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Most Android smartphone producers are not profitable: Is 525€ really too much?

I just found this article via faire-computer.de: http://www.digit.in/general/apple-accounts-for-92-of-the-smartphone-industrys-profits-26568.html

I think this is another argument for the opinion that 525€ is not too much for the Fairphone 2. Fairphone as a company can’t afford to make losses because they do not have other sources of income (e.g. Sony has TVs, Bluray-players, etc…).

Edit: I’m adding @Ben and @nils because we had been discussing this in another topic.

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A key part of the Fairphone 2 is not just the phone though, its the ‘Fair Trade’ and philosophy behind its creation which means, almost by definition, that it will be more expensive than the competition.

The current race to the bottom in price and razor thin margins for hardware manufacturers is built off unsustainable and unethical business practices, and if you don’t care about that then you wouldn’t be here. If all you want is the latest stuff at the lowest price there are better options for you out there, but for those of us who are fortunate enough to be able to say “you know what, I can pay a bit more for my device so that someone else gets a fair go” then it’s great that projects like the Fairphone exist.

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I think it is a fair price.

I other posts, we argued about smartphone produces being profitable. @nils specifically mentioned LG as an example. LG was able to increase it’s profits (in the smartphone division) in the third quarter 2014 and the first quarter 2015, for example. However, this was only after 3 successive quarters of operating lost. Interestingly, LGs successes is specifically related by LG and press to it’s Flagship smartphones LG G3 and G4. Which came to market with a price around 599€ and soon settled for around 530€ (see the german price trend for reference). And, while LG planned to sell 500.000 units, the profit was made possible because they actually sold well ofter 900.000 units at a time price of the phone was still over 500€! The current top model, the G4 came to market at 650€ now settled for around 500€.

This is just one random example, it is not a valid scientific assessment of the smartphone market. But for it is an indication. Most companies to not release very detailed numbers, but is known that a lot of companies operate at loss and it seems only top models a profitable. Sony for example, while getting great reviews for their top model, have operated at loss since several quarters. They targeting that by focusing on less devices and their Xperia Z range. These are generally considered a good deal for their price, but on the other hand, Sony has a lot of financial reserves and they can go for market share over profit.

Another aspect often ignored is the (hopefully) increased lifespan: If the Fairphone2 will work for 5 years, it is fair if costs more then a device that only is usable for 2 years. I know usable is very subjective: For some it is calling, occasionally browsing and email, for other it means most of the latest and greatest apps run and games can be played. This is one reason for me to assume a lot of users will go for a more recent device in the future (possibly a FP3) and FP2s will go into the second hand market.

Then there is the idea of swapping the processor for a cheaper model. I think the problem is: The experiences with the MediaTek processor make it impossible to go for a very cheap chipset which can not be profitable serviced by the manufacturer. And then, the Snapdragon used in the FP2 is neither the most recent, nor the most powerful chipset on the market and i suppose it is by far not the most expensive. It is a powerful chipset, but already a compromise (a good one i think except for missing 64bit support, but that is another story;-)). In a PC you can simple swap the processor the reduce the price: Swap the Core i5 for a Core i3 or even a Pentium and you can save over a hundred euro with a otherwise identical PC. This is not possible in smartphones. Not only are devices as a whole far mor integrated, the chipsets are as well. Typically, Processor, Graphics Processor, Modem and more come in a singe package. They have interfaces for Cameras and Storage. So if you swap the chipset, you need to make sure the rest stays compatible. You also either do not save so much or must sacrifice on other hardware aspects as well. But the most important problem is how tightly coupled hard- and software is in the smartphone world: The Android distributions are specific to one device: They must be build with right configuration and drivers. That means, two different chipsets means two different Androids Fairphone must maintain, at least to a specific degree. And then there is modularity: If other manufacturer should be able to offer a new camera module, for example, these must work with every Fairphone 2 out there, reducing the number of possible replacements. Then there is volume: It would required two production lines and reduces the volume of devices for each lane and the volume of each chipset bought. In summary, i think all this will pretty much the price reduction due to a cheaper chipset away.

All in all, the more i think about it, i come to the conclusion that the price of the Fairphone 2 is fair and adequate.

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Hi,

I have seen a lot of people reacting negatively about the price.
I think this is because it is quite a big increase comparing to the FP1, that was more about 350€, if I am right ?

I think a lot of people, like me, liked the FP1 and would have liked to buy another, for example for their husband or wife, but it was not on sale anymore, so they waited for the FP2, thinking it would be in the same price range.

So, obviously, these people are disappointed : the price is fair, since the specifications are much better than the FP1, but someone who considered that the specs of the FP1 was enough for his use it not interested in these better specifications, and consider only that the price is much higher.

