The center of gravity in the global smartphone market is shifting to premium phones. The share of low-priced smartphones is shrinking rapidly, while the share of high-end products priced well above 1 million won is growing. Rising component prices have hurt the profitability of low-priced products.

Omdia data showed the share of smartphones priced under $200 is expected to fall to 25.6 percent by 2027 from 40.6 percent last year. Over the same period, the share of devices priced at $800 or more is seen rising to 28.4 percent from 21.1 percent. In 2027, smartphones priced at $800 or more are expected to surpass those under $200 for the first time.

The shift is more pronounced at lower price points. The share of ultra-low-priced smartphones under $100 is expected to decline to 3.0 percent by 2027 from 12.6 percent last year. Devices priced at $100 to $199 are also seen slipping to 22.6 percent from 28.0 percent. Phones priced at $200 to $699 are expected to hold at around 40 to 41 percent.

The change is not driven by rising sales volumes. Omdia expects global smartphone shipments to total 1.097 billion units this year, down 12 percent from a year earlier. It forecasts total market revenue rising 12 percent to $651.6 billion, while the average selling price (ASP) climbs 27 percent to $594. The market is shrinking, but the price of a smartphone is rising.

◆ Memory price rises influence... value phones in South Korea also priced around 400,000 to 500,000 won

Rising component prices underpin the rapid decline in budget phones. A South Korean telecom industry official said memory price increases have limited the scope for cost cuts. The official said manufacturers face worsening profitability the more low-priced phones they make because they cannot compromise on performance.

Omdia said smartphones priced under $400 in the first quarter had memory accounting for about 60 percent of total component costs. For devices under $99, the share exceeded 64 percent. The cheaper the phone, the greater the cost burden from rising memory prices.

Manufacturers are therefore reducing the share of ultra-low-priced products and shifting toward mid- to high-end models that are relatively easier to make profitable. Shipments of smartphones priced at $400 or below are expected to fall by more than 22 percent this year from a year earlier, while devices priced above $400 are forecast to grow 5.7 percent.

For manufacturers, it is more advantageous to focus on mid- to high-end models than on budget phones, where it is difficult to pass higher costs on to prices. Premium products have more room to raise prices by strengthening the application processor (AP), camera and AI functions. An industry official said it is not easy to keep cutting prices even for entry-level phones due to cost burdens. The official said manufacturers have little choice but to focus on profitability per device rather than sales volume.

◆ Even 'value phones' priced around 400,000 to 500,000 won... budget phones losing ground

The budget phone market is not disappearing. Price-sensitive consumer demand still exists. In South Korea, practical models aimed at a child's first smartphone, a parent's device or a second phone continue to be released.

Practical handsets recently introduced by carriers are priced around 400,000 to 500,000 won. Dedicated models offered by the three mobile carriers are typical. SK Telecom launched the 'Galaxy Wide9' in July with a list price of 469,700 won. KT released the 'Galaxy Jump5' in the same month priced at 545,600 won. LG Uplus is also selling the 'Galaxy Buddy5' for 528,000 won. They are marketed for value, but most are priced in the 400,000 to 500,000 won range.

High-end phones, by contrast, are increasing their market share despite their high prices. The position of ultra-low-priced phones under $100 is narrowing quickly. Devices under $100, which accounted for 1 in 8 smartphones last year, are expected to make up 3 percent of the total in 2027. Over the same period, the share of phones priced at $800 or more rises from the low 20 percent range to close to 30 percent.

The trend is also leading to changes in manufacturers' product strategies. With the latest chipsets, cameras and AI functions applied first to premium models, product differentiation is also appearing to center on high-end phones. Jusy Hong (주시 홍), a senior research director at Omdia, said manufacturers' strategic balance points are changing. He said they are focusing more on sustainable growth, sound product portfolios and stronger profitability rather than chasing shipment share alone.

In South Korea's retail market, there are also signs that budget phones are no longer as prominent as before. A telecom retailer official said demand for budget phones has not disappeared completely, but there is a palpable drop in interest compared with the past. The official said entry-level products are likely to keep adding features while settling at a certain minimum price level.