Explained: Why smartphone prices have been rising in 2021 – Times of India

Almost two weeks ago, Xiaomi raised the price of its Redmi Note 10 series. Three days ago, Realme hiked the price of four of its smartphones while Micromax also raised the price of a smartphone today. The price rise of these smartphones may not have been significant but it does indicate a trend: prices of smartphones continue to rise. We take a look at why there has been a hike in the prices of smartphones.
Global shortage of smartphone components
While smartphone shipments have been growing and are further expected to grow in 2021, there has been a shortage of components. According to a report by Canalys, “as key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers.” This was in July and since then the cost seems to have been passed on the consumers. Most of the price hikes have been in the budget or entry-level segment. According to Canalys, there are major constraints around LTE chipsets, which has created a challenge at the low-end of the market.
Another research firm Gartner believes that the global chip shortage has not yet impacted the smartphone industry as the demand and supply equilibrium is met. “This may change in the coming quarters and result in an increase in the average selling price of smartphones globally,” noted the firm.
Rising prices of smartphone components
Earlier this year, Xu Qi, vice president, Realme also warned about the increase in the prices of smartphones. Apart from the shortage of 4G processors, the prices of components for charting adapters, memory chipset and others have gone up. Qi said that this price hike has added to at least a 10% increase in the costs of making smartphones, which eventually will reach the end consumer.

Xiaomi president Xang Wiang in March had warned about the same. He said that the company would try to optimise costs but only to a certain limit and beyond it will reach the consumers. The low-cost handsets are more affected as the margins on them are quite low.
5G: Another reason for price rise
As more countries embrace 5G-enabled networks and 5G phones gain popularity, the cost of smartphones is expected to rise further. With users looking to migrate to devices that support 5G, there is bound to be a rise in demand for these smartphones. As we have seen with budget 5G smartphones in India — even though the technology isn’t available — the price is on the higher side. Once 5G does roll out in India, there will be a bigger demand and people will have to pay extra for that technology.