The first half of the year's 5G flagship phones have come to an end: "unintentionally" more expensive

Nearly halfway through 2020, mainstream mobile phone manufacturers have basically completed the upgrade of 5G flagship phones. Looking at the flagship phones in the first half of this year, high-performance 5G chips, high refresh rate screens, periscope telephoto, and curved screen technologies have become standard features of flagship phones, and along with them, prices continue to rise. Flagship phones are "unintentionally" becoming more and more expensive!

1. It is becoming increasingly difficult to make friends with mobile phone manufacturers

"Selling mobile phones doesn't make money, it just makes friends", we often hear this sentence at the new product launch conferences of domestic mobile phone manufacturers, which means that a very surprising price will be displayed on the big screen. At that time, the most common thing that domestic mobile phone manufacturers talked about was cost performance, and they took the path of small profits but quick turnover.

But this year, the prices of 5G flagship phones have generally increased, and it seems to be becoming increasingly difficult to "make friends" with mobile phone manufacturers.

The Xiaomi Mi 10 series fired the first shot of the price increase for 5G flagship phones, directly raising the price of the standard version to 3,999 yuan. Compared with the Xiaomi Mi 9, the price has increased by more than 1,000 yuan, an increase of 33.3%, and the price of the top version of the Xiaomi Mi 10 Pro is as high as 5,999 yuan. Some netizens joked, "I didn't have money to buy Xiaomi before, but now I don't have money to buy Xiaomi." After a closer look, you will understand the connotation.

The price increase of Xiaomi 10 is just the beginning. The highest selling price of OPPO Find X2 series exceeds 10,000 yuan; the starting price of vivo NEX 3S series is close to 5,000 yuan; Huawei P40 series should have the smallest increase. Compared with the domestic price of the previous generation P30, the starting prices of P40 and P40 Pro have increased by 200 yuan and 500 yuan respectively, but their high-end versions have also risen to 7,988 yuan.

The prices of not only the flagships of various manufacturers have increased, but also the sub-flagships that focus on cost-effectiveness have also increased to varying degrees. The starting price of the Redmi K series Pro version has increased from 2,499 yuan to 2,999 yuan, and the IQOO series has also increased from 2,998 yuan last year, which was aimed at Xiaomi 9, to 3,598 yuan this year. In addition, the Honor 30, which uses its own Kirin chip, has also increased by 300 yuan compared to last year.

In 2019, the price of 5G mobile phones experienced a wave of high opening and low closing, from more than 8,000 yuan to 1,999 yuan. In 2020, with the arrival of the 5G replacement wave, mobile phone manufacturers intend to expand the price range of 5G mobile phones and participate in more price-level competition, which constitutes a new trend in 2020.

2. Internal and external factors behind the price increase

The price increase of flagship mobile phones is due to the fact that mobile phone manufacturers "have to do it" on the one hand, and "do it intentionally" on the other hand.

From the overall industry trend, 5G mobile phones will be more expensive than 4G mobile phones because the internal component performance requirements are higher. According to data from JPMorgan Chase, the chip cost of 5G mobile phones is about 1.85 times more expensive than 4G LTE. Taking Qualcomm's flagship processor Snapdragon 865 in 2020 as an example, the cost of the chip + baseband + RF front-end system is twice that of the Snapdragon 855 in 2019.

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In addition to 5G chips, in order to improve the performance experience of the entire mobile phone, flagship mobile phones will undoubtedly choose the best solutions in terms of screen refresh rate, camera module, fast charging, etc., further pushing up the price of the mobile phone.

Take the Xiaomi Mi 10 series as an example. The 90Hz high refresh rate screen not only has to bear high fixed costs, but also tariffs, patent fees to Samsung, and screen opening fees, etc. The 1/1.33-inch 100-megapixel HMX sensor and OIS equipped in the Xiaomi Mi 10 cost as much as $50, while the 48-megapixel sensors equipped in many products last year cost only around a dozen dollars.

Therefore, the increase in material costs directly leads to an increase in the prices of flagship mobile phones in 2020.

If the increase in material costs forces mobile phone manufacturers to "follow" market trends, then actively impacting the high-end market and "piling up materials" as much as possible is what mobile phone manufacturers "intentionally" do.

In recent years, the shrinkage of the domestic market has become a consensus, and the user replacement cycle continues to lengthen. In the zero-sum game stock market, even the leading manufacturers have begun to become "anxious."

According to a report by third-party consulting firm Counterpoint at the end of 2019, the price distribution of smartphones shipped globally in Q3 2019 has changed significantly compared with the previous year. Sales of models priced between $400 and $600 decreased by 42% year-on-year, while sales of high-end mainstream models priced between $800 and $999 increased by 59%.

Obviously, if domestic mobile phone manufacturers cannot succeed in the high-end market, it will be even more difficult for them to survive.

On the other hand, when overall sales cannot continue to grow, pursuing profits from individual units is also a way to survive. For example, Apple iPhone has a gross profit margin of over 50%, and even with market sales fluctuations, Apple can still achieve very good revenue performance. However, Xiaomi, which focuses on mainstream and cost-effective products, only reported a gross profit margin of 9% in the third quarter last year.

Therefore, although high-end mobile phones require large R&D investments, the returns are also relatively generous. It is naturally necessary for domestic mobile phone manufacturers to impact the high-end market.

Of course, the competition behind a flagship phone is about R&D investment. In the past, the profit of "assembling a phone" was low, and it was difficult to invest heavily in R&D. But now, in order to enter the high-end market, self-developed technology is particularly critical.

For example, the Huawei P40 series brings a number of self-developed technological innovations, including the Kirin 990 5G SoC, Leica five-camera + RYYB filter array, Huawei WiFi6+ technology, etc., making it the flagship benchmark for 2020; OPPO's self-developed Smart 5G technology, the fastest commercial charging technology 65W SuperVOOC 2.0 technology, and Goodix Technology's ultra-thin under-screen optical fingerprint and intelligent voice noise reduction and recording solutions; vivo NEX 3S uses a non-physical button design and a lifting front camera design idea, which not only realizes the integration of the whole machine, but also brings a screen-to-body ratio of up to 99.6%, thus achieving a "true full-screen" display effect.

3. How will flagship phones evolve in the second half of the year?

After domestic mobile phones collectively impacted the high-end market, how will flagship mobile phones evolve in the second half of 2020?

According to the situation in the first half of the year, mobile phone manufacturers' flagship phones will continue to follow the wooden barrel theory, that is, there should be no shortcomings in configuration, design, heat generation, battery life, screen, camera, etc., because this will directly determine the overall quality of a mobile phone. In the past, mobile phone manufacturers could also use a combination of configurations to create different price ranges, but this year, the "whole family bucket" hardware has become the standard for flagship phones.

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After the barrel has no obvious shortcomings, manufacturers will pay more attention to product personalization and differentiation, and "fine-tune" various performance experiences such as screen refresh rate, resolution, color accuracy, camera pixels, zoom distance, imaging quality, professionalism, hardware operating speed, transmission rate, etc.

In terms of mobile phone design, although foldable screen mobile phones experienced a small climax at the beginning of the year, they are still some distance away from mass consumption. In comparison, consumers in the second half of the year are more looking forward to the emergence of mobile phones with hole-free under-screen cameras. Which of the leading manufacturers will be the first to mass-produce mobile phones with under-screen cameras will become a big suspense in the second half of the year.

In general, with the further deepening of 5G technology, the charm of 5G scenario applications is gradually emerging. Whether the flagship mobile phones after the price increase can be equated with it will become the key to whether domestic manufacturers can gain a firm foothold in the high-end market.