iPhone May Raise Prices in Smartphone Market

Although the iPhone is cool and has pushed some boundaries, a group of analysts has suggested that Apple’s handset may have the unintended side-effect of raising prices for the smartphone industry in general. According to Richard Windsor of Nomura Securities, the iPhone’s high-end feature set (lack of 3G networking notwithstanding) and advanced interface could push other smartphone manufacturers to add new features that could drive up their prices.

In the rush to catch up, moves such as adding dedicated graphics chips from companies such as AMD and Nvidia could add $10 to a smartphone’s base manufacturing cost, a price buyers may be charged several times over to make up for.

“If you took all the memory out of an iPhone and compared its insides to a Nokia N95, you’d have roughly the same cost of components,” says Carey. Carey also cited the component that’s currently the most in demand to be flash chips, which seem the most likely item to be bought up as firms work to match the iPhone’s feature set in the future device models.

Other analysts pointed out that a new goal within smartphone companies seems to be to combine technologies onto the same chipset, another factor that may drive prices up. The end result can help save on the actual retail price and slim the size of the device down, but can add to research and development costs. Said Yossi Cohen, VP and general manager of the wireless chip unit at Broadcom, “We’ve got products on the market now that not only combine two or three chips into one, but can integrate eight or nine different kinds of chips into one.”

Still others see the smartphone market segmenting into different entities as it grows, dividing into products that focus on different purposes and income levels. “When the handset market is a billion units a year, there’s enough room for the manufacturers to differentiate themselves,” said Jagdish Rebello of research firm iSuppli. “And that will put pressure on the semiconductor companies to do more differentiating of their own.”

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