Consumers may be in for a shock as 5G phones enter the marketplace, with the price premium set to be 29 times higher than expected.
According to a new IHS Markit survey, conducted among more than 2,000 respondents primarily based in the US, three-quarters of consumers expect to see a 10 to 25% price increase for a 5G phone.
However, the actual pricing of the first wave of 5G phones is much higher, with Samsung’s S10 5G phone retailing at $1,300. This 335% premium, in the face of the $388 average for the company’s existing models, is likely to exceed consumer expectations.
While IHS expects that the premium is unlikely to impact early adopters of the model, it could slow sales to the mainstream consumer market.
“The 5G market is primed for massive growth, with the transition to the new technology expected to occur at a much faster pace than any previous wireless generation during the first five years of deployment,” says Joshua Builta, senior principal analyst at IHS Markit.
“However, as with each new wireless generation, the first wave of phones carries sky-high costs because of the additional electronics required to support the enhanced features. With smartphone brands passing these additional costs down to consumers, many buyers will be turned off by the high prices and will wait until they come down before purchasing a 5G phone.”
IHS Markit suggests that brands may be able to overcome initial consumer reticence by promoting the other attributes of 5G beyond faster data speeds, as a lack of awareness around the new features the technology offers could account for consumers’ low expectations for pricing premiums.
As an example, the tech will provide the ultra-low latency required to improve immersive entertainment experiences like VR – although on the other hand, fewer than 30% of respondents expected to increase their use of VR with the arrival of 5G.
