'Used to cost W1m, now W3m?' Used-phone market nears W1tr

Rising costs push up device prices, driving consumers to used phones

Domestic used-phone purchases set to hit record high this year

Global refurbished market expands as major brands enter the space

A consumer browses used smartphones. [Generated with ChatGPT AI]

"Do I really have to spend 3 million won ($2,170) on a smartphone?"

"Just a few years ago, anything over 1 million won was considered expensive." (From an online community for prospective smartphone buyers)

Soaring prices for the latest smartphones are fueling rapid growth in the used-phone market at home and abroad. As the cost of memory chips — a key component — has driven up new-device prices, a growing number of consumers are turning to cheaper secondhand options.

The 1 million won threshold that once defined a premium smartphone now feels like a relic of the past.

As a result, nearly 3 million used phones changed hands in South Korea in the first half of this year alone, with the total purchase value approaching 1 trillion won. Price competitiveness has emerged as a decisive factor in smartphone buying decisions.

Apple's first foldable phone, the iPhone Duo, unveiled Thursday, starts at 3.29 million won in South Korea. [AFP]

According to UPM, a business-to-business used-phone transaction management system, about 2.92 million used phones were purchased in South Korea in the first half of this year, with the total purchase value reaching 995.13 billion won. UPM is a dedicated enterprise resource planning system used by about 80 percent of used-phone dealers nationwide.

With new smartphone prices continuing to climb, the total used-phone purchase value for the full year is expected to set an all-time record.

The trend is playing out globally as well. Market research firm International Data Corporation forecast that worldwide shipments of used and refurbished smartphones would grow from about 253.4 million units in 2021 to about 413.3 million units this year.

Industry observers say a clear pattern has emerged: rising memory chip costs lead to more expensive new phones, which in turn push consumers toward the used market.

Memory chips have come to account for a significantly larger share of smartphone manufacturing costs. Market research firm TrendForce estimated that memory's share of the bill of materials for Apple products would reach around 40 percent in the first half of next year — surpassing application processors and displays, which have traditionally been the dominant cost components.

Counterpoint Research projected that in the third quarter of this year, system-on-chip (SoC) components including application processors would account for 24 percent and displays would account for 7 percent of smartphone bill-of-materials costs, respectively.

Apple's first foldable phone, the iPhone Duo, unveiled Thursday, starts at 3.29 million won in South Korea. [Yonhap]

Major companies have also been moving into the used, refurbished and leasing segments one after another. Refurbished products are items returned by consumers or used as store display units that are repaired, inspected and repackaged for resale. Notable examples include Apple's leasing program Apple Upgrade, its certified refurbished resale business, and Samsung's Galaxy Certified Pre-Owned program.

Market research firm Omdia said Samsung, Apple and major carriers "are activating the market through trade-ins, refurbished product sales and resale," adding that such programs — which include component replacement, warranties and discounted pricing — "will expose more consumers to refurbished smartphones."

"The biggest barrier to buying a new smartphone is price," an industry official said. "As semiconductor and other component costs have risen sharply, device prices have followed, pushing consumers into the used market."

ko@heraldcorp.com