• Global smartphone ASP is projected to rise by 3% YoY in 2024 to reach $365.

• This increase can be attributed to several factors, including the transition to 5G, enhanced computing capabilities, and premiumization.

• In 2025, increasing consumer interest in GenAI will mainly support the premiumization trend.

• While the rising prices of SoCs contribute to the overall increase in smartphone costs, memory prices are also a crucial factor.

The global average selling price (ASP) of smartphones is projected to rise by 3% YoY to $365 in 2024, with a further 5% increase in 2025, according to Counterpoint Research’s Market Outlook report. This increase can be attributed to several factors, including the ongoing transition to 5G technology, enhanced computing capabilities, and a notable shift toward premium smartphones. In 2025, increasing consumer interest in generative AI (GenAI) will mainly support the premiumization trend as GenAI demands SoCs with significant enhancements in CPU, NPU and GPU capabilities. Furthermore, in mature smartphone markets, which have longer replacement cycles, manufacturers are adopting advanced technologies like GenAI to boost upgrades in the premium segment.

Rising smartphone ASP

In the first half of 2024, sales of smartphones priced at $1,000 and above surged by 18% YoY. As consumers seek devices with advanced features and capabilities, major smartphone OEMs are responding by integrating GenAI technologies into their models, marking the dawn of the AI smartphone era.

For instance, flagship Android models are seeing a price uptick, with Xiaomi’s latest release Xiaomi 15, which is powered by the Snapdragon 8 Elite along with the new Oryon CPU and Hexagon NPU, launching at approximately $70 more than its predecessor. This trend signals that the upward momentum in the ASP is likely to persist as more brands innovate and enhance their offerings with cutting-edge technology.

Key drivers of rising smartphone BoM costs: SoC and memory

The ASP rise is closely linked to the increasing bill of materials (BoM) costs. A primary contributor to this escalation is the SoC. As manufacturers adopt more advanced process nodes, such as 4nm and 3nm, the costs associated with wafer manufacturing are expected to rise starting in 2025. This increase will impact the pricing of select Qualcomm and MediaTek products that incorporate GenAI, leading to single-digit percentage increases.

The latest SoC offerings from companies like Qualcomm and MediaTek are not only more expensive but also significantly more powerful. Enhanced AI capabilities, particularly within NPUs, allow these chips to perform complex tasks more efficiently. For instance, the MediaTek Dimensity 9400, featuring the NPU 890, Cortex-X925 and Immortalis-G925, boasts over 40%, 30% and 40% performance improvements, respectively, and is launching at more than 20% higher price over its predecessor Dimensity 9300+.

While the rising prices of SoCs contribute to the overall increase in smartphone costs, memory prices are also a crucial factor. In Q3 2023, memory chips ended a price decline cycle and entered a new rising cycle. From Q3 2023 to Q2 2024, the spot prices of DRAM and NAND increased by more than 60% on average. The GenAI trend will likely drive the adoption of higher-performance DRAM and NAND such as LPDDR5x 9600 and NAND UFS 4.0, relatively more expensive compared to the previous solutions. The price gap between LPDDR5x and LPDDR5 is expected to narrow, further impacting overall costs. However, demand for higher-capacity chips, such as 1TB, is diminishing and their prices are expected to decline slightly by late 2024 and potentially continue into 2025.

As we enter the AI smartphone era, the integration of GenAI features is expected to continue this upward trend. The interplay between rising costs and consumer expectations will define the competitive landscape of the smartphone industry in the coming years.