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Smartphones are getting costlier and going forward, be ready to pay more with the rising prices of generative AI chips, transition to 5G, enhanced computing capabilities and premiumisation. 

The global average selling price (ASP) of smartphones is projected to rise by 3 per cent (year-on-year) to $365 in 2024, with a further 5 per cent increase in 2025, according to Counterpoint Research’s Market Outlook report.

In 2025, increasing consumer interest in generative AI (GenAI) will mainly support the premiumisation 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, the report mentioned.

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

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.

The ASP rise is closely linked to the increasing bill of materials (BoM) costs. A primary contributor to this escalation is the SoC (system-on-chip).

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 report mentioned.

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.

While the rising prices of SoCs contribute to the overall increase in smartphone costs, memory prices are also a crucial factor.

“As we enter the AI smartphone era, the integration of GenAI features is expected to continue this upward trend,” the report mentioned.