There are cultures where a bit of bling is popular, and those that tend towards temperance and dislike of ostentation. Those where the rich show off their wealth and those where they do their best not to. We all may have our opinions on these sorts of behaviour, and going into the details may show our own prejudices, but most of us would acknowledge big differences between cultures. So we might expect there to be marked differences in how much money people around the world fork out for smartphones, long a very public symbol of wherewithal. You might think that also there would be a pretty big boost in average prices where Apple is popular, as iPhones are pricey, and in some countries, Apple has half the smartphone market but just a single-figure share in others.
Having compared the average price paid for a phone and against GDP (Gross Domestic Product) per capita, however, I can say that generally, local culture does not have much impact to play at all. The amount people fork out for a smartphone is simply closely related to the nominal GDP per capita figure.
Nominal GDP versus Purchasing Power Parity
I took data from the IDC Worldwide Quarterly Mobile Phone Tracker and compared it with International Monetary Fund figures on gross domestic product per capita per country, all with data for 2018. IDC normally quotes retail prices without VAT or sales tax, so I added this back on, and with the IMF figures I looked at both nominal GDP figures and those for purchasing power parity. Nominal GDP is valued at relevant exchange rates, while PPP methodology adjusts raw GDP values according to the cost of living of a basket of basic products and services.
The correlation against nominal GDP is strong, though with poorer countries the clustering around a central curve line is tighter with PPP. In the chart shown here, the mapping is against nominal GDP.
At the top, in the richest countries, Switzerland, consumers spend about 10% of monthly nominal GDP per capita on a smartphone. At the bottom, in for instance Pakistan, Myanmar, and parts of Africa, consumers’ outlay is more than a month’s GDP per capita.
This is a simple comparison, and I should point out what it is not. For a start, it is not a measure of people’s disposable income, as GDP per capita is far from being average income, which of course only comes after tax is paid.
Careful What You Compare
The average sales price is not a measure of how much people spend on phones over time. The replacement cycle of a phone varies considerably from one country to another. Precise figures on this are hard to pin down in a general international comparison, but IDC believes that on a country basis the shortest average smartphone lifespan is less than a year and a half, while in the poorest countries, especially where phones are bought in the open market and used with prepaid SIMs cards, the lifespan may be more than three years. In other words, people in richer countries are spending twice as much or more on smartphones over time than inhabitants in poorer countries, than the average sales price comparison quoted here suggests.
Nor is this comparison of the total expenditure on phones, as it does not look at overall market value, just the average price per smartphone. Though the global smartphone market is no longer growing in any important way, there are some countries covered in the IDC phone tracker where the smartphone market is still small, both in terms of the phone market and related to the country’s population. Some effect of this is visible in the figures — a few countries of low income have higher than might be expected average smartphone prices because in these countries the smartphone is not really yet a mass product.
Here are my other conclusions of note.
A Big Apple Share Makes Little Difference to the Ratio
There is no noticeable “Apple effect” — if we look at countries where iPhones have the biggest share, smartphone ASPs tend to be related closely to nominal GDP per capita, not to Apple share.
There is a tail off at the top. In the richer countries with incomes above $60,000 GDP per capita, there is no additional ASP increment with higher GDP per capita.
There are some telling outliers. Qatar, UAE and Kuwait have much lower ASPs than their GDP per capita would suggest. They are all oil producers with a large number of poorer itinerant workers, so this is easy to understand. Other major oil producers — Saudi Arabia, Bahrain and Oman in the Gulf, and also Russia and Nigeria, all of which have a smaller or very low proportion of itinerant workers — do not follow this low ASP-high GDP per cap exception.
In the other direction, at the top of the market, there is one notable outlier, South Korea, which has an average smartphone price as high as anywhere else, but a nominal GDP per capita that is around halfway between the lowest and highest in the global range.
South Korea is not a market where Apple is very strong, and my take on this is that this is a geek bias, not a bling one. Koreans, in my opinion, want high-performance phones.
It’s the Phone, Stupid
In general, my view from this analysis is that in an era where most smartphones look alike, and their value as status symbols has been undercut by seemingly everyone around you having one, consumers dole out similar amounts of money related to national income on these devices because they focus on what the phones actually do. People in poorer countries are more careful with their money, they keep phones for longer and may resell their old phones themselves, but their choice as pretty much everywhere else is on what their phone will do for them in practical terms.