Flagship Phones Collectively Raise Prices: Who Will Win This "Price War"?

Tech 2024-10-24 09:01:21 Source: Network

Flagship Phones Collectively Raise Prices: Who Will Win This "Price War"?On October 17th, news of flagship phone price hikes surged to the top of trending topics, with vivo's new X200 series becoming the catalyst for this "price surge." Compared to the previous X100 series, the standard and Pro versions of the new phone have both increased their starting prices by 300 yuan

Flagship Phones Collectively Raise Prices: Who Will Win This "Price War"?

On October 17th, news of flagship phone price hikes surged to the top of trending topics, with vivo's new X200 series becoming the catalyst for this "price surge." Compared to the previous X100 series, the standard and Pro versions of the new phone have both increased their starting prices by 300 yuan. This move has sparked considerable criticism, as vivo has always been known for its affordable pricing strategy.

The Driving Force Behind the Price Surge: Rising Chip and Memory Costs

This autumn's "price surge" is not an isolated incident. Many phone manufacturers have already, or are preparing to, join the trend. The primary reason behind this is the rising prices of CPU and memory chips. In recent years, intense price wars have continuously squeezed the profit margins of phone brands. The escalating cost of chips has ultimately shifted the burden onto consumers.

Industry experts point out that although all companies are raising prices, the magnitude of the increases varies, indicating that the price war continues. Ultimately, the brand that can convince consumers that their price hike is "worth it" will be the one to gain an advantage in this price war.

Xiaomi, OPPO, and Other Brands Join the Price Hike Trend

According to digital bloggers, Xiaomi may be the first to raise prices, with an estimated increase of around 500 yuan for the starting price. Previously, Lei Jun, the founder of Xiaomi, hinted at this during the launch of the Xiaomi 14, stating that it would be the last model in the digital series to start at 3999 yuan. Wang Teng, Xiaomi's Deputy General Manager of China's Market Department, confirmed this price hike trend through a Weibo post, attributing it to two factors: the significantly increased production costs of the latest 3nm process flagship processors and the continuous rise in memory prices, now reaching a peak.

Before November, two major models are expected to be released: the Xiaomi 15 and OPPO Find X8. OnePlus, Honor, IQOO, and other brands also have new products waiting to be launched, though no price hike announcements have been made yet. When contacted about the price hikes, vivo did not respond, while a relevant Xiaomi representative said they were unaware of the Xiaomi 15's price.

Flagship Phones Collectively Raise Prices: Who Will Win This "Price War"?

Reasons Behind Phone Manufacturers' Price Hikes: Cost Pressure and Market Competition

Phone manufacturers do have their own justifications for raising prices. TSMC's 3nm process has become more expensive, resulting in a dramatic increase in the cost of producing the MediaTek Dimensity 9400 and Snapdragon 8 Gen 4, which utilize this process. The Dimensity 9400 is now priced at $155, while the Snapdragon 8 Gen 4 has reached $190.

Besides processors, memory prices have also climbed. TrendForce, a market research firm, reported that DRAM prices rose approximately 20% in the first quarter of 2024. Compared to the fourth quarter of last year, the price of smartphone DRAM has increased by more than 20%. This has resulted in a trend of "shrinking" features in high-end models released this year, with the 24GB + 1TB configuration becoming a thing of the past. The mainstream configurations are now 16GB + 512GB and 16GB + 1TB.

Will Consumers Accept This? Market Feedback After Price Increases

The most crucial question is whether consumers will accept this escalation of the price war. Guo, an avid tech enthusiast, expressed that while the vivo X200 standard version does address user pain points with upgrades like a larger battery capacity and faster charging speed, he believes the speakers and the motor still fall short. He also feels that despite the improved camera performance, the screen hasn't received an upgrade, remaining a 1.5K screen. He doesn't see a noticeable difference in image quality, making the price increase seem unjustified.

