Tech industry heavyweights have been adding a new feature to our devices that no one wants: higher price tags.
Samsung on Wednesday became the latest tech giant to hike prices on its products, charging $100 more for its Galaxy Fold 6 and Galaxy Flip 6 smartphones than the equivalent devices from last year. The phones now cost $1,900 and $1,100, respectively.
If that wasn’t enough, the company also said some of its newest products would cost more than those of its competitors. Samsung slapped a $400 price on its new Galaxy Ring wearable sensor, $100 more than the market leading Oura Ring. Meanwhile, Samsung’s new Galaxy Buds 3 headphones start at $180, or $10 more than the entry price of Apple’s eerily similar-looking AirPods 3.
CNET’s Katie Collins wrote that she winced when she heard the Galaxy Ring’s price, calling it “eye-wateringly expensive.” (One analyst called it “super-premium” instead.) Colleague Abrar Al-Heeti wrote that things weren’t much better with Samsung’s foldables. “The future of phones just got slightly more expensive… again.”
In a statement, Samsung representatives said the company’s pricing is determined by many factors, including increased durability of its phones, new artificial intelligence technologies and other “premium experience” features the company included without additional subscriptions.
Whatever the reason, it raises questions about how widely tech companies will be increasing prices as they announce their biggest new products ahead of the year-end shopping season. With price increases hitting everything from groceries to transportation, inflation has become a key issue for the 2024 US presidential election.
In the tech industry, companies have been spending big to develop new AI technologies and add them to their products. The costs have included needing to build expensive new data centers, such as a $100 billion project Microsoft and OpenAI jointly announced in March, which includes building an AI supercomputer they call “Stargate.” These projects are often powered by specialized, high-demand chips from companies including Nvidia, which also require increased energy costs to run. At least one analysis, reported by The Information, predicted that overall the Stargate project will be “100 times more costly than some of today’s biggest data centers.”
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Meanwhile, AI isn’t the only thing pushing up prices. Companies have also announced price hikes over the past few months for services like Microsoft’s Xbox Game Pass and Spotify’s premium subscription, citing increased licensing and content production costs, among other things. Companies continue to say the value of their services outweigh the increased fees. Some analysts have noted, though, that the increased subscription costs are outpacing inflation across the wider economy.
Tech companies have already begun testing what people are willing to pay for AI-powered devices. The startup Humane released its AI Pin in May, asking $699 and an additional $24 per month for a product they pitched as a first step toward replacing our smartphones and apps. Critics said it didn’t live up to promises and wasn’t worth the price. Shortly afterward, a startup called Rabbit began selling a $200 pocket-sized gadget that people could use to summon Uber rides and order food delivery. Critics said Rabbit also failed to live up to its promises.
A Microsoft representative declined to comment about whether the company is planning any more price hikes ahead of the holiday shopping season. Representatives for other companies including Amazon, Apple and Alphabet didn’t respond to requests for comment.
How prices are rising
Despite AI’s mixed track record with consumers, industry watchers say its operating costs are significant.
Early last year, The Wall Street Journal reported that Microsoft’s $10 per month GitHub Copilot AI was costing the company $20 per user every month, with net losses reaching as high as $80 per month per user in some cases. Other analyses have indicated that AI costs are eating into profits at Facebook owner Meta, and executives at Microsoft and at Google parent Alphabet have found themselves having to quell concerns among investors about future AI costs as well.
For its part, Google has begun marketing a $20 per month AI Premium subscription service, promising access to more advanced tools and technologies for editing photos and writing emails.
Apple, meanwhile, is reportedly considering a mixed approach, holding back access to its Apple Intelligence service for all but its recently made iPhones, iPads and Mac computers, while also weighing a paid subscription for extra features. The company has also historically found ways to increase prices for its iPhones by expanding its product line. For example, it was able to charge hundreds of dollars more for its Pro line of iPhones, which often come with better components such as cameras and screens.
There is an upside for Big Tech, at least for the moment. Companies including Apple, Alphabet, Microsoft, Meta and chipmaker Nvidia have seen their share prices reach record highs amid continued excitement over AI technology and the potential that it may push people to buy new smartphones, computers and other products geared to work with it.