With the Galaxy S7, Samsung might have just started a price war

When it comes to true flagships, the choice is pretty much around the popular brands - Apple and Samsung.

Broadly from a platform point of view and keeping fanboyism aside, the industry has settled for iOS and Android. Among Android device manufacturers in India, Samsung is still the leader when it comes to device shipments . iOS may not be among the largest platforms in India, yet app developers continue to develop with Apple in mind.

And when it comes to choosing a smartphone, it’s either the iPhone for iOS purists, or the latest Galaxy for masses in the Android stable. The dilemma though, was the rising prices of flagships that dissuaded consumers from investing significantly higher amounts in – a smartphone. A device used to call, text, browse, snap photos, email and consume apps. Not necessarily in that order. In the past, manufacturers have tried dabbling in tablets, phablets, hybrids to create newer sources for generating revenue. But eventually, value conscious consumers latched on to companies that offered the most value for their money.

The result, was the rise of several smartphone manufacturers offering budget products. In fact, companies such as Xiaomi and OnePlus have risen significantly over the past couple of years. The rise in price, in this case, creates an opportunity for a product in the budget segment. But what happens when premium offerings fall in price? Does it cause a further shift in the price of budget products, or does it enhance the possibilities of consumers opting for a premium device at a discounted price?

According to a Bloomberg report , Xiaomi’s $45 billion valuation was ‘unfeasible.’ And a major reason attributed to it is that the growth of the overall devices market was cooling. Xiaomi has been successful in gathering widespread attention. And so has been OnePlus, via its rather popular invite system. But neither prefer being labelled as companies with budget products. And given the stigma associated with ‘budget’, it does make sense.

Things weren’t too different for OnePlus in India either. In December 2015, there were reports of OnePlus missing its sales targets during the first year in India. That number was at a million devices (10 lakh). Back then, although specifically declining to post a number, OnePlus India CEO Vikas Agarwal said the target would be higher than 1 million for 2016 .

Now, with a leading flagship such as the Samsung Galaxy S7 seeing a price cut compared to the previous Galaxy S6, it does seem as an important development worth following. In effect, a tipping point in terms of the pricing of flagship devices. Given that the Samsung Galaxy S6 was launched in March 2015 at a price of Rs 49,900 for the 32GB version, the price of Rs 48,900 for the 32GB version of the Samsung Galaxy S7 is a reduction of more than Rs 1000 if inflation is considered.

As many in the business would agree, it’s always easier to slash prices, rather than cut margins. When the end price needs to go south, it’s much easier when you have larger margins. And a company with a wider product portfolio and deeper product depth stands a chance over another that focuses on a single product with minimal margins. Apple on the other hand, also specialises in minimal products, but an evolved supply chain, insane product appeal and hefty margins compensate for threats from wide bouquet of devices.

Although the larger trend of product commoditisation by cheaper Chinese brands has triggered a price drop, it seems a top down drop in price (popularly referred to as undercutting) would consolidate the rather crowded devices space. The end consumer has a lot to gain from the price battle and related trends.