Large glass panels in the front, and chunky camera systems in the back. Smartphones have generally revolved around the same basic design since their inception.
The closest approximation to next-generation phone design is the foldable phone: a device that behaves like a regular smartphone and fits in your pocket, but opens like a book to reveal a larger screen when you need it.
It’s a definite advancement in form and function. Unfortunately, most people can’t afford foldable phones.
Some of the richest tech companies in the world, including Samsung, Microsoft, and now Google (as of last week, with the first generation Pixel Fold) are in this space. But despite massive tech improvements over the past four years — Samsung, for example a lot Better at making foldable phones after their rocky start — they’re still a status symbol at best.
It’s not their designs or their performance. The main aspect holding foldable phones back is their price.
It’s not about margins
The first big foldable smartphone on the scene, the Galaxy Fold was priced around $2,000 in 2019, and unfortunately, not much has changed.
Samsung’s latest foldable phone, the Galaxy Z Fold 4, costs $1,800. Was Google’s Pixel Fold unveiled last week? Also $1,800. To be clear, $1,800 is rent or a mortgage for a lot of people.
Foldable phones are certainly based on new and expensive technology. An independent analysis from Nikkei showed that Samsung’s new Galaxy Z Fold 4 has about $670 in components, which is about 38% of the phone’s selling price. But that leaves a potential 62% gross margin (although we don’t know Samsung’s costs for assembling the devices). By comparison, the cost to make a top-tier iPhone, the 14 Pro Max, comes out to $474, according to Counterpoint Research — which translates to 58% of Apple’s gross margin potential. In other words, Samsung might make more money from its foldable phones (at least, on a gross margin basis, which doesn’t include marketing costs) than Apple makes from smartphones based on a standard design. Prices for these tools could be lower.
Lesson learned from the iPhone
There must be an argument for you Can Make a nice little business with expensive tools by aiming them directly at early adopters and hobbyists. But one thing we’ve learned in the nearly 16-year history of the smartphone is that new classes of tech products need lower prices to become mainstream.
The first iPhone cost $499 for 4GB of storage and $599 for 8GB — a lot for a cell phone in 2007. Her second-generation phone, the iPhone 3G, renegotiated her carrier deal to have AT&T subsidize the cost. phone (AT&T will offset most of the losses over the course of a two-year contract). This allowed consumers to purchase the iPhone 3G with 8GB of storage for just $199, and the 16GB version for $299. As a result, unit sales of Apple’s iPhone in the US increased by more than 1,100% between 2008 and 2015, with the iPhone ranked as the best-selling smartphone in the US.
Carrier subsidies obviously made a huge difference because for many years, the iPhone struggled in Europe, where not many carriers subsidized phones. This led to a jump in Android phone adoption in the region because, compared to $680 for an iPhone, you can buy an Android phone for less than $200.
Apple has relied on carrier subsidies for about a decade — the death of the $199 iPhone came in 2016, when Apple instead let you buy the phone outright or pay for it with a monthly plan. And it wasn’t until 2017 that Apple introduced its first $1,000 phone. So raising the price of the iPhone was an incremental effort — and the same should be done for foldable devices if their makers want to succeed.
room to grow
Falling prices for foldable phones could be a huge benefit to a company like Google or Samsung, which for years has tried to divert customers away from Apple’s walled garden ecosystem. And Android phones clearly need some help: the rate of Android users switching to iPhone is at a five-year high. Since Apple is not currently offering a foldable phone, these curved screen devices could provide a reason for people to stay on Android, or even switch to Android.
For what it’s worth, people buy pleats, even at these nosebleed-worthy prices. But sales are still a drop in the bunch compared to the overall smartphone market.
It’s hard to see why companies haven’t priced foldable devices. The components needed to make foldable phones may still be limited. If this were the case, lowering the price could be counterproductive, as there would not be enough supply to meet demand.
Keeping foldable phones at the premium level could also be important for any number of corporate strategic reasons. But when you think about the history of smartphones, and how they fared when they became so affordable, it’s clear that if Google, Samsung or others want their foldable device to win over, or at least become widely used, there is one simple solution: price.
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