to be useful, (as mine does), it’s likely going to get replaced. Even if you donate the phone to a good cause, they will struggle to get value out of it.

I would really like to simply replace my phone’s battery. But  it’s not an option. This phenomena is not limited to phones either – built-in, non-serviceable batteries are finding their way into lots of products like headphones and speakers. I’ve had headphones that have lasted for over a decade – my newest ones won’t. I tried to avoid products without replaceable batteries, but it’s hard.

So what about the invisible hand? Well, it turns out that high-end phones have a bit of an oligopoly. The invisible hand is keeping mass market phone prices at bay, but  there’s only a few makers at the high-end. Few suppliers, so that invisible hand is giving us a face slap lesson on supply and demand. They don’t mind a small market, but it’s a huge market to fragment. Everyone has at least one phone, and they get replaced every 15-24 months. That’s not even counting lost/stolen/broken replacement phones.

Jobs sold the iBase on built-in batteries. The Android makers first laughed at it, then did the math and followed.

The indispensable computer in your pocket is a disposable. It’s annoying to me to have to buy a new phone, but it’s also a much bigger problem. The glass, silicon, lithium, and everything else were natural earth resources just a year before. These resources aren’t getting reclaimed. We are all playing into a planetary Ponzi scheme.

I’m frustrated by the game, but don’t see many options to opt out. I can buy a cheaper phone but it likely won’t last much longer. I can find one with a replaceable battery, but there are not many to choose from – no flagships – and the replacement battery market is full of counterfeit knock-offs. The best thing I can do is attempt to force a longer life out of my phone – but that’s hard too. It’ not like I can just swap batteries mid-day – I have to connect to separate, heavier battery. It’s a long, heavy, bulky process and I think it’s going to break my connector port.