Consumers already knew that this was going to be a thing. With the slow and steady rollout of the 5G network, 5G-ready smartphones have followed right along—and they’re very much in the premium price point range. But according to new research from IHS Markit, even consumers’ expectations for just how expensive 5G phones would be upon their launch has been surpassed exponentially. In fact, in some cases, 5G phone prices are coming in as much as 29 times higher than what consumers had anticipated.
In the IHS Markit survey, 91 percent of consumers said that they expected to have to pay more for a 5G device compared to existing 4G LTE smartphones, with three-quarters of those respondents saying they expected prices to be roughly 10 to 25 percent higher for 5G phones.
With those responses in mind, IHS Markit took a look at the average sales price for a smartphone in 2019, which hovered around $319. So then, a 10 to 25 percent premium would add roughly $32 to $80 to the average sales price. However, the actual pricing of 5G phones has been exceptionally higher than the estimated $350 to $400 price range. Looking at Samsung’s Galaxy S10 5G, for example, that phone is priced at $1,300—a 335 percent premium compared to the $388 average for the smartphone maker’s existing lineup of 4G-ready devices. So we’re looking at a $912 price increase over the average price point.
“The 5G market is primed for massive growth, with the transition to the new technology expected to occur at a much faster pace than any previous wireless generation during the first five years of deployment,” Joshua Builta, senior principal analyst at IHS Markit, said in a statement. “However, as with each new wireless generation, the first wave of phones carries sky-high costs because of the additional electronics required to support the enhanced features. With smartphone brands passing these additional costs down to consumers, many buyers will be turned off by the high prices and will wait until they come down before purchasing a 5G phone.”
Of course, the analysis is taking the latest 5G flagship devices and comparing them against an industry average sales price. And, as such, those flagship devices contain various other premium features and massive displays that add to the increased sales price over run-of-the-mill 4G devices. But the pricing discrepancy between early 5G phones and what the average consumer is used to spending on a smartphone could be enough to induce sticker shock. Early adopters will undoubtedly show up and throw pricing out the window. But for all of the hubbub around 5G, these high retail price points are going to likely hinder just how quickly consumers are able (or willing) to adopt the technology.
Along those lines of adoption, global 5G phone shipments are expected to eventually soar to 424.5 million units in 2023. However, shipments will be much lower out of the gate with only 9.5 million expected to reach consumers’ hands by the end of this year. Another 73.7 million are expected to ship in 2020—the first full year of 5G’s availability, at least in some markets around the country.
According to IHS Markit’s report, as was the case with 4G LTE’s rollout and the supporting devices, 5G phones will see the average sales price eventually come down. Within the next few years, as 5G phones fill the market, the research firm anticipates average sales prices falling to between the $700 and $800 range, which would make them much more affordable for the price-conscious consumer.