Why Samsung and Possibly Apple Are Targeting Budget-Conscious Buyers With New Smartphones

Both tech giants have every incentive to offer new smartphones at a broader range of price points.

After years of steadily raising prices on their premium phones, Samsung  (SSNLF)  and Apple  (AAPL) - Get Report have been changing course. 

On Friday, Samsung announced the Galaxy Note 10 Lite and Galaxy S10 Lite, which are billed as more affordable counterparts to its popular flagship models. 

The electronics giant did not disclose pricing for the two new smartphones, but wrote in a press release that they will bring the Galaxy lineup “to more people” at an accessible price point, and include several key features found in the costlier models, such as multiple cameras and edge-to-edge displays.

Samsung’s announcement comes on the heels of rumors that Apple plans to further diversify its iPhone pricing this year, including more modest price increases on top-range iPhone 12 models and one smaller, entry-level phone that may cost as little as $399.

Between Samsung and Apple, results from recent quarters show that many consumers are shying away from the most expensive new phone models and upgrading less frequently. In the third quarter, for example, Apple’s best-selling model was the iPhone XR, the budget-friendliest version of Apple’s 2018 iPhone lineup.

According to Peter Jarich of GSMA Intelligence, part of the strategic value of less costly phones is helping premium smartphone makers break into new geographic and other markets.

“These are flagship-type devices at low prices," Jarich said, noting that the target buyers of new budget models "don’t necessarily need to or want to invest in a flagship phone."

Although Samsung didn’t specify in Friday's release whether the new “lite” Galaxy phones will come with 5G support, it wouldn’t be surprising if they did.

Analysts anticipate that the broader rollout of 5G networks, 5G-enabled devices and corresponding promotions by carriers, will reinvigorate smartphone sales over the next year or so. And device makers as well as operators have every incentive to market lower-cost 5G phones with appealing features in a bid to broaden out their customer bases.

“It’s part of that recognition that we need high-quality devices on these networks,” Jarich said. “The sooner you can get low-cost devices that can make 5G accessible to more people, the better.”

At this point, 5G networks come in three ranges: Ultra-fast mmWave 5G networks, which are available only in a few major metro areas, mid-range networks and low-range 5G networks. The lowest-range 5G networks cover more rural areas and will have the effect of boosting network speeds for customers in those areas. Device makers likely have those customers in mind with some of those 5G-capable phones, particularly those at a lower price point.

“I think the biggest impact is going to be the low-range 5G making LTE speed realistic for everyone,” Rene Ritchie, a longtime Apple analyst and lead editor of iMore, told TheStreet.

In the coming year, Apple is expected to diversify its iPhone offerings in terms of size and capabilities as well as price, and may release as many as four new phones this year according to rumors. Meanwhile, Samsung will show off the Galaxy Note 10 Lite and Galaxy S10 Lite at the annual Consumer Electronics Showcase, which kicks off on Jan. 7.