5G Expands to More-Affordable Phones as Chip Prices Fall

5G is increasingly available in cheaper phones, making faster mobile service affordable to more lower-income consumers around the world, market researchers say.

The key to this broader access to 5G service is the falling price of the specialized semiconductors needed for 5G phones, a trend that analysts expect to continue over the next two years. The lower price makes it economically feasible to put the chips in a wider range of phones.

Already, 5G technology has moved beyond the premium smartphone market, in which devices sell for $550 or more, to the midtier market where devices sell for $250 to $550, and even cheaper 5G phones are available in some places, says Jeff Fieldhack, research director at Counterpoint Research.

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5G technology is “moving very quickly downwards in terms of affordability, faster than any previous generation,” says Frank Boulben, chief revenue officer of Verizon Communications Inc.’s Consumer Group. In Asia, prioritization of 5G chips by chip manufacturers in China and Taiwan is pushing chip prices lower and driving the production of budget 5G-capable devices, says Neil Shah, vice president of research at Counterpoint.

The average price of a so-called 5G system-on-a-chip that performs multiple functions is now $40 to $45, according to Counterpoint. That price could reach $20 late this year or early next year, at which point it would make economic sense for more mobile-phone makers to put 5G chips in devices with a retail price of around $150, says Mr. Fieldhack.

Airlines canceled some flights before a new 5G wireless service rolled out, even after Verizon and AT&T agreed to limit the signal around U.S. airports. The FAA says the service could affect airplane safety systems, a claim the wireless industry refutes. Photo: Justin Lane/Shutterstock

U.S. carrier Consumer Cellular Inc. expects to offer a 5G phone priced at $199 by June, and one priced at around $150 by early next year, according to Greg Hughes, the company’s vice president of portfolio strategy. Currently the company offers 5G-capable phones priced at $349 and higher. Mr. Hughes says he expects consumer adoption of 5G to increase when the technology is available in lower-priced smartphones.

Globally, 5G capability will spread to at least 80% of phones priced under $200 over the next two to three years, from less than 5% now, says Runar Bjørhovde, research analyst at market-research firm Canalys.

In all, 42% of smartphones shipped to retailers around the world in 2021 were 5G-capable, according to Counterpoint. That percentage is expected to increase to 54% this year and 66% next year, Counterpoint says. In the U.S., 58% of smartphones shipped to retailers were 5G-capable last year, and that percentage is expected to increase to 83% by the end of this year and to 89% by the end of 2023, Counterpoint says.

Mr. Bhattacharyya is a Wall Street Journal reporter in Philadelphia. He can be reached at suman.bhattacharyya@wsj.com.