To please everyone, maybe it would have been nice to sold 2 versions of the phone (if it is really modular, maybe it is possible ?), one with average specs for about 350€, like the FP1, and the current version at the current price.

Personally, the price seems fair to me regarding the specs. My huge issue is the loss of the root access and Google Apps installed by default, and the fact that we will loose the warranty by rooting the phone. I know it is another debate, but this it was keep my from getting a FP2 : if I have to loose any guarantee to root the phone, I can do this on a much cheaper phone, it would be a much smaller risk. In term of freedom for the user, I see no interest in a phone I can open/change any part if I am not even allowed to get rid of the Google search bar on the desktop…

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It doesn’t matter whether its a fair price for the device or not. It’s simple more than lots of us are willing to spend.

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Very personally, it is not much more than I am willing to spend for a good device, that is also better for the planet and the workers than the other. Buying fair/organic stuff is always a little more expansive than the industrial products, and we can understand why.

As I said, I my case the blocking point is the “no root access/loss of waranty when rooting the phone”. 525€ is to high to take the risk. And now that I have enjoyed my FP1 and all the freedom of being root on my phone, there is no going back ! :smiley:

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This really is another discussion, but there is no official statement on the loss of warranty issue yet. Let’s keep this discussion in another thread though.

i doubt that most android manufacturers are not profitable in the long run. the profit always comes after all investments, if a company builds a new research facility / an office building and a factory and buys up another company this will be all going into the final budget and reduce the profit to virtually zero or losses. so a companies value will rise a lot (reflected in the rise of its stock value) and still make a huge loss for a few years, that does not mean the smartphone industry is at all not profitable. apple and samsung are the pioneers of smartphones and have got all the facilities in place, so they have no chance to cut down their profits (also for tax reasons this is often good for some companies). if smartphones would not be a profitable business, there would not be so many new companies popping up every year. ofc competition is tough, but that is what happens in every market with high revenues.

fairphone is able to pay its bills and has shown that the first fairphone could be produced for a pretty low price. I would have understood a price raise for like 100 euro for the next model - 430 euro or so would have been ok in my opinion. 530 is just very hefty. of course there is enough people who can afford it, but as i have said in other threads - if a little less processing power could have kept the price a little more affordable, there would be less complaining now.

i think we should see this model as a new stepstone which is just one that might be to fund the development of the modular design of the future fairphones. if this model is a huge success, then fairphone will be able to develop cheaper models in the future by utilizing the same modular system. i think smartphones have reached the point, where more processing power is not going to benefit the overall experience of the user, it is like with cars. why do you need a 300mph fast ferrari when the speed limit in your country is 100mph? i would rather see developers make the UI sleeker and more accessible, instead of using their applications as benchmark tools that will only run on the latest device running the newest operating system.

i also think a root option should be definitely included, as it is part of the fairphone concept from day one. having to root devices by third party solutions is not what i expect when i buy a phone and simply want to backup my data completely through some backup program which requires root.

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@Aline, you summed it up perfectly. As it is, currently, I am contemplating buying a Moto G2 for someone. It’s not a “fair” phone, but is a very good smartphone apparently, at half the price of the first Fairphone.

I would pay more than the 325 € I spent for a FP1 for a better device. But it’s still a risk, and 525€ is to large a risk. I know at least three people who are looking for a phone currently, and two others who already decided against the FP. One bought the MotoG2, the other a Sony Z3. 525€ is simply to much to ask if you are taking a risk. And believe me, my friends and colleagues do percieve buing a FP as a risk.

Yes, at that should keep that way. Anyway: My argument is (and fairphone said something similar) that the price for the first model was only possible because an existing design was employed.
This was good first step, but i think it is not possible to pursue all goals Fairphone has that way (otherwise, they would have continued that path). Therefore the need for a original design. Only one factor that raises cost.

Good point.

My impression is that we are not there yet (more processor power is always good and apps will use it), but thankfully the process outdating devices is much slower today then some years ago.

This thread has a very specific topic: Price. Let’s try to keep on that topic.

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Good point. And to be fair: It currently is. We do not know if updates really work better, there is not a single review (and how can there be?). Know, we are preordering devices that do not even exist in final design.
But i think that will change soon. This winter, the first FP2s well be delivered and thoroughly tested. And some time next year we will have some indications on long term quality, software updates and third party support.

…and this is well to late for the people I know who contemplated buying a FP2, because their “dumbphones” are dying now.

To be honest, at this price the FP2 will not be perceived as worth buying in, say, January, because the price for the phones mentioned above will drop further. New models from other manufacturers will be available, probably featuring modularity, other OS, and who knows: maybe even certified raw materials. But FP2 can’t really drop in price, otherwise customers who preordered get upset, and quite probably Fairphone would not be earning any money.

