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Why are budget smartphones getting more expensive?

During our market analysis, we came to know that the prices of budget smartphones that used to offer good value for money witnessed more price hikes. The prices rose up to 10-15% based on the smartphone models and brands

Smartphone manufacturers are releasing the latest budget phones at an increased price than usual and there have been hikes in the price of smartphones that have already been released in the market during the last couple of months.

During our market analysis, we came to know that the prices of budget smartphones that used to offer good value for money witnessed more price hikes. The prices rose up to 10-15% based on the smartphone models and brands.

For example, Xiaomi’s Redmi Note 11 smartphone was launched in Bangladesh this March. The price for the 4GB RAM and 64GB ROM version of the smartphone was Tk16,500. But now, the same version is selling at Tk18,999. Within just two months, Redmi Note 11 witnessed a Tk2,500 rise in its price.

Moreover, Realme Narzo 50, released in April, was priced at Tk16,499. Now the smartphone costs Tk18,999, with a Tk2,500 rise in its price.

Meanwhile, Oppo did not have to increase prices for some of its devices including the Oppo F21 Pro. Released on April 10, the smartphone is still being sold at Tk27,990, the same price it launched with. However, the price of another Oppo smartphone, the A76, increased to Tk22,990 from Tk19,990, which is a massive Tk3,000 rise.

The prices of Samsung devices mostly remained unchanged. Samsung A23 still costs the same Tk25,999 as it used to when the phone first launched in Bangladesh. Even the price of its flagship S22 Ultra remains unchanged at Tk1,43,999.

Reason for the price hike

Dhaka Tribune contacted Realme, Oppo, Samsung and Xiaomi Bangladesh for the reasons behind such price hikes. Realme reached back.

According to Realme, the key reason behind the increase in the price of smartphones in the Bangladesh market is the increase in the dollar rate. Realme is also saying that they are setting the prices based on the current market price of dollars since the major components of a smartphone need to be purchased in dollars.

While the rising dollar price is impacting the overall smartphone business, Realme did say that it is not causing any delay in the release of their new smartphones. The company said that everything is going on according to their yearly plans.

The company further said that they are raising the prices as much as necessary without making any compromises on the chipset or specifications of the smartphones that are being released.

Realme also assured that the prices will depend on the market price for dollars and the overall smartphone market situation. The price will fall again if they need to spend less on manufacturing.

Unwilling to be named, an official of another smartphone manufacturing company also said the same thing. When asked if the rising price has anything to do with the supply chain crisis, the official said that the prices increased mainly due to a rise in the dollar price.

The official said that the prices of smartphones witnessed a 10% hike so far. They also said that the price of smartphones will return to its previous state if the dollar rate also goes back to what it was before the hike.

Global scenario

According to a Bloomberg article published on May 13, Samsung Electronics is talking with foundry clients about charging as much as 20% more for making semiconductors this year, joining an industry-wide push to hike prices to cover rising costs of materials and logistics.

Samsung is the world’s biggest memory chipmaker.

Contract-based chip prices are likely to rise around 15% to 20%, depending upon the level of sophistication, according to people familiar with the matter, who asked not to be identified due to the sensitivity of the issue.

“Chips produced on legacy nodes would face bigger price hikes,” they said.

Semiconductors are the logic and memory chips used in computers, phones, vehicles and appliances. Increasing prices of semiconductors will eventually lead to smartphone and computer manufacturers spending more on manufacturing and cause the overall prices to go up globally.

Due to the higher demand for smartphones, laptops and other work-at-home devices amid the Covid-19 pandemic, the demand for semiconductor chips also increased.

At the same time, chip production facilities were shut down due to the lockdowns. It all led to a global chip shortage at the end of the year 2020.

The global chip shortage is still going on fuelled by factors like soaring metal and energy prices and the Russia-Ukraine war.

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