Apple, Samsung taking smartphone prices to edge

Apple likely to unveil new iPhone at September 12 event

The newest smartphones are taking their screens to the edge. Apple Inc. AAPL 1.01% and Samsung Electronics seem to be doing the same with their prices, in what amounts to a gamble to revive growth.

The two companies have long dominated the high end of the modern smartphone market. But that part of the business has gotten saturated, curbing the runaway growth they once enjoyed. Apple and Samsung combined accounted for 36% of smartphones sold globally last year— down from 49% five years ago, according to IDC.

Both companies also saw smartphone revenue decline in their latest fiscal years. They are betting they can revive growth by selling ever more expensive phones to their most loyal customers. Samsung unveiled its Galaxy Note 8 last week, which includes the same edge-to-edge display design as the smaller Galaxy 8 smartphone that went on sale in April. That sort of design uses curved glass and organic light-emitting diode, or OLED, technology to add more high-definition display space to the phone, without increasing its overall size.

It’s also expensive. Samsung’s Galaxy Note 8 will start at a price of around $950 depending on the carrier, which is 8% to 12% higher than what last year’s Galaxy Note 7 started at. The smaller Galaxy 8 was also priced about 12% higher than last year’s models.

Meanwhile, Apple is expected to introduce three new iPhone models at a Sept. 12 event. At least one is widely believed to feature an edge-to-edge display along with a glass-covered frame. Analysts expect this new model to start at $1,000 or more, which would make it the most expensive smartphone to ever launch in the U.S. market. The current iPhone 7 starts at $649.

Price hikes seem risky in a slowing market, though Apple may be hoping to repeat some of the success of the iPhone 6, which launched in late 2014. That phone was the company’s first entry into the larger-screen smartphone segment and it paid off handsomely, boosting both iPhone unit sales and Apple’s operating profit by more than 36% for the company’s 2015 fiscal year.

The iPhone’s average selling price rose 11%, to $671, for the same period. Apple’s stock price, which rose about 30% in the six months prior to the iPhone 6 launch, gained another 30% in the six months that followed.
 

Still, prices approaching $1,000 will be a sticker shock—even if offset with promotions and monthly payment plans from carriers. A Barclays survey earlier this month found that only 18% of iPhone users are willing to pay higher than $1,000.

Both Apple and Samsung have proven skilled at making eye-catching designs. But now the price of those designs seems likely to make their customers eyes bulge.

Source: The Wall Street Journal