Don’t get me wrong: I sincerely hope the FP2 will get really, really good reviews. And I hope the whole thing, i.e. the company, will thrive. But ATM, I am a bit sceptical.

Actually i highly doubt that.

Ok, that is bad luck. But if they need a phone any minute, preordering might not be the best decision anyway or is it?

Also, the Fairphone team will be very interested in not losing their customers’ trust in them. So actually the risk is bilateral as people might lose faith in the company if problems like with the FP1 occur again with FP2.

I’m personally willing to take that risk and ordered a FP2. I’m quite positive the phone will at least (!) cover my needs and then I’ve still supported an idea that is definitely necessary to be assessed in our society.

[EDIT: I have never paid that much for a phone, regularly my dumbphones cost €250 or less. The arguments that more expensive phones are more sustainable convinced me of spending more money.]

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[quote=“huskers, post:14, topic:8512”]
Also, the Fairphone team will be very interested in not losing their customers’ trust in them.
[/quote]You can’t lose something you don’t have.

You can’t lose something you don’t have.

Okay then. Let’s say we assume that people don’t have faith in a company. Wouldn’t the company then also be interested in convincing them of their product’s qualities and the company’s skills? :smile:

As oftenly mentioned before by others, I don’t expect a perfectly flawless phone - which is of course a very complex product - from a little company like Fairphone that has existed for only a few years. The FP1 was their very first product to release and in my opinion they did a pretty decent job (I don’t own one, but I saw several).

If you have an idea for a new product and you want to go into production, you and your customers will always have to take risks. For instance, Microsoft and Apple wouldn’t be those infinite-amount-of-money companies today if people had stopped buying their computers after they crashed several times. They believed in the power of this new technology.
In the case of the Fairphone, this would be many people’s faith in the capability of the phone to ‘change the way products are made’.

And appearantly, there are people who give their trust into Fairphone. For what other reason would they join the newsletter, buy a FP2 (right now already 5,400 phones sold) or show commitment in this forum? Even people who got disappointed by the FP1 join the discussions here and support the community. :slight_smile:

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Dear @HackAR, sometimes i wonder why you are even in the forums here. It seems you are no longer interested in Fairphone and you have made your dissatisfaction clear in almost every post here. It think sharp critic is important, but it must also be constructive.

I have more and more the feeling you are only here to make your dissatisfaction heard. But remember: This is a forum for Fairphone Users and Interested people, most of as are not paid or affiliated with Fairphone and i feel those “bad vibes” really starting to get an my nerves.

Thank you!

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[quote=“ben, post:17, topic:8512”]
Dear @HackAR, sometimes i wonder why you are even in the forums here.
[/quote]Because I still believe the FP goals with FP1 are the right ones. And this forum is the only source of infos on FP / FP1.[quote=“ben, post:17, topic:8512”]
it must also be constructive
[/quote]A discussion can only be constructive, if both sides are talking, listening and are open to changes. But FP is a profit company made by few people. And it’s policy is, more or less, the same as with other companies: You may suggest, we decide. That’s not a valid base for “constructive” debate.

[quote=“ben, post:17, topic:8512”]
I have more and more the feeling you are only here to make your dissatisfaction heard.
[/quote]That’s not true. I’m here to know the bugs I might get so I can react on those if those happen on my phone also.

And let’s make one thing clear: Trust must be earned. I’ve got no reason to trust FP, do you? Besides my trust they’ll actually deliver the hardware you pay for or return your money. But that’s also the law.
So if I say FP can’t lose trust since FP did not had it, it’s true unrelated to my “dissatisfaction” with FP1, but based purely on logic in our capitalistic world.

I don’t see why any trust is needed for all that… :confused:

I think I understand your thought here. But how would you realize it for Fairphone to let ALL their customers decide about everything? Besides, I’m sure they made several market analyses to figure out what most of their potential buyers would like to have in their phones.

The trust isn’t needed for joining the newsletter but the fact that people join the newsletter list means that they are interested which again means they belief that this concept isn’t no good.
I was talking about the trust necessary to provide Fairphone with money so the phone can be built. Sorry if I didn’t state clearly enough what I meant :wink:

Of course you are right that trust must be earned. We (most of us) don’t know the FP team personally. But as you said: It’s the law for both parties (producer and customer) to fulfill their part of the contract that is made when a phone is bought. So we have at least the guarantee that we will get either the hardware we paid for or get our money back. Please correct me if I’m wrong here!

Also: I truly belief that the team’s aim is NOT to sell a phone nobody wants to use. :stuck_out_tongue:

Do you think they didn’t with FP1?


Hopefully this cleared some misunderstandings :smile:
I appreciate any comments or corrections!

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525 is not too much for me, but only, if there are other OS-options than Android.