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The U.S.A. Loves Smartphones, But Only If They’re Expensive

By August 7, 2014 34 Comments

Nearly 60% of American adults own a smartphone and it’s estimated that 220 million people will be embracing the technology within the next four years. And while there are many manufacturers to choose from when purchasing a smartphone, Americans have made it clear which brand they prefer: Apple.

When comScore presented their U.S. smartphone subscriber market share report earlier this year, they showed that 41.6% of smartphone users over the age of 13 owned an iPhone; making it the most popular smartphone in the country. This statistic is perplexing because it shows that despite Android’s 51.7% U.S. market share dominance, Americans are willing to shell out the average price of $650 for an iPhone.

Infographic: The Price Gap Between iOS and Android Is Widening | Statista
You will find more statistics at StatistaThe average price of an Android smartphone is $276 — $374 cheaper than the iPhone. The price gap between iOS and Android has never been this extreme and it’s expected that the release of the larger-screen iPhone 6 next month will open this gap even wider. Because so many Americans are choosing iPhones over Android brands, Apple has managed to remain the largest profiteer in the smartphone industry despite its diminishing market share.

So why are Americans willing to spend more money when they can spend less? The answer is simple: The Apple Store.

With 254 prime real estate locations across the United States, the Apple Store is literally everywhere American consumers are. No other brick-and-mortar store in the country makes as much money per square foot than Apple, and it’s the only sales floor in the nation that manages to make computers look hip instead of boring. Millions of Americans are flocking to the Apple Store because it’s the only place where they can actually use an iPhone before they purchase one, and it’s something they can’t do anywhere else.

Recently, Google has tried to combat iPhone sales by offering smartphones with better specs at reasonable prices. The Nexus 5 beats the iPhone 5S in nearly every category and the Moto X offers more customization options than any other smartphone on the market, yet their sales pale in comparison to the iPhone despite actually being better. Analysts theorize that while Americans have embraced online shopping, these smartphones aren’t as successful because they are primarily sold online – and Americans like using their smartphones before they buy them. However, this is not the case in China.

Xiaomi's Redmi Note has been described as "an Android device inside an iPhone's body."

Xiaomi’s Redmi Note has been described as “an Android device inside an iPhone’s body.”

In just four years, a privately-owned Chinese electronics company called Xiaomi rose from obscurity to become the most popular smartphone manufacturer in China. The company has reported a whopping 240% improvement over the same period last year and has prompted technology experts to christen its founder as “the Steve Jobs of China.”

“We sell all our products online and our gross profit rate is very low. Our price is one third of Apple’s. We make our profits through content and services.”

–Lei Jun, Founder and CEO of Xiaomi

Xiaomi exclusively sells their smartphones online and has an aggressive pricing model that doesn’t even try to make a profit. Instead, the average price for one of their smartphones is $130 (what it costs to make) and all their profits come from the purchase of add-ons and apps. The company also sells models for up to 18 months instead of the usual 6 months like Apple.

To keep their costs low, Xiaomi chooses to not own any physical stores and spends no money on traditional advertising methods. The company relies solely on social media channels and word-of-mouth promotion from their customers to increase sales. These methods may seem odd to American companies — like Apple — who operate in the exact opposite manner, but these methods have helped Xiaomi earn $5.3 billion so far this year.

Now that Xiaomi has taken over China, one would expect they want to spread their dominance to other countries. The company is currently looking to expand into Indonesia, Mexico, Russia, Thailand and Turkey; but is staying clear of America – and with good reason.

Statistic: Global market share held by Nokia smartphones from 1st quarter 2007 to 2nd quarter 2013 | Statista
Find more statistics at Statista
The U.S. market has proven that international smartphone manufacturers are not successful here. A perfect example of this is Nokia’s worldwide dominance that lasted over a decade in just about every country except America. But as Apple grew, Nokia evaporated.

Americans have a different mentality than the rest of the world and it’s called “consumerism”. Because Americans have more disposable income than any other country, many of them aren’t worried about saving money when it comes to buying a mobile device they will use every day. But that isn’t to say that Xiaomi won’t eventually break into the American marketplace. Don’t think it’s possible for a foreign company to convince Americans that more money isn’t necessarily better? One look at their corporate motto may change your mind: Always believe that something wonderful is about to happen.”

Do you think budget smartphones like Xiaomi can penetrate the American marketplace? Or will American consumers stick with their iPhones?

Ivan Barajas

Author Ivan Barajas

More posts by Ivan Barajas

Join the discussion 34 Comments

  • Adam says:

    I don’t prefer iPhones because I think their physical components are superior to androids…plain and simple…android makes a **** operating system that isn’t stable regardless of the physical components of the phone.

