It won’t be too long before you can buy a much cheaper 5G phone

Save your money until 5G modems show up in more affordable phones next year

Karen Chiu

Published: 8:55pm, 8 Jul, 2019

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This article originally appeared on ABACUS

If you want to take advantage of 5G today, compatible smartphones are already available. But it will cost you.

Early 5G phones can cost a significant premium over similar 4G models. The Samsung Galaxy S10 5G, for example, sells for US$1,300 on Verizon and Sprint. The S10+ starts at $1,000, but with half the storage. More affordable options exist, but even Xiaomi’s Mi MIX 3 5G still costs about US$670 in Europe. The regular Mi Mix 3 can be found for under US$500. And if you don’t need a flagship-tier device, you’re just out of luck.

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It’s true that, depending on where you live, most of you might want to wait a bit before purchasing a 5G handset anyway. Network providers in the US, China and other places are only beginning to expand coverage from a handful of specific areas in select cities.

But you might also be wondering whether you’ll actually be able to afford a handset that allows you to take advantage of 5G when it finally arrives in your hometown.

The answer is very likely to be yes.

One reason why 5G phones are so costly right now is the hardware they require.

“As it’s still at the early age of 5G adoption, the research investment is high, modems are expensive,” said Canalys research analyst Mo Jia. “So it’s very hard for smartphone vendors to bring down the handset prices at this stage.”

Besides Huawei and Samsung, most Android phone makers rely on 5G modems from Qualcomm. These modems only support 5G, meaning 5G phones also require an additional 4G chip to ensure a seamless connection when not in range of a 5G connection. And since that 5G modem eats up a lot of power, these phones are also equipped with larger batteries. All that adds up to a higher price.

But this will all change in the coming months. By the end of this year, 5G smartphones are expected to start shipping with Qualcomm’s new modem. It’s not only smaller in size than the existing modem, it’s also compatible with 4G and uses less power.

Another factor that could push prices down? More 5G phones.

This year, less than 1% of smartphones sold around the world are 5G compatible, according to Canalys. By next year, that number is forecast to jump to almost 12%. As 5G handsets become more widely available, analysts and industry insiders expect prices to drop.

And that price drop looks to be steep.

“By the end of 2020, I expect 5G will be supported in part by mid-end models,” said Counterpoint analyst Ethan Qi, who forecasts that retail prices will fall sharply in the second half of next year to under US$300.

Canalys’ Jia said with improved network coverage and hardware, 5G phones are expected to become significantly cheaper, going down to as low as about US$200. That will make 5G smartphones a choice for the masses.

Industry insiders seem to agree with that view.

“From mid-2020 onwards, there will be many 3,000 to 5,000 yuan (US$435 to US$725) 5G phones,” Xiang Ligang, director general of the Information Consumption Alliance, told state media. “Afterwards, the price will drop further, with some 5G phones costing about 2,000 yuan (US$290).”

China Mobile’s Jian Qin also said he expects the price of 5G phones to drop to around 1,000 to 2,000 yuan (US$145 to US$290) by next year.

Part of the reason for the significant price drop is that 5G modems will move down to cheaper devices. Manufacturers tend to roll out premium features on their higher-end devices before later adding them to lower-end handsets.

Samsung, for example, released its first ever 4G phone -- the Epic 4G -- in 2010. Armed with pretty decent specs for the time, including a super AMOLED screen and a 1GHz processor, the phone cost US$250 after a US$100 rebate and with a two-year contract. By the next year though, Samsung introduced the Exhibit II 4G. The device more than made up for its lack of fancy specs with the affordable price tag of US$200 without a contract.

Counterpoint’s Qi said chip vendors and phone makers are adopting a similar strategy this time, choosing to bundle 5G technology with higher-end handsets in the early stages.

So all signs suggest there will be far more reasonably-priced 5G phones appearing by next year. But before you get too excited, there’s likely to be one big exception.

If you’re an Apple user, chances are your next iPhone (whether it’s 5G capable or not) will cost at least the same as the previous generation, if not more. And in any case, you probably won’t see the first 5G iPhone this year. That will have to wait until 2020, according to Ming-Chi Kuo, an analyst with a good track record of forecasting Apple product development.

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