Why are tablets much cheaper than phones?

M

Miksu

Regular
Why tablets are cheaper than phones? Is this because of some actual technical reason like it costs more to produce a smaller device or is just because the battle in the tablet space is so fierce that everyone is sacrificing their margins?

Or is this even a global thing? Do we have some skewed pricing here in Finland? Here's couple examples:

* Phone: Nexus 4 16GB: 490€
* Tablet: Nexus 7 32GB: 250€ (2012 model)

* Phone: Galaxy S4: 585€
* Tablet: Galaxy Tab 3 7": 185€

* iPhone 5 16GB: 670€
* iPad Mini 16GB: Wi-Fi + Cellular: 460€

Especially the 7" tablets seem really cheap (even the cellular ones) when compared with the phones. In the past I thought that a bigger screen always equated to a bigger price tag. But that doesn't seem to be the case anymore. Why is that?
 
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I believe it's mainly because phones have contracts and tablets don't. Marketing tells the consumers that the brand new iPhone 5S costs them only 199$. In reality the two year contract makes the phone cost around 700$ in the long run (just as much as an unlocked phone would cost).

iPad 4 is 499$, and you must have all the money up front. For many consumers 499$ is a higher price than 199$ + contract. Clever marketing I must say.

Actually here in Finland you can get some tablets with a 2 year contract as well (bundled with 3g/4g data plans). You get the tablet for "free" in these cases. But of course the data plan is priced so that they get the tablet price back in 2 years :)
 
Bumping the price for profit and then hiding it away in monthly contract payments is likely a large reason, but also wireless tech licensing costs and additional hardware in the form of multiple cellular radios another. Tablets with built-in cellular tech are considerably more expensive, after all.
 
Of course there are some technological reasons as well. It's harder to get identical hardware running on a smaller case, you need higher DPI displays and case construction becomes harder as it gets smaller. For the same reasons equally powerful laptops cost more than desktops, and equally powerful slim laptops with premium material (magnesium / aluminum) cases (Ultrabooks) cost even more.

Phones all have cellular modems (and I believe quite strict certification requirements). Tablets that have cellular modems also cost significantly more than models that don't (+125€ for Galaxy Tab 3, +75€ iPad Mini).

But I believe the biggest difference in cost is caused by the different sales model (contract vs no contract). Here in Finland, the manufacturer (and advertiser) has to always tell the real price of the phone (including the contract). But in many bigger markets, that not a requirement. People don't think that much about the real price (199$ is the real price for them).

UPDATE: I am 14 minutes late... Should learn to type faster :)
 
Miniaturization in phones is also something that needs to be considered. Off the top of my head is things like POP memory instead of separate modules. It adds up throughout the whole PCB.
 
It's not really cheaper. In a comparison like this you must compare flagship vs flagship. Meaning that you don't compare Nexus 7 with 4 because 7 always intended to be a cheap device. You compare the initial Nexus 4 price with the Nexus 10. Right not you probably can compare Nexus 4 new pricing with the new Nexus 7 (especially the LTE version).

Basically the bigger tablet (9 to 10) is seen as the flagship model and the smaller tablet (7-8) as the mini version, thus cheaper.
You definitely can't compare iPhone5 vs iPad Mini. But you can compare iPhone5 vs the new iPad. I don't exactly follow the iPad pricing, but it would probably be close.
I hope no company following Apple stunt by releasing 2 new iPhone version (cheaper and more expensive version) but actually they try to rise the new phone price.
 
sebbbi said:
In reality the two year contract makes the phone cost around 700$ in the long run (just as much as an unlocked phone would cost).
Click to expand...

Cell service costs the same here in the US whether or not you have an unlocked phone so you're not paying anything extra for a subsidized phone. What you sacrifice is the freedom to switch carriers for free during the two year contract period but in reality that's a problem for very few people.
 
trinibwoy said:
Cell service costs the same here in the US whether or not you have an unlocked phone so you're not paying anything extra for a subsidized phone. What you sacrifice is the freedom to switch carriers for free during the two year contract period but in reality that's a problem for very few people.
Click to expand...

That's not necessarily true.