    • TJ says:

      It’s obvious that you’ve never used a high-end Android phone. My Nexus 5 isn’t even considered high-end and it rarely ever crashes. The cheap Android phones are more prone to crashes due to cheaper components and bloatware, but you’d never find an iPhone at a comparable price. Meanwhile the iPad I’m writing this on crashes almost daily, running ios7. I bet you say PCs crash all the time, too.

      • John says:

        TJ – Agreed. I’ve had a Moto X for six months and it has crashed exactly zero times. I’ve had two friends ditch their iPhone 5s after using my phone. On the other hand my brother only uses Apple laptops despite the fact he’s gadt two different Mac books have hard drive crashes in less than two years.

      • Pat Jones says:

        The cheap android phones are not more prone to crashes due to cheaper components and bloatware. What is this boatwere that you are talking about? My $30 Samsung Galaxy Rush runs fine. Google maps and Facebook app are fast.

    • Vinnie says:

      I actually have to agree here, and I own an Android and use a Windows 7 PC. Android OS works solidly, but isn’t quite as streamlined as iOS. I take good care of my phone (software-wise), but I have to watch that it doesn’t make any mistakes (typing, navigating, etc). iOS seems like you never have to worry that it will do what you want it to do, responsively. It’s completely polished, and they’re only able to do that because they control and restrict the system a lot. I’d say Android is great if you want great customization ability and it to work 95% of the time (given you bought a good one), and iOS is great if you want a simple, standard thing that works 100% of the time.

      • Bill says:

        As a tech support rep for one of the major US wireless providers, I can assure you, iOS is *not* something that works 100% of the time. When it *does* work (and the end-user isn’t completely clueless), it’s nearly flawless. But oh, my… when an iPhone decides to screw the pooch, it’s a nightmare.

        Android devices, despite the OS fragmentation and hardware imbalances, are much easier to troubleshoot – and recover from disaster.

    • Larry says:

      I have to disagree every adroid i have owned has been solid apple makes you use itunes…I plug my phone in to my pc and can do stuff without extra sotfware… there are more free app on android…and I have firefox…for my phone galaxy s5 battery life better thank iphone screen bigger and prettier quadcore at 2.5ghz but I will say in respect a phone is a part of you so it is a choice also my phone rarely crashes I think 2 times since release running most recent android version my phone is rooted and works great ios is very clinical and not really able to be personalized my 17 year old daughter has the iphone 5s and hates it after having an ipod and iphone shes going to get a gs5 asap… but again android ios or windows phones…are a choice and a personal taste

    • iii2 says:

      Have you who replied even read this comment? The first sentence doesn’t even make sense…

  • Andre B says:

    You mentioned the physical Apple Store in the article, but you left out one very important thing: The App Store, or iTunes. Once you go Apple, the cost of change is very high. You can’t move your apps (many purchased) from an iPhone to a S5. And moving your music isn’t as easy. So it becomes a cost of convenience. Do I pay $600 for the new iPhone and keep everything I’ve bought over the past few years… or do I pay less up front for the new S5 but then spend extra money purchasing all the apps and content again so that my Android can do the same things I was used to doing with my iPhone?
    You see the same issue with Amazon’s Kindle Fire vs Google’s Nexus 7 vs the iPad. Proprietary applications that don’t move between providers.
    This is why I don’t buy Apple, and sold my original iPod back in 2003. I don’t like being locked into a closed tech ecosystem.

    • Kathy says:

      Agreed 100%. Won’t buy apple anything because you have to continue that trend regardless of what you want really want to do because of everything you mentioned. I prefer the ability to make changes on my terms without repercussions.

  • no-one says:

    I would say it has more to do with 2 other reasons. iPhones have less customization and more integration for non tech savvy people(especially with the way carriers mess with stock android) and second the sheer amount of manufacturers making android phones with only 1 company making iPhones.

  • random says:

    My first smartphone was a cheap Android phone.

    Once I got over the ‘smartphone honeymoon,’ that device was incredibly frustrating. The plastic screen that scratched and was hard to read in direct sunlight. The inaccurate touch interface which required me to press above and to the right of any desired touch point. The incredibly slow processor which made browsing a pain. The software which dimmed my screen while in a call, requiring me to turn on the screen and then open the keyboard to use an automated phone system. Or how about when my phone froze, shut down, and restarted while I was in the middle of a call? Or when it froze in the middle of a call and I had to pull out the battery to restart it.

    A great smartphone is amazing, a cheap smartphone is barely usable, and will make you hate technology.

    After I literally took a hammer to that phone, I went out and bought a 64GB iPhone 4S. I have had that phone ever since, for years now, with trouble free function. I built my own computers for the last 8 years so I’m not afraid to modify, upgrade, and replace. And I’m not afraid of digging into an operating system to make technology do what I want. However, my cheap phone was such a bad experience, I went and bought the only Apple product I promise myself I will ever own.

