Smartphone Average Selling Price Keeps Rising

The global average selling price (ASP) of smartphones is projected to rise by 3% to $365 in 2024, with a further 5% increase in 2025, according to Counterpoint Research. 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 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.

In the first half of 2024, sales of smartphones priced at $1,000 and above surged by 18%. 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. 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.

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. 3Q23, memory chips ended a price decline cycle and entered a new rising cycle. From 3Q23 to 2Q24, 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, 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.