Cheap Smartphones Come With Costs You May Not Know About

Source: iStock

Source: iStock

Google’s Android operating system has been great for consumers, kicking off a major competition for smartphone makers, who went head-to-head first on specifications and now on price tags. And it’s easy to think that the Android-facilitated smartphone price wars are awesome. You can pretty easily find a good phone at a great price, and you no longer have to make deep compromises on functionality or quality if you’re looking for a budget-friendly device. But those cheap smartphones actually come at a cost that few of us have thought about.

As Vlad Savov reports for The Verge, HTC, which was once the leading manufacturer of Android smartphones, recently announced that it will cut 15% of its workforce in response to dwindling sales of its devices. The move will leave 2,300 people looking for new jobs. But HTC isn’t alone. Lenovo, which is a more recent (and still growing) entrant to the smartphone manufacturing scene, will cut 3,200 jobs in order to adjust to better take on the competition. And Quartz’s Josh Horwitz calculates that the world’s top smartphone manufacturers have cut approximately 15,000 jobs, mostly from their mobile divisions, in 2015 alone. (In addition to the cuts at HTC and Lenovo, that figure includes 7,600 jobs cut by Microsoft, 2,100 jobs cut by Sony, and an undisclosed number by BlackBerry.)

Both HTC and Lenovo look to China as a key market, where they have to compete against a widening group of smartphone makers who offer top-of-the-line devices at rock-bottom prices. For instance, Savov notes, Xiaomi recently introduced the $125 Redmi Note 2, which has the same screen size and resolution as the iPhone 6 Plus and is powered by the same processor as the HTC One M9+.

Xiaomi’s phone also has a microSD card slot, an IR blaster, and phase-detection autofocus, a flagship-tier feature that was first introduced with Samsung’s Galaxy S5 and has since appeared on the iPhone 6. Xiaomi’s profits on the phone are certainly meager, if they exist at all, but as Savov explains, “Xiaomi knows that razor-thin margins for it are equivalent to major losses for its bigger competitors, who have to contend with the extra costs of maintaining a global support and distribution network.”

The reason for the widespread job cuts among the world’s smartphone makers is the rise of Android-based phone makers, including not just Xiaomi, but other brands like Oppo, Vivo, Coolpad, Meizu, Cherry Mobile, and Micromax. There are now nearly 1,300 brands of Android phones available to consumers, three times as many as there were in 2012.  And more consumers are buying phones from these brands, with IDC reporting that smartphone market share for “other” brands has more doubled in five years, from 17.1% in June 2010 to 45.3% in June 2015.

It’s remarkable that, in an industry where even the top contenders are, as Savov puts it, “constantly mired in financial worries,” it’s remarkable that there’s room for upstart manufacturers to claim a piece of the market, however briefly. It’s an accepted fact in the industry that many of the names that are popular today are unlikely to stick around for long. And particularly in markets like China, many companies don’t even concern themselves with building sustainable businesses that will be around for anything but the nearest future.

The situation isn’t good for smartphone manufacturers — or for the people who work for them — but it’s also not good for consumers. If you buy a smartphone with top specs from an anonymous Asian manufacturer that soon after goes out of business, who will sell you a replacement battery, or ensure that your phone gets an update for the next version of Android? And who can you hold responsible if your phone overheats or the display exhibits some flaws?

Savov points out that when we buy a phone, we buy not only the hardware, but also “a lot of implicit assurances” that only the most established of brands can really live up to. While companies like HTC are struggling to make their mobile divisions sustainable, they won’t disappear overnight and they won’t stop distributing Android software updates (even when their distribution schedules leave a lot to be desired).

If you discard those assurances in favor of getting awesome specs at an impossible price from a no-name brand, you’re, quite logically, likely to get burned sooner or later. But what happens when smartphone manufacturers themselves adopt the direct-to-consumer strategy and offer their devices at unsustainably low prices? Few smartphones makers are building truly sustainable businesses, and Savov rightly points out, “This isn’t going to lead to better customer service for us, or better working conditions for the people assembling our phones. If we want those things, we’ll have to pay for them.”

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