    IMO The apps are inferior for iOS.
    Having no Flash support is a huge bummer.
    The operating system is not flexible.
    iTunes and Apple ID integration is unwelcome, I wish my device was more independent.

    But having a screen I can read and is tough, a touch pad that works, an adequate processor, and a stable and functional operating system more than compensates for the drawbacks.

    Perhaps these problems have been solved in the latest devices, or in the devices which cost more. But for me personally it is too late, at least until I am ready to purchase a new phone when this ultra-reliable Apple product eventually fails.

    I think Ivan missed the mark when he stated, “So why are Americans willing to spend more money when they can spend less? The answer is simple: The Apple Store.”

    I (remember I’m a PC home builder) have only stepped into a Apple Store once, and that was to purchase an iPhone for my father. Again, IMHO the stores don’t sell the devices, the devices justify having the stores.

    My argument is that mobile devices are a non-essential consumption good, and in this market it is VERY VERY VERY true that ‘you get what you pay for.’

  • This article pretty much confirms my suspicion: only gullible Americans fall for slick marketing and buy Apple products, especially iPhones and iPads. Nothing can touch stock Android as is found in the Nexus line of devices.

    • Larry says:

      agreed 100% mine is rooted current kitkat I have removed crapware my gs5 have a great battery (12-17 hours with average to heavy use…all the stuff off I am not using)
      2.5 quadcore full 1080p screen all apps I use run solid dl and up speed are great
      using my phone on TMOBILE and have no issues

  • A.J. says:

    Wow, Adam and Random sound like they are stuck in 2010. I can’t even really respond because all of their gripes are things that would have been semi-good arguments 4 years ago, but not now and not to anyone who has kept track of Android.

    As for the article itself, my LG G2 cost just as much as an iPhone so I don’t see how the price gap can be that much. To sort of touch on Random’s post a little along with the article, cheap phones are cheap for a reason and I believe pushing a first time user to the entry level smartphones does a disservice to both Android and the user. If the iPhone is a “premium” device and you want something similar, why in the world would you decide to get a super cheap Android device and try to compare the two?

    Of course a single core 1GHZ processor with 512MB RAM isn’t going to compete with the iPhone 4S. I would think someone who builds their own computers would realize that (I’m a software engineer).

  • Robert says:

    Ok can this actually look and see how much the android devices actually cost. A galaxy s5 cost about $610. If your going to compare phones compare the flag ship models that people normally. That price gap isn’t realistic at all.

  • Investing Cow says:

    I just got the iphone 5c, and I really like it. I bought it for the style and know that it is going to be a reliable phone. Yea, apple is an expensive brand, but I’ve had to deal with a lot of bad phones before and if I’m going to be sending a chunk of money on a phone I prefer a guarantee on quality build.

    I really dislike the Microsoft mobile OS – It just feels so uninviting. It’s like Microsoft ignores basic things in design, marketing, and psychological appeal and expects to sell big.

    The Android phones I saw did indeed have better specs. But, I really wanted to get the Apple ios development experience.

    • Charles Reed says:

      I have a 5c to I love it !!!

    • Larry says:

      hope you got the insurance apple does NOT cover the screen…I work at walmart in electronics and deal with cellphones I see it daily “i dropped my iphone the screen cracked is it covered by apple?” that is a big no…unless you have their mobile care which I am not 100% sure it does get a case odds are higher thank it will be safe

  • The Android phones meant to compete with the iPhone would be: The Nexus 5, Moto X, OnePlus One. Those devices can be bought unlocked for about 1/2 the price of an IPhone 5 yet they have powerful specs. I personally own the Nexus 5 and it has been rock solid running the latest version of Android 4.4.4

    • blizbiggy says:

      +1, Also a Nexus 5 owner and it is SOLID. Best phone I have owned yet with the least amount of problems. I have owned iPhone 4s, Razr Maxx and Nokia Lumia 928 in that order. I am hoping to get a few more years out of this before getting something else.

    • Larry says:

      dont forget the samsung Galaxy phones check the specs on the S5 I have one and it is a bad ass phone 12-17 hours daily I can get more but I do too much on it bigger screen 5.1 full 1080p and NO itunes

  • Jon Vance says:

    I got my 4S for $100 with my Verizon contract. I don’t have an OS preference, it just happened to be the best price for power deal at that particular time. Haven’t had any crashing issues with it and it still seems to run as well as when I bought it. I wouldn’t be against getting Apple again if the price is reasonable when this 4S craps out. If I can’t get Apple for a good price when I upgrade I would probably go with Nexus.

  • Bob Dole says:

    I’m no statistician, but it seems to me like Apple’s 41% market share suggests that the majority of Americans prefer to NOT buy Apple – that the only generalizations you could make from that data bout Americans and Apple are technically in the negative.

  • Helloeveryone says:

    Wouldn’t American citizens be supporting American products rather than importing from other countries to better our economy?