There's also a voice in the market advocating for "reverse sales," suggesting that vivo's price hike has boosted sales of the previous generation, the X100 and X100s. The X200 and the standard version of the previous generation offer comparable imaging capabilities, while this year's Pro version aligns with the X100 Ultra. Considering that the X200 is unlikely to participate in the "Double 11" shopping festival, while the previous generation might see significant discounts, combined with "trade-in" offers, consumers could potentially acquire the X100 for just over 3000 yuan.

Faced with the new price of the vivo X200, some consumers are taking a wait-and-see approach, anticipating the release of models like the Xiaomi 15 and OPPO Find X8. After all, the starting price of the new standard version is 4299 yuan, while the Pro version starts at 5299 yuan. The newly introduced Promini version also costs 4699 yuan. In comparison, if Xiaomi and OPPO offered a discount of just around 200 yuan for phones in the same category, they could attract a significant number of users.

Apple's Price Consistency Stands Out as a "Clear Stream," Highlighting Value for Money

The continuous barrage of price hikes has made this year's iPhone 16 a "clear stream," maintaining a starting price of 5999 yuan and holding its price across the entire series.

Undeniably, Apple's products are inherently more expensive, leaving room for cost increases. However, their decision not to raise prices further enhances their value for money, attracting some users to join the Apple ecosystem.

Behind the Price Hikes: Escalating Price Wars and Supply Chain Game

Ding Shaojiang, an industry observer, believes that domestic brands increasing prices is a trend, but there's still a price war within this process. The brand with the smallest price increase gains an advantage. Before the final prices are revealed, brands releasing their products later will quickly gather market feedback and adjust their pricing accordingly. Even without comparing themselves to competitors, if a new model doesn't perform well in sales, dealers will resort to disguised price reductions by offering "gifts."

Worth It or Not? Phone Manufacturers' Defense and Market Analysis

Despite the ongoing controversy, phone manufacturers are standing their ground. Huang Tao, Vice President of vivo's product division, stated that the upcoming X200 Ultra will be more expensive than the X200 Pro, and the choice depends on individual needs. He emphasized that the current pricing is vivo's limit, squeezing out all possible space. He explained that the cost of core components like SoCs has risen significantly and will likely remain elevated in the short term, compelling vivo to find a balance between cost control and product competitiveness.

Some in the market also believe that the domestic market, which has long been focused on extreme value for money, is finally "reaching its limits," prompting manufacturers to raise prices after years of intense competition. Xiaomi's second-quarter report for 2024 shows that while smartphone revenue increased by 27.1% year-on-year, its gross profit margin stood at only 12.1%, down by 1.2% year-on-year. Though OPPO and vivo haven't disclosed their figures, the market estimates their gross profit margin at around 10%. In recent years, Huawei has focused on high-end models, leading to an increase in its gross profit margin. However, before facing sanctions, this margin remained within 10% to 12%.

Ding Shaojiang believes that the long-lasting price war is indeed unsustainable, but the manufacturers are not the only ones "protesting." Take the memory price hike, for example. This is the primary reason behind many manufacturers raising prices. After a prolonged period of low prices, major memory manufacturers initiated a proactive reduction in production and a rise in prices in the third quarter of last year, using this strong approach to control supply and ultimately drive up prices. These increases ultimately affected the prices of end products.

In this price surge, phone manufacturers are also in a somewhat passive position. The global memory market is highly concentrated, with a handful of major players holding the dominant share. While domestic flash memory leaders possess greater flexibility in price adjustments, their limited production capacity for storage chips is a critical issue, hindering their ability to control pricing.

Additionally, 2024 marks a new replacement cycle for phones. The rise of AI has boosted demand for mobile phones, while also demanding greater memory capacity. Phone manufacturers are forced to spend more on memory purchases, and these costs are ultimately passed on to consumers.

Experts point out that while price increases by phone manufacturers are a market behavior and justifiable, it's not acceptable to use raw material price increases as the sole justification. A key measure of a brand's strength is its control over the supply chain. The more control a manufacturer has over the different stages, the greater their pricing leverage. If price increases are unavoidable, they must offer consumers a completely new experience, as "worth it" is the ultimate deciding factor.

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