The smartphone industry is moving beyond competition over device performance to competition over how devices are purchased. As premium device prices rise, Apple and Samsung Electronics are strengthening strategies to lift upgrade demand through leasing, subscriptions and guaranteed buyback programs.

TechCrunch reported on Aug. 1 that Apple teamed up with fintech firm Klarna last week to launch Apple Upgrade in the United States. Users can use iPhones, Macs, iPads and Apple Watches for a monthly fee, then upgrade, return them or buy them later. Samsung Electronics also runs Galaxy Forever in India, combining financing and guaranteed buybacks so customers can use flagship Galaxy smartphones at more predictable costs.

Apple Chief Executive Tim Cook (Tim Cook) said on an earnings call that the program is meant to help customers who regularly replace devices access the latest products more easily. He added that the strong resale value of Apple products makes this approach a good fit.

A longer replacement cycle is behind the change. As component prices rise and performance improvements become incremental, consumers are using existing devices for longer, leaving manufacturers in need of new sales strategies. Counterpoint Research forecast that the global average smartphone replacement cycle will extend to 4 years in 2026. IDC also said the average holding period among U.S. premium smartphone users increased to 42 months.

As replacement cycles lengthen, manufacturers face the burden of simultaneous declines in new-device sales and supply to the refurbished market. Max Weinbach (Max Weinbach), an analyst at Creative Strategies, said leasing and guaranteed buyback programs help bring devices back into the used market. He said the core of the program is not a simple lease but a structure designed to encourage customers to return devices within 12 to 36 months and switch to the next model.

For consumers, the pros and cons depend on how often they upgrade. Matt Schulz (Matt Schulz), LendingTree's chief consumer finance analyst, said leasing can be a meaningful option for users who replace devices frequently, but lump-sum purchases are often advantageous for those who use phones for 3 to 5 years or more. Weinbach also said his analysis of Apple's program found that for consumers who already have short replacement cycles, buying outright and trading in may not differ much in cost and could be cheaper. He added that for higher-capacity models, trade-in value often does not fully reflect the purchase price.

Manufacturers are aiming for more than higher sales. A monthly payment structure is also part of a strategy to keep customers within their ecosystems for longer. Navkendar Singh (Navkendar Singh), vice president for IDC device research, said the key is not to make customers upgrade more often, but to raise margins and retention in a market where price burdens have increased.

In the United States, wireless carriers have long run financing and upgrade programs, but manufacturers have recently been moving to offer them directly to secure customer relationships. Nabila Popal (Nabila Popal), an IDC senior research director, said 36-month zero-interest financing and trade-in policies of up to $1,100 have driven up average selling prices for smartphones in the United States. Based on that structure, Apple and Samsung Electronics are maintaining more than 80 percent market share in the U.S. smartphone market, IDC said.

Subscription models are also creating opportunities for startups. India's BytePe said more than 80 percent of its customers choose subscriptions instead of lump-sum payments or traditional installment plans. Founder and CEO Jayant Jha (Jayant Jha) said demand is increasing among young office workers who want to use premium smartphones without the burden of upfront costs. Britain's Raylo and Germany's Grover are also expanding monthly subscription services.

Analysts forecast that more companies will join the trend. Research director Tarun Pathak (Tarun Pathak) said the key is to raise customer lifetime value, create predictable replacement cycles and secure stable volumes for refurbishment. He said financing programs are likely to play a bigger role for now as a way to reduce price burdens.

Lump-sum purchases, however, are unlikely to disappear. Cashify co-founder and CEO Mandeep Manocha (Mandeep Manocha) forecast that leasing, subscriptions and lump-sum purchases will coexist rather than replace one another. Popal said Apple's new upgrade program is also more likely to broaden financing options, particularly for Mac sales, than to fundamentally change how U.S. consumers buy devices.