For some carriers you pay the subsidized rate regardless of whether you BYOP (bring your own phone) or buy a subsidized phone from the carrier.

On T-Mobile when they were doing both subsidized and unsubsidized phone plans at the same time there was actually a notable difference between the monthly rates. I believe T-Mobile have dropped all of their subsidized rates.

So when you buy a phone through T-Mobile you either pay full price of phone + plan. Or Monthly price of phone + plan.

So for example.

http://www.t-mobile.com/cell-phones/apple-iphone-5c.html

You either pay 528 for the phone up front plus whatever plan you choose. Or you pay 22 USD per month for 24 months plus whatever plan you choose. And obviously if you brought your own phone (a used T-Mobile phone for example) then you just pay the normal price per month.

Also because of that you can buy a T-Mobile phone and use it on any T-Mobile MVNO but not on another network without unlocking it. So you can buy a brand new iPhone or whatever that is locked to the T-Mobile network and use it on a 5 USD per month MVNO plan like what I have.

In past to get that same phone for 0 USD, your cell phone plan would be increased by that 22 USD per month, but after 2 years it wouldn't drop down. It would remain at the subsidized price.

AT&T makes things REALLY convoluted. All of their plans are subsidized for a 2 year contract. But if you buy a phone on a 12 month "upgrade" plan, then you pay an extra monthly fee that makes up for the extra 12 months. So for example, for the same iPhone 5C as T-Mobile. You either get the phone on a 2 year subsidized contract with 99.99 USD down. Or you get it on a AT&T Next plan at an additional 22 USD per month (for up to 20 months) in addition to your subsidized contract, but you have the option to upgrade your phone after 12 months (and not be charged for the extra 8 months). In other words that 22 USD per month is to cover the cost of the phone that isn't getting paid by the 12 additional months of subsized service that you won't have with that phone based on the standard 2 year subsidized price structure.

So if you don't trade your phone in after exactly 12 months, you'll end up paying significantly more for that iPhone 5C versus getting it on the 2 year contract and being stuck with it for 2 years (unless you pay early termination fees).

And best thing of all. If you don't upgrade at the 2 year mark, AT&T continues to get you for the subsidized phone rates. IE - you're still paying a monthly charge for your phone in addition to the monthy fee for the service.

Oh and if you could bring your own phone? You'd still be paying the subsidized monthly phone rate as if you had gotten a new phone on contract. As well, you can't use any AT&T new phone on an AT&T MVNO without unlocking it. And AT&T doesn't allow their new phones to be unlocked in the first 6-12 months usually.

Bleh.

Regards,
SB
 
That Nexus 4 price you listed is hopelessly marked up by the provider. Straight from Google the 16GB version was only $350 (USD), recently dropped to $250 although that was just to clear remaining stock. Even here carriers were selling this phone for a lot more than Google was.
 
trinibwoy said:
Cell service costs the same here in the US whether or not you have an unlocked phone so you're not paying anything extra for a subsidized phone.
Click to expand...

And how much is that 2 year contract worth again?
No you guys pay a ton of extra, you just have to pay the extra with or without a phone thrown in.
 
Monthly fees aside, flagship smartphones do become a lot more expensive than similarly specced flagship tablets, even when the processing hardware is similar.

From the top of my head, the current Xperia Z Tablet WiFi costs 500€ in a store, whereas the unlocked Xperia Z phone goes for 600€ in the same store.
They use the same SoC, same amount of RAM, same amount of mass storage, same I/O, etc.
The tablet has a 10" FHD IPS screen, while the Xperia Z has a 5" FHD panel (not sure if it's TN, but the quality is reportedly quite low). I'm pretty sure the baseband processor in the smartphone (along with testing/certification procedures) doesn't cost even half of the 100€ difference.

My guess is that companies tend to have a lot larger margins with smartphones than tablets.

Probably because smartphones are devices with no obvious substitute and tablets have to compete with netbooks and ultrabooks.
 
Here both the Sony Xperia Z Tablet and the Xperia Z phone are a little under €500. In that case I'm not sure which one has the biggest margins. I'm not familiar with the economics behind the screen for example. The phone does have a full baseband in there on the other hand and is probably harder to build.
 
