Counterpoint: It is expected that the average selling price of smartphones globally will increase by 3% year-on-year in 2024, reaching $365.

According to Counterpoint Research's market forecast report, the average selling price of global smartphones is expected to increase by 3% year-on-year in 2024, reaching $365; it will further increase by 5% in 2025. This growth may be caused by multiple factors, including the transition of smartphones to 5G, improved computing power, and a clear shift towards high-end smartphones, among others. In 2025, increasing consumer interest in GenAI will mainly support the trend towards high-end smartphones, as GenAI requires a significant improvement in CPU, NPU, and GPU capabilities in SoC. Additionally, in mature smartphone markets, the replacement cycle for phones is longer, and manufacturers need to adopt advanced technologies, including GenAI, to promote continuous upgrades of high-end market products. Rising average selling price of smartphones In the first half of 2024, the sales of smartphones priced at $1000 and above increased by 18% year-on-year. As consumers increasingly prefer high-functionality, high-performance smartphones, major smartphone brands have responded by incorporating GenAI into their phones, signaling the dawn of the era of AI smartphones. For example, the prices of flagship Android smartphones have increased, with the latest Xiaomi 15 model with Snapdragon 8 Elite featuring Oryon CPU and Hexagon NPU priced $70 higher than Xiaomi 14. This trend indicates that the upward trend in average selling price of smartphones may continue as more brands innovate with cutting-edge technology and enhance their products. Main drivers of rising smartphone BoM costs: SoC and memory The increase in average selling price is closely related to the increase in BoM costs. The cost of SoC is the primary factor driving cost increase. As manufacturers adopt more advanced process nodes, such as 4nm and 3nm, it is expected that wafer manufacturing costs will start to rise from 2025. This growth will affect the pricing of some Qualcomm and MediaTek products that utilize GenAI, resulting in price increases in the single digit percentage range. The latest SoC products from companies like Qualcomm and MediaTek are not only more expensive, but also significantly more powerful in functionality. Enhanced AI capabilities, especially in Neural Processing Units (NPU), allow these chips to execute complex tasks more efficiently. For example, the MediaTek Dimensity 9400, with NPU 890, Cortex-X925, and Immortalis-G925, has seen performance improvements of 40%, 30%, and 40% respectively, with a price increase of over 20% compared to the previous Dimensity 9300+. While the increase in SoC prices has led to overall cost rise of smartphones, memory prices are also an important factor. In the third quarter of 2023, the downward cycle of memory chip prices ended, entering a new upward cycle. From the third quarter of 2023 to the second quarter of 2024, the average spot prices of DRAM and NAND have increased by over 60%. The GenAI trend may drive the adoption of higher-performance DRAM and NAND, such as LPDDR5x 9600 and NAND UFS 4.0, both of which will be more expensive than previous versions. The price gap between LPDDR5x and LPDDR5 is expected to narrow, further impacting overall costs. However, the demand for high-capacity chips like 1TB is decreasing, with prices expected to slightly decline by the end of 2024 and this trend may continue into 2025. With the advent of the AI smartphone era, the integration of GenAI functionality is expected to continue rising. The interaction between cost increases and consumer expectations will determine the competitive landscape of the smartphone industry in the coming years.