Smartphone Prices Are Dropping (Yep, Even for the iPhone)

Smartphone Prices Are Dropping (Yep, Even for the iPhone)

OK, don't get too excited: Apple's iPhones prices aren't that far down from a year ago. But according to data from IDC, the smartphone pricing trend is on a downward slope -- though the price gap between Androids and iPhones is growing.

How low can you go?
According to the report, smartphone average selling prices have dropped 12.5% in the third quarter of this year. The average smartphone selling price is now $317, and the drop came across all major mobile smartphone platforms save one. Amazingly, BlackBerry actually increased its average selling price by about 13% from the second quarter of 2012. While BlackBerry increased its year-over-year ASP, prices dropped from Q2 to Q3 along with every other platform aside from iOS.

Let's take a look at the IDC smartphone pricing chart to see exactly how the platforms' ASPs compare:

Apple clearly continues to sell its iPhones in the premium segment, but its average selling price has fallen from $688 in the second quarter of 2012 down to $635 in the third quarter of this year.

There are two important points to pick out from the data: First, the average selling price is about the same for both Windows Phones and Android smartphones. While Android has gained a massive 81% smartphone OS market share, Microsoft's platform may be able to take some ground if it can continually match the ASP of Android devices.

Second, though Apple's average selling price has dropped, iPhones have actually gotten more expensive in relation to Android devices. From the second quarter of 2012 to the third quarter of this year, the iPhone's average selling price increased by 30% relative to Android ASP. That increase puts the average selling price for an iPhone at 236% more than the ASP for Android phones this past quarter.

What's changed for Apple?
Aside from the iPhone's ASP slowly going down, the IDC data show Apple unsurprisingly losing market share to Android. Apple's iOS now stands at 12.9%, down from 14.4% a year ago. Meanwhile, Android jumped up to 81%, and Microsoft's Windows Phone OS now holds 3.6%.

But those market share numbers don't paint the full picture of how the iPhone is doing, particularly in the U.S. Recent data from comScore show the iPhone had an installed base of 40.6% in the U.S. from July to September. The installed based percentages are more accurate, because they account for actual users rather than just device shipments.

So where does all of this leave Apple?

The iPhone ASP shows us that Apple is still focusing on the premium market, and is willing to let its quarterly market share numbers suffer for it at the moment. Apple investors will have a real issue if the cost gap between the iPhone and Android/Windows devices gets so big that consumers start thinking Apple's iPhones aren't worth the price.

This week, Motorola launched its new full-featured Moto G smartphone, which starts at just $180 without a contract. As more devices like this hit the global market, Apple's premium brand may be seen as a bit too premium. So far Apple has succeeded in offering enough new features to get consumers to buy millions of iPhones every year, but in a few years I think it'll take more than fingerprint scanners to hold the high-end market. That means Apple will need to either significantly raise the bar on its iPhone innovations, or lower its price tag.

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