Helmore said:
Here both the Sony Xperia Z Tablet and the Xperia Z phone are a little under €500. In that case I'm not sure which one has the biggest margins. I'm not familiar with the economics behind the screen for example. The phone does have a full baseband in there on the other hand and is probably harder to build.
Click to expand...

In some stores the Xperia Z is starting to get lower prices because the model is being EOL'd (Z1 is just around the corner).

Perhaps a better comparison would be between the Z Ultra and the Z Tablet? The Z Ultra has a Snapdragon 800 but it costs about 750€ unlocked/unsubsidized.
 
The Xperia Z phone has been under €500 here for months now (since May).

About screen size. A 10.1" FHD screen is bigger and thus more expensive, but a 5" FHD panel has a higher pixel density which makes it harder to manufacture and thus more expensive. Where does this even out? Could it be that the 10.1" FHD screen is roughly the same price as a 5" FHD screen?
 
Dr Evil said:
And how much is that 2 year contract worth again?
No you guys pay a ton of extra, you just have to pay the extra with or without a phone thrown in.
Click to expand...
If you're trying to make the case that the US pays more for cell phone service than other parts of the world, maybe you should first find a counter party who disagrees? Otherwise it's a bit of a pointless exercise. ;)

But given the fact that we pay the same for a smartphone plan whether or not it includes a phone, it's fair to look at the upfront price of a phone as the only extra cost, and compare those against each-other.
 
A bit off-topic, but aren't phone service plans even worse in Canada or is that changing? For that matter, are there countries that are even more expensive? Just curious. From the little I've heard, it can be even worse.
 
silent_guy said:
If you're trying to make the case that the US pays more for cell phone service than other parts of the world, maybe you should first find a counter party who disagrees? Otherwise it's a bit of a pointless exercise. ;)

But given the fact that we pay the same for a smartphone plan whether or not it includes a phone, it's fair to look at the upfront price of a phone as the only extra cost, and compare those against each-other.
Click to expand...

Well, there is one major carrier in the US that only has unsubsidized plans, unfortunately they also have the worst wireless coverage of the major carriers. One of the nice things as well is that their internet plans don't charge overages like the other majors, instead they cap your bandwidth once you pass the amount you paid for.

Regards,
SB
 
Helmore said:
A bit off-topic, but aren't phone service plans even worse in Canada or is that changing? For that matter, are there countries that are even more expensive? Just curious. From the little I've heard, it can be even worse.
Click to expand...

Yes Canada is worse, it's so bad here that people were getting excited about the possibility of Verizon coming to Canada. The CRTC is trying to impose some rules on the telcos, so of course they are suing because they can't possibly offer better deals and the rules will confuse their customers...
 
silent_guy said:
If you're trying to make the case that the US pays more for cell phone service than other parts of the world, maybe you should first find a counter party who disagrees? Otherwise it's a bit of a pointless exercise. ;)

But given the fact that we pay the same for a smartphone plan whether or not it includes a phone, it's fair to look at the upfront price of a phone as the only extra cost, and compare those against each-other.
Click to expand...

Yeah I wasn't even going to say anything, because my post wasn't exactly a counterpoint to anything. I just wanted to point out that the "game" is so rigged with your mobile contracts that saying you don't pay extra is like a concentration camp victim saying after seeing arbeit macht frei-sign that if you work they only kill you once, not extra times... Sorry for the crude example, but I feel like the pricing is already so high with these plans that extra basically can't be paid. The whole system is built so that everyone gets that phone with the contract. The other option (paying the same with no phone) is basically only theoretical and exist only to guide the customer to the only valid option and make it seem better than it in reality is.

the upfront 100-200$ difference in phone costs amount to small cost difference in the end. I've said it before, but those phones aren't really subsidized, not when you end up paying it many times over. If purchasing A mandates you to buy B also, you should only look at the total cost of A+B.
 
Modem adds a lot to the cost. Same tablet w/ and w/o LTE modem usually makes a difference in the ballpark of $100. That's why it's rather hard to find an LTE-enabled tablet in my part of the world (customers don't want an extra cost of modem + extra data contract and they use tethering from smartphones instead).
 
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