iPhone X is not solely to blame, premium smartphones are getting more expensive

The Apple iPhone X has given birth to a ‘super-premium’ smartphone category. Are consumers fine with spending more for features that are advertised as new, but aren’t really so?

Apple CEO Tim Cook, announces the new iPhone X at the Steve Jobs Theater on the new Apple campus on Tuesday, Sept. 12, 2017, in Cupertino, Calif. (AP)

Apple's anniversary special smartphone iPhone X costs ₹89,000. The exuberant price, incidentally, has grabbed more attention than the product itself. As Apple has always been a trendsetter in the industry, the high price tag could have a big impact on the market as well as consumer spending.

However, we should not single out Apple for attaching steep price tags to its new devices. Samsung, Apple's biggest rival in the global market, has launched its Note 8 in India for ₹67,900 - making it the most expensive Note smartphone ever. The Samsung Galaxy Note 8 64GB model is at least ₹7,000 more expensive than the Galaxy Note 5 64GB variant, which was launched in India with a price tag of ₹59,900 the year before last.

The price difference between the base model of the iPhone 8 and iPhone X is ₹25,000 - a gap wide enough to accommodate a decent mid-range Android smartphone. If you add another ₹1,000, the gap will match the price of the base model iPhone SE.

Are the Apple iPhone X and Samsung Galaxy Note 8 actually that special? No. If you think about it, neither the iPhone X nor the Note 8 bring anything radically new to the table. Before the iPhone X, a number of Android players had launched their own versions of bezel-less smartphones. Xiaomi has, so far, launched two generations of Mi MIX bezel-less smartphones. Didn't Andy Rubin, the founder of Android, launch an equally beautiful Essential smartphone?

A phone created by Andy Rubin. (Essential)

A phone created by Andy Rubin. (Essential)

If you talk about augmented reality, Google has already taken giant strides in that direction with its Project Tango and ARCore platforms. FaceID, Apple's facial recognition-based biometric authentication, seems highly inspired by Samsung's Iris scanner. Even the wireless charging support is not new. For Android users, most of the features offered by Apple on the iPhone X are nothing to harp about. However, for Apple users, this device is in a different league altogether.

"The iPhone X is a super-premium device from Apple. The company has satisfied the expectations of iPhone users by incorporating features like full-screen OLED display and wireless charging, which were not present in the iPhone 7. Moreover, Apple has also added premium features like augmented reality, artificial intelligence and facial recognition. Providing all these features raises the BOM [bill of materials] of the device. So, the iPhone X more than justifies its price tag," Parv Sharma, an analyst at Counterpoint Research, told Hindustan Times.

However, Sharma conceded that most devices in Android's premium segment - such as the Samsung S8 and Note 8 - already offer similar features. "It's mostly the Apple user base that will be excited by the iPhone X. These features are new to them," he said.

So, has Apple shifted consumer spending patterns? Industry watcher IHS Markit is bullish on the iPhone X's prospects. "The iPhone X is a premium-priced smartphone that has, for the first time, gone over the $1,000 threshold for the top 256 GB model. But it will still sell in great numbers because Apple has repeatedly demonstrated its ability to persuade consumers to change their overall spending patterns in a way that allows them to place a greater share of their disposable income into a smartphone purchase. Besides, the starting price of $999 is only $33 more than the iPhone 7 Plus 256GB - the most expensive smartphone from the Apple stable before this," IHS Markit said on its website.

"Apple has succeeded with all previous iPhone models leading to the highest average selling price (ASP) in the smartphone market. When the first iPhone went on sale in mid-2007, Apple succeeded with an ASP that was five times greater than Nokia - the largest handset-maker at the time. Apple is the most successful smartphone maker because of its revenues, not the 1.2bn iPhone shipments it has clocked over the last decade," it added.

Apple and its products have always held an aspirational value among consumers. The company understands this, and its new products clearly indicate that it will continue to hold that value. For consumers, this only means that they should be ready for another category within the premium smartphone segment. This category - dubbed as "super-premium" - will push the threshold held by premium smartphones at the moment.