Though most executives in the U.S. mobile industry arguably would rather not spend as much money as they do on device subsidies, it is hard to argue with the results. U.S. mobile penetration is up around 100 percent, by some estimates. And subsidized phones are a significant part of the reason.
Nearly two-thirds of U.S. smart phone buyers paid less than $200 for their devices during the third quarter of 2011 according to a recent study published by consumer-electronics researcher NPD. And much of that was driven by sales of the iPhone 4 and iPhone 3GS, which outsold competing phones from HTC, Motorola (NYSE: MMI), and Samsung despite their advanced age, NPD says. Average Smartphone Price Falls Again In U.S.
The share of U.S. mobile handset sales that were smart phones reached 59 percent in the third quarter of 2011, an increase of 13 percentage points since the third quarter of 2010.
Based on the latest data from NPD’s monthly Mobile Phone Track service, average selling prices for smartphones have declined for four consecutive quarters, reaching $135 in the third quarter.
Among U.S. consumers who considered purchasing phones in the $200 to $250 price range, 64 percent ended up purchasing a phone for less than $200. Smart phone prices fall.
Goldman Sachs analyst Bill Shope says iPad demand is slowing. “We believe it is prudent to assume the iPad is facing some near-term demand challenges,” says Shope. To reignite growth, price cuts are required, he says.
“The iPhone enjoyed several major retail price cuts in its first year,” he says. “The 8Gb version of the first iPhone saw its retail price slashed from $599 to $399 in its first three months on the market.”
Similar price cuts occurred with the iPod throughout its existence, and both the iPhone and the iPod saw storage capacity increases with each product refresh. In contrast, the launch of the iPad 2 saw no increase in storage capacity across the SKUs and no price change, says Shope.
A price cut at the low end, and the possible introduction of a low-capacity iPad 2 line once the iPad 3 is released, could stimulate demand considerably without any substantial margin compression, he argues.
It is possible demand is shifting a bit in the direction of e-readers, by some potential buyers, and towards Android tablets, by other buyers, one might suspect. Demand For The iPad Is Fading
It seems reasonable to suppose that iPad sales volume has been helped by business buying, something that probably did not happen so much with iPhones, which initially were not supported by enterprise information technology departments.