Publication

The arrival of the first mass market smartphone in 2007 was one of the most important technological improvements of the past quartercentury. By effectively building a high-powered computer, radio, and sensors such as cameras and gyroscopes into a compact form factor, smartphone manufacturers were able to connect individuals in a way that was not possible before.

Following the introduction of the first iPhone in 2007 and the iPhone 3G in 2008, Samsung introduced several touchscreen-enabled phones in 2008 and its first Android-powered device in 2009 before releasing its first modern smartphone, the Samsung Galaxy S, in 2010. In the decade since, smartphones have become ubiquitous, with smartphone ownership rising from 35 percent of U.S. adults in 2011 to 81 percent by 2019. What is possible with a smartphone has evolved too, as more apps have become available and devices have been upgraded with better processors and graphics, larger memory capacity, longer battery lives, higher-powered cameras, and now have the ability to interact with remote objects. In addition to Apple and Samsung, smartphone brands today include Huawei, Xiaomi, Oppo, Motorola, Mobicel, Sony, Nokia, HTC, Vivo, and LG.

Today, the best-selling brand in the U.S. is Apple, with 61 percent of the market as of January 2021. In Europe and globally, the best-selling brand is Samsung, with 33 percent and 29 percent of the market as of January 2021 respectively. The average price of Apple phones is $873 in the United States, while other phones sell for much less. For example, the Motorola G Power 32GB smartphone retails for $200. 

An important economic question is why consumers do not switch ecosystems more often when cheaper substitutes are available. The simplest explanation is that consumers view the top-end phones as offering enough value to justify their price, including faster processors, better cameras, higher quality screens, more memory, or any one of a number of other characteristics.

The other possibility, offered up by some policymakers in the U.S. and Europe, is that consumers feel locked into their current models by a high “cost of switching.”

“Switching costs include learning a new operating system, which can discourage users from leaving Google or Apple due to familiarity with their distinct operating systems, as well as the inability to easily port all of their data, such as messages, call history, and photos,” the House Judiciary antitrust sub-committee wrote in an October report on competition in digital markets.

On the face of it, the switching cost explanation for smartphone prices looks less and less likely over time. For example, learning a new operating system is hardly a barrier to today’s smartphone customers, who have been long inured to switching between multiple operating systems and devices at work, school, and at home.

The question, though, is whether there are any artificial structural barriers that make it more difficult than it needs to be to switch devices. In this paper, we explore the feasibility and cost of switching between iPhone and Samsung devices and vice versa. We note that while we outline how users can switch between these specific brands, the methods can be used to switch from iPhone to brands other than Samsung and vice versa. We begin by comparing brand loyalty in the smartphone market with other industries. We then identify the overlap of the top 200 free apps available on both ecosystems in the U.S. and E.U. as of March 2021, apps that copy data from an old device and transfer it to a new device at no charge to the consumer, and how users can manually port their data using the same or similar apps available on both platforms. Finally, we estimate how much time and money it takes to switch between devices, including the opportunity cost of time spent changing, relative to certain annual consumer expenditures in the U.S. and E.U. 

Read the full report here.