Simon Baker (Program Director)

Relentless pressure is pushing down mass market Android prices, leaving most of the high end to Apple, which has been able to go further up market. Except Android is entering again at the very top, via the foldable phone.

The new Samsung premium Android model, the Galaxy S21, is selling fairly well, backed by Samsung’s formidable marketing machine, and doing better than its predecessor of last year, the S20.

But the S20 was a fizzle in many markets compared with the model before, the S10.

If we look at the smartphone market globally, at first sight again premium Android looks as if it is in good shape. Global revenues from Android models over $600 have not dropped markedly over the last couple of years.

Once again, in more detail, it looks as if it is not.

If China is taken out of the equation, from $400 to $800 Android is dropping in every 100-dollar bracket as the market focuses on the $100–$200 segments, according to IDC’s Worldwide Quarterly Mobile Phone Tracker. (All prices referred to are retail before tax.)

There have been false demises for top-end Android before — it took a dip in late 2015 and again in 2017. This time round it looks more serious for premium Android.

Smartphone Market Splitting in Two

But if we take a step back from the detail, we see that the real story is bigger — that the smartphone market itself is in danger of splitting in two.

Up to now the market has looked like a single entity, with a premium segment and an entry one, and most of the market in between.

Android and Apple used to overlap for much of the middle and upper price bands, but now the cheapest iPhone goes for around $450, while the Android market is thinning out from above $200.

Apple has succeeded in moving away up market from most of Android. Four years ago, Apple earnt single figure percentiles of value from models priced at more than a thousand dollars before tax — in the first quarter of this year more than half of iPhone revenues came from above this threshold. The iPhone 12 range, all 5G, have higher prices than the iPhone 11, and so far, the most expensive iPhone 12 versions, the Pro and the Pro Max, are selling better than their predecessors from last year.

Not Too Expensive, but Too Cheap

The coronavirus crisis has left more disposable income in richer countries in the hands of those lucky enough to keep their jobs, many of whom have got bored cooped up at home and are ready to spend. So it should come as little surprise if some consumers are becoming less price conscious just as others are becoming more.

Could the issue with premium Android be along the same lines — not that the current models are too expensive, but that they are too cheap?

Android models have so far only pushed much more marginally into price ranges above a thousand dollars. Outside China, Android is struggling in the old plain vanilla top end, in the $600–$800 band, which IDC calls in its phone research High-End, and in the Premium band, from $800–$1,000. But above a thousand dollars — IDC calls this High Premium, and above $1,600, Ultra Premium — Android is making a bit of progress.

The Arrival of Foldables

There’s only one really significant model, Samsung’s S21 Ultra, at the top of Android, a big phone but of conventional form factor. The vendor’s foldable models, the Fold and the Flip, are much less prominent.

Nevertheless if super expensive Android has a future, it probably lies here with foldables.

To begin with at launch, two and a half years ago, the foldable category was not a serious product — it was promotional.

For many years Audi ran advertising internationally for its cars with a tag line in German — Vorsprung durch Technik. Very few foreigners understood the German exactly (“progress through technology”), but they got the message — the company was at the forefront of automotive technology.

For the phone industry, the foldable phone started out as its Vorsprung durch Technik, a clearly recognizable new product in the technology image war between Samsung and Huawei.

It showed to the world they were at the forefront of phone technology.

They were a thing of bling in a sea of smartphones hard to distinguish one from another.

The products that emerged were way more expensive than anything without a hinge.

They were generally put on display in glass boxes and gave little confidence of durability.

In the last year, however, their successors have begun to look much more like commercial products rather than totems. The technology issues in the longevity of the spring and the general hardiness of the screen have begun to look soluble.

Samsung has brought down the price of its Flip, which is now on display and sale at many ordinary phone shops — in fact it looks like an ordinary smartphone, just you can fold it in half horizontally.

There aren’t many competitors to date. Moto’s RAZR Fold (around $1,400) has sold around 200,000 units, according to IDC data.

Things are about to get busier. Samsung is now believed to be preparing a third iteration of its Flip and Fold series.

Korea’s JoongAng Daily believes that Samsung sees foldables as a means of countering the image at home in its domestic market of its Galaxy models being the phones of middle-aged men. With foldables, the paper says, it aims to bring in more attractive designs and colours to attract younger people and especially young women, who tend to prefer iPhones.

A number of publications have reported that Samsung is gearing up for substantial production levels of both the forthcoming Flip 3 and Fold 3 — as many as 7 million produced by the planned launch in August. This would be an unprecedented level of supply for foldable devices.

Meanwhile, Huawei’s remodelled second foldable, the X2, has received good critical reviews. It remains very expensive at around $2,500, and with Huawei held out of Google Mobile Services, it only has a chance to find a home in China.

Chinese Brands Need to Burnish Their Image

Most of the newer Chinese rivals are set to follow. They all need to show their tech chops to consumers and enhance their brand image through a bit of Vorsprung durch Technik of their own.

Mass market Android has coalesced in the lower-middle section of the market thanks to these Chinese brands, as they have brought better specs to cheaper price points.

Foldables offer a way for them to move upmarket, which all are striving to do, as an alternative to the war for best camera which nearly every player is currently pursuing.

Xiaomi has its Mix Fold (from around $1,300), with a host of new technologies including in the camera, and from the BBK stable, OPPO has a pre-production rollable X phone with a slide side extension display. The Android commentary industry is alive with reports that OPPO and its brand stablemate vivo will launch their own foldable models. Honor, now separate from Huawei, may launch a model as well.

One of the latest names to be added to the rumour list is Google, and there has been talk of such development at Apple for some time.

Taking another step back here, one way to look at foldables is part of the process of the merging of phones and PCs. Tablets of course have to a certain extent already bridged that gap. The tablet market has been fading, but the pressure nevertheless remains to make the PC more mobile, lighter and easier to carry — in other words more like the smartphone. A device that can metamorphose from phone to a larger form factor may hence have a future.

Those foldable volumes will be relatively small and prices high, but that is perhaps not the main point. The PC industry deals in much smaller quantities of a more expensive product than does the smartphone business.

There are many ifs at the moment around foldables, and lots of industry analysts are sceptical. The yawning gap in price between mass market Android and its new top end will become more and more apparent. The hinges and flexible displays need to prove to be robust over years of use. Android software will need to be better and more widely adapted to rapid switches between screen shapes.

For foldables to take off, prices may need to fall a lot and come down over a couple of years to the level of the High End and Premium Android price bands which are under pressure.

5G was a fillip to top-end Android for less than two years before it became democratised.

Foldables are at least a better longer-term bet to sustain a place upmarket than that.

At a global level, the smartphone market is unlikely to split in two — the move upmarket by Chinese players in their domestic market to challenge Apple may see to that.

Elsewhere in the world, while top-end Android is not yet quite hanging on by a thread, its future may pivot on a hinge.

 

To learn more about our upcoming research, please contact Simon Baker, or head over to https://www.idc.com/eu and drop your details in the form on the top right.

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