Last week, I was on a radio show based on a Washington Post article talking about why more of us are buying higher-end smartphones for five reasons. The subject really resonated with me. First was the impact of carrier subsidies and aggressive trade-in prices that significantly reduced the cost of the phones. Second is the fact that we are keeping phones longer, so buying higher-end phones will seem current longer. Third and fourth are how Apple drove this trend by restricting competition and moving its phones upmarket (typically, tech products get cheaper over time). And fifth is that smartphone OEMs aren’t promoting or putting much effort into lower-cost phones, which makes the higher-end phones look far better than they would otherwise.
Outside of focused PCs like gaming or workstations, people tend to buy based on price for the most part. While there are premium-class PCs, the average price of a laptop, according to Google Gemini, is $800, while the typical range is $300 to $3,000 dollars. So, a lot more people are buying below $500 than above $2,000. For smartphones, the average spend is $823, with a typical range of $100 to $1,600, according to Gemini, suggesting people appear to be spending more on smartphones even though the prices for these devices range far lower.
So why can smartphones get higher average prices and generate more profit per unit (particularly Apple, which has 32% of the revenue but a whopping 66% of the profit for this segment), while PC profit margins are typically below 20%?
Marketing
There is a lot more marketing for smartphones, particularly Apple smartphones than there is for PCs. Marketing is what makes higher-end products stand out; at least, it does when they are done well. Apple was famous for making sure influencers got and spoke about Apple’s latest products. I don’t know if Apple still does this, but it used to make sure every major tech reporter got a free iPhone. These folks would rave about their new phones on the air, creating the impression of status for the phones and the brand. The carriers also advertise their top phones and seem to favor Apple when they do so, which again establishes status and draws people to the higher end of products.
Samsung, Apple, Google, and others do major launch events that are mostly focused on their high-end products, again drawing attention to them and connecting status to the product’s initial rarity. Foldable phones or other unique designs often become halo products and draw potential buyers to the brands.
While there used to be major OS events, currently hardware launches do very little to promote PCs in general and high-end PCs in particular. So, the premium products don’t convey the status that would pull people to them, allowing price to have a far bigger impact on the related decisions.
Simple vs. Complex Lines
Apple keeps things simple by substantially reducing the risk of someone choosing the wrong product. Smartphone lines tend to be comparatively simple, while PC lines are all over the map with different screen sizes and types, memory and storage levels, laptop designs (foldables, convertibles, standard), finishes (carbon fiber, metal, plastic), and limited color choices. And while you can easily customize your smartphone with a case, you need to go to a company like Toast (which isn’t well known) to do the same thing with your laptop.
Fewer choices mean less chance of buying the wrong thing, and customization makes the phone more uniquely yours, something that is far more difficult with a laptop and again pushes people towards lower-cost devices.
Personal vs. Institutional Purchase
Smartphones tend to be selected and purchased (even if company funded) by individuals, and while there was a BYOD trend with PCs, particularly during the pandemic, the PC industry has started to flip back to company-purchased and selected laptops (with exceptions for some executives and many engineers) with a huge focus on consistency because IT has to support the laptop while they generally have less responsibility for smartphones.
Companies buy on price, so premium devices are limited to top level executives and those who can justify a unique configuration (graphics artists, engineers etc.). The rest of us get what the company chooses. I recall the first time a company gave me a standard cheap brick of a laptop. It was good enough, but I wasn’t proud of it.
A Focus on Innovation
Smartphone vendors really push to get you to buy the latest and greatest with amazing new cameras, foldable screens, better modems (thanks Qualcomm), and things like inductive charging. We do get performance bumps with CPUs, GPUs and, recently, NPUs, and Microsoft did roll out Copilot+ PCs, but they didn’t seem to do much we needed them to do because key AI features either were pulled back (Recall) or had yet to emerge.
Yes, there have been foldable screens, but unlike smartphones, where the screen was additive, foldable screen laptops did funny things with the keyboard that many didn’t like, and the resulting offerings were more difficult to use. Laptop upgrades tend to be far less noticeable, and coupled with the lack of product marketing mentioned above, just don’t get the same traction.
Smartphones Displacing PCs
And finally, of the two devices, we are using smartphones for more and more things, and PCs for less and less. There used to be a huge gap between what you could do with a cell phone and what you could do with a PC. Now, you can browse the web on both, you can email on both, you can watch videos on both, you can keep track of your schedule on both, and you are more likely to have your smartphone with you than your PC.
At some point I expect the PC will simply become redundant unless something changes. If you can do the same things on both devices and the only difference becomes screen size and keyboard, then why not hook a smartphone up to a bigger screen and physical keyboard and get rid of the redundant device?
This is the problem that resulted when the PC OEMs and Microsoft failed with smartphones. Now if the two system types merge or one is eliminated, it is more likely the smartphone will walk away as the victor, and that could have a significant impact on the segment.
Wrapping Up
Smartphones are trending to displace PCs as they not only consistently provide higher margins and are better marketed, but they are advancing far more quickly than their PC counterparts. Greater marketing spend, simpler lines, more focus on users and less on IT, more innovation, and the inside track on winning the overall market make smartphones a far better bet (particularly when you consider the higher margins) than PCs.
This could be changed with a stronger focus on marketing and innovation and a move to get the carriers more engaged with PCs, but that isn’t happening at the moment. Thus, the smartphone market is not only more lucrative but also likely the one to remain when these two product types become interchangeable.
- Five Reasons Why PCs Aren’t Selling Like Smartphones - February 25, 2025
- HP Partners with Real Madrid Foundation to Help Disconnected Communities - February 18, 2025
- Qualcomm Has an Impressively Good Quarter - February 10, 2025
