Rising Phone Prices Drive Up Household Communication Costs

Telecom Equipment Spending Up 28.9% from Q1 Last Year
Samsung and Apple Divide Market... Device Prices Rising
Government Increases Additional Subsidies... Boosting Mid-Range and Used Phones

The rise in smartphone prices is driving up household communication expenses.

According to the National Statistical Portal of Statistics Korea on the 10th, household communication expenses in the first quarter of this year amounted to 130,285 KRW, a 7.1% increase compared to last year. Spending on communication equipment rose by 28.9% to 30,412 KRW during the same period, while communication service costs increased by 1.8% to 99,674 KRW.

Concerns about device prices were also raised at a forum held at the National Assembly on the 7th. Professor Gwak Jeong-ho of the Big Data AI Department at Hoseo University stated, "While the cost and proportion of communication services within household communication expenses have been steadily decreasing, the cost of purchasing devices is on the rise." Professor Gwak noted that in 2011, when LTE was commercialized, spending was 2,613 KRW on communication equipment and 140,444 KRW on communication services, whereas in 2022, spending was 28,250 KRW on communication equipment and 99,439 KRW on communication services. Bang Hyo-chang, Chair of the Information and Communication Committee at the Citizens' Coalition for Economic Justice and professor of Smart IT at Doowon Technical University, stated, "The domestic device supply market has lost price competition due to the duopoly of Samsung and Apple."

According to Counterpoint Research's survey on domestic smartphone market share, in the fourth quarter of last year, Samsung held 63% and Apple 34% of the domestic smartphone market share. Other manufacturers accounted for only 3%. The Korean market is known as the "graveyard of foreign phones" due to strong resistance against Chinese manufacturers. Since Pantech and LG Electronics exited the mobile business in 2021, only Samsung and Apple effectively remain as manufacturers in the market.

Moreover, device prices are also on the rise. The Galaxy S23, released by Samsung Electronics earlier this year, is priced 150,000 to 170,000 KRW higher than its predecessor. The Galaxy Z Fold and Flip 5, to be unveiled by Samsung at the end of this month, and the iPhone 15, expected from Apple in September, are also likely to see price increases. Greek media Techmaniacs recently reported that the Galaxy Z Flip 5 is priced at about 1,299 euros (approximately 1,856,102 KRW), about 200 euros higher than its predecessor. The Galaxy Z Fold 5 is expected to maintain a similar price level or slightly decrease compared to the previous model.

Apple is also highly likely to raise the price of the iPhone 15. Dan Ives, a Wedbush analyst, projected last month that the average selling price of the iPhone 15 will be about $925 (approximately 1,205,275 KRW), more than $100 higher than the average selling price of new iPhone models over the past 18 months. Jeff Pu, a research analyst at Haitong International Tech Research, also predicted a price increase for the iPhone Pro Max model. Chinese media MyDrivers reported that a 2TB model of the iPhone 15 Pro Max will be released, priced at 20,000 yuan (approximately 3,603,000 KRW).

The government announced measures to control device prices through the "Telecommunication Market Competition Promotion Plan." To reduce the burden of device purchases, the limit on additional subsidies for devices through distribution channels will be raised from the current 15% of the publicly announced subsidy to 30%. Furthermore, to diversify mid- to low-priced devices, the government plans to negotiate with manufacturers and activate the used phone market by introducing public announcements for used phone businesses and a service to verify used phone transactions.