    • MOC says:

      Every Apple product I’ve seen says the following. “Designed by Apple in California. Made in China.” Their spiel about moving more manufacturing to the US is just a rouse. They won’t hurt their bottom line to be patriotic. They wouldn’t be keeping all their money offshore if they had any intention of helping the US. You aren’t supporting US manufacturing other than the Gorilla Glass which is just because Corning happened to have already made the glass without a known application. Apple helps China much more through the various raw materials, parts, and all of the other supply chain trickle down than the fewer engineers, computer scientists, and businessmen in Cupertino do.

  • Nathan says:

    My biggest gripe with Apple is how proprietary they are. I have a Windows PC and all of my music is in WMA format. My Galaxy S5 plays without the extra pain of having to convert to MP3. Also my GS5 has benough rock solid, 1080P screen, 4K video recording, expandable to 128GB and an easily removable battery just to mention a few of the many additional benefits of the GS5 over the iPhones. As for reliability, I feel Samsung makes great products in general and the quality of this phone is no different. I have yet to have to power down my phone in the few months that I have owned it. In contrast, my previous Razr Maxx I would have to reboot a couple of times a month and before that I had a Droid Global which I had to reboot daily. Could be developer familiarity with the Droid OS or maybe this phone is better but Android seems to be getting better. This is the end of my little rant so thanks to all who took the time to read. PS… This was written entirely on my GS5.

  • Mark says:

    After all these years and with all that has been written about Apple and Steve Jobs, I can’t believe that people are still arguing about and comparing specs. Functionality is just the entry point. The reason why Apple dominates is that it tells a better story and is driven by better design values than any other manufacturer out there.

    For me, an iPhone just feels better in my hand or in my pocket. The look is so clean and smooth. It stands out from the rest because Apple thinks different and it shows in their design of the hardware and software. It’s a joy to use.

    For a better explanation, you should watch Simon Sinek’s TED presentation on YouTube entitled Start With Why or read his book of the same title.

    Forget price point, consumerism, and specs. It’s all about the story and the values. This is true about their computers too.

  • Hunter Morgan says:

    Everyone is following the “Trend” Or Iphones I prefer Androids I have a Galaxy S 3 It runs solid and all of my Iphone friends have cracked screens.

  • MOC says:

    I disagree with the premise of your article. You completely ignored carrier and retailer contract subsidies for phones and implied that every iPhone in the market cost the user $650. I bought an HTC One M7 last June for $100. Then I bought my girlfriend an iPhone 5S for $120 from Sam’s Club in December of last year. They are obviously under contract, but I imagine many people who can do math would do a contract also. My ETF on Sprint which decreases over time is $350 so my total cost if I cancelled would be $450 for the HTC and $470 for the iPhone if I had immediately cancelled. Now they would be less.

    I didn’t buy those phones because they were expensive. I bought them because they presented the best value for the most performance. In fact, much less than the unlocked prices you are stating. I don’t care for iPhones, but at $120, it is very reasonable. My plan is also very reasonable for 3 phones with unlimited data and plenty of minutes. I imagine the math may work out differently on the more expensive data-restrictive carriers like Verizon and AT&T. I think you should at least compare how many have a subsidized phone versus a phone they bought unlocked if you’re going to make this argument. The price difference isn’t as big with subsidized phones. The HTC One M8 is $200 versus the iPhone 5s 16GB at $150 with a 2 year contract on Sprint right now, and retailers probably have even better prices.

    I think it is more likely that this article was written with the intent of invoking the tired old Apple vs everything else debate.

  • Rahul Kalra says:

    There are many expensive smartphone in the market but as per my experience US people still love IPHONE .. they have a huge attraction towards APPLE products ..

  • Nick says:

    I’ve owned an iPhone since 2009 and will be trying out the HTC one m9 when it comes out. Apple sleek design and marketing can’t fool this American anymore.
    I also just got a Roku3 and it beats my appletv. No comparisons.

  • Dosmastr says:

    Well if that title isn’t click bait….

    Americans don’t buy cheap phones for the same reason they buy honda instead of kia.

    One will run without issue for a long time.. The other will not.
    (though kia has gotten better the last few years)

    IPhone is simple, it works, and it only takes a dump when updated to a new OS that was designed for more capable models.
    Android in contrast, is like Windows 95, it needs a factory reset to keep it running smoothly and even with those every 6 months it will inevitably start acting wierd and slow right around 18-24 month of age.

    People have no patience for that bull$hit so they buy an iPhone (… As I’m fighting the urge to do after owning 6 androids which all start out great and then get slow and glitchy– vn |-} > a] ac} {+y {/} .0

  • Dosmastr says:

    Ha, we’ll if that doesn’t prove my point.. All the characters at the end of the post… I didnt put them there… Did your site? Or did my phone?

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