'Much Higher Than Inflation Rate'... Smartphone Prices Rise 41% Over 9 Years

"Calls for Vital Activation of Mid-Range and Used Phone Markets"

The average price of mobile phone devices in South Korea has increased by 41% compared to nine years ago. This has raised concerns about the phenomenon of ‘phoneflation,’ where rising phone prices increase the burden of household communication expenses.

On the 10th, the office of Park Wan-joo, a member of the National Assembly’s Science, Technology, Broadcasting and Communications Committee, disclosed data on the ‘Number of Mobile Device Installment Credit Insurance Claims and Insurance Payout Amounts’ submitted by the Financial Supervisory Service.

According to the data, excluding official subsidies and additional support funds from telecom companies’ marketing policies from the device’s retail price, the actual cost paid by consumers for devices rose from 620,639 KRW in 2014 to 873,597 KRW as of the end of July this year, an increase of 40.75%. This rate is significantly higher than the average consumer price inflation rate of 1.62% over the past 10 years.

Park’s office stated, “According to data submitted by Seoul Guarantee Insurance, approximately 1.67 million people were delinquent on device installment payments from 2018 to 2022, and the amount Seoul Guarantee Insurance paid to telecom companies for these delinquencies reached 1.2 trillion KRW.”

They added, “When Seoul Guarantee Insurance pays the installment fees on behalf of customers to telecom companies, the delinquency information of device purchasers is registered with the Credit Information Center, causing credit score drops and other financial transaction disadvantages, and can even lead to being registered as a credit delinquent.”

In fact, in the first quarter of this year, the average monthly communication expense per household (including single-person households) was 130,285 KRW, a 7.1% increase compared to the same period last year (121,676 KRW). Among this, communication fees rose by 1.8% year-on-year, while spending on communication equipment such as mobile phones surged by 28.9% in one year. This indicates that device prices are a significant burden on household communication expenses.

As device manufacturers have consecutively raised prices, the burden on consumers has increased further. Foreign media including Bloomberg reported on the 23rd of last month that “Apple is expected to raise the prices of the high-end models, Pro and Pro Max, in the upcoming iPhone 15 series by $100 to $200 compared to the previous generation.”

Samsung Electronics has also already raised mobile phone prices by a similar margin. The Galaxy S23, released in February, was priced 156,000 KRW higher than its predecessor, and the Galaxy Z Fold5 and Flip5, released on the 11th, were priced 46,200 KRW and 99,000 KRW higher than their predecessors, respectively.

Park said, “The government urged a reform of communication fees to ease the burden on household communication expenses, but the real culprit was the high-priced devices whose purchase prices increased by 41%. In an era where mobile phones have become essential daily items, with installment delinquencies on high-priced devices reaching 1.2 trillion KRW and 1.67 million users suffering credit score declines that negatively impact households, improvements are necessary.”

The government is pushing for an amendment to the Device Distribution Improvement Act to increase additional subsidies from sales points to 30% of the official subsidy, but most opinions suggest the effect will be limited. Given that the official subsidies provided by telecom companies average between 300,000 and 400,000 KRW, even increasing additional subsidies would only reduce the actual price felt by consumers by about 50,000 to 60,000 KRW.

Therefore, voices are emerging that expanding mid- to low-priced phones and revitalizing the used phone market are essential to reduce the burden of household communication expenses. Park argued, “The domestic device manufacturing market is virtually a monopoly, making price competition difficult. We need to broaden consumer choices and ease household communication expenses by introducing foreign devices and revitalizing the mid- to low-priced device market.”

This content was produced with the assistance of AI translation services.