Global smartphone shipments declined 4% year-on-year YoY in 2018, but in stark contrast, the average selling price (ASP) increased 9% YoY. This was the highest ever growth in smartphone ASPs for a full year. The effect of rising ASP was such that despite lower shipments, smartphone revenues for the full year in 2018 grew 5% YoY. According to our findings, the growth in the ASP was driven both by premium segment as well as the mid-segment (Exhibit).

Exhibit: 2018 Sell through Growth by Price band

OEMs are increasing their ASPs with each iteration of flagship launches. In 2017, the first smartphone priced above US$1,000 entered the market with the Apple iPhone X. The iPhone XS and XS Max have taken this even higher in 2018. As iPhones become more expensive, an opportunity has opened up for other OEMs to enter higher price bands. This is, at least partially, the reason that 2018 flagships from key Android OEMs like Samsung, Google, Huawei, OPPO, Vivo, OnePlus were priced higher than earlier years. There is also a material cost increase pushing up prices. For example, increased memory, higher quality, faster processors, curved displays, more cameras, new features like Artificial Intelligence (AI), bezel-less display, innovative industrial design or color-material-finishing, are some of the costlier new features on the latest flagships.

While the premium segment remains niche and a more relevant for developed economies, it is the mid-segment which is more volume centric and driving up ASPs in emerging economies. There has been a rapid diffusion of features from the premium segment to the mid-segment, which is giving users enough value proposition to upgrade. For example, premium design factors like punch-hole display, pop up cameras, triple cameras, high megapixel cameras, in-display fingerprint sensor, and more, have already proliferated the mid-segment. With prices of the phones below US$300, these feature-loaded devices have become attractive to a big bulk of consumers who value device utility and value for money rather than the exclusivity of the latest flagship models.

The increasing ASP trend is also similar to consumer behavior. According to Counterpoint’s Consumer Lens Survey, although users are holding on to their devices for a longer time, they are willing to spend more on their devices.

As we enter the second half of the year in 2019 and OEMs refresh their flagship portfolio, the ASP in the premium segment will recover. However, with Apple decline, the collapse of the premium segment in Q1 2019, the trade ban on Huawei, and lengthening replacement cycles – the focus on the volume centric mid-segment with shorter replacement cycles also becomes extremely crucial for OEMs to drive ASP growth. Consumers’ expectation for better performance will continue to drive up the demand for high-spec devices. ASPs will continue to grow in 2019 and beyond. Although after 2019, the rate of adoption of 5G will be a crucial factor in driving up smartphone ASPs.

The analysis is part of Counterpoint's Market Monitor service. The report series provides detailed analysis of the vendor activity and performance, measuring both volume and revenue by sell-in by major regions and key countries (55+) and top (130+) vendors covering close to 95% of the global handset shipments. It answers the questions of which OEMs, brands and models are performing well, in which markets and why. It also addresses the main derivative impacts to the supply and distribution chains.