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Are 5G-enabled phones going to be too expensive?

According to recent research from IHS Markit, while everyone is expecting to have to pay more for 5G smartphones—the actual cost of the initial wave of phones is going to dramatically exceed expectations.

IHS is suggesting that the price premium could be as much as 29 times higher than many consumers anticipate.

A total of 91 percent of survey respondents said they thought that 5G devices would cost them more than existing 4G LTE smartphones, and three quarters foresaw paying an additional 10 to 25 percent for a 5G-capable phone.

In dollar terms that would mean increases of around $30 up to $80 but, in reality, the increase is likely to be a shock for consumers as the actual pricing of the first wave of 5G phones is set to be far higher. For instance, Samsung’s S10 5G phone is priced at $1,300, a 335 percent premium compared to the $388 average for the company's existing 4G smartphone models – that’s a massive $912 increase in price.

Huawei’s Mate 20 X 5G smartphone carries a retail price of $1,200, a more than 400 percent premium compared to $295 for the company’s 4G models.

While 5G smartphones are configured with larger-than-typical displays and packed with extra features which will all contribute to a higher-than-expected retail price from a consumer perspective, this pricing discrepancy could still be a shock for consumers. While such a pricing premium is unlikely to impact early adopters, it could slow sales of 5G devices to the wider, more mainstream consumer market.

“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,” said Joshua Builta, senior principal analyst at IHS Markit. “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.”

Global 5G handset sales are expected to soar over the coming years but with the price of the first wave of handsets set to be so high the take up is expected to be slower than with previous mobile phones.

That means, according to HIS, that the industry may have to start promoting the attributes of 5G – immersive entertainment and the like – if they are to overcome consumer reluctance, when it comes to paying substantially more for 5G enabled handsets.

Neil Tyler

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