Apple and Samsung Electronics are changing how they sell smartphones. With component prices surging and no choice but to keep raising smartphone prices, they are expanding sales models that focus on "use" over "ownership" to lower consumers' upfront purchase burden and encourage upgrades.
On Aug. 28 (local time), Apple launched its device rental service, "Apple Upgrade," in the United States. It is a program to use iPhone, Mac, iPad and Apple Watch by paying a monthly fee. Monthly fees start at $17.99 for iPhone, $11.99 for iPad and Apple Watch, and $24.99 for Mac. Users pay a set amount each month during the contract period and can either pay off the remaining device cost or switch to the latest model even during the contract. When the contract ends, they can either own the device or return it.
Samsung Electronics is running similar programs tailored to the characteristics of each national market. While Apple's model is a "rental" in which consumers pay a monthly device usage fee, Samsung is offering a "residual value guarantee" model in which it buys back the device after a set period following purchase. In Korea, regarding smartphone purchases, Samsung guarantees up to 50% residual value after a certain period of use through the "New Galaxy AI Subscription Club." In India, starting this year, it introduced the "Galaxy Forever" program for flagship smartphones, allowing users to choose one of Return after one year of use, Upgrade to the latest model, or Retain for continued use. In the United States and Europe, it operates mainly through trade-in, interest-free installments, and financial programs.
Industry watchers cite the rising structure of smartphone prices as the backdrop for this shift. As manufacturing costs climb quickly due to advanced AI features and soaring memory prices, manufacturers have little choice but to raise retail prices, while consumer price resistance is growing at the same time. In fact, Apple announced its rental service right after it raised Mac and iPad prices by hundreds of dollars, citing memory supply shortages and other reasons. With the new iPhone series to be unveiled in September also facing potential price hikes, analysts say Apple is expanding the rental service model as a mechanism to mitigate demand declines caused by higher prices.
A more fundamental reason is the slowdown in hardware innovation. As smartphone performance has leveled up, consumers no longer feel a strong need to replace their devices every two years as before. Replacement cycles have stretched to three to four years or longer, making sales declines inevitable for manufacturers. Monthly rentals and residual value guarantee programs lower consumers' initial burden to bring forward replacement timing, while also enabling a circular model in which recovered used devices are refurbished and resold.
These programs go beyond simple sales promotion and also serve as a customer lock-in strategy. If a structure takes hold in which consumers replace devices from the same brand every one to two years, the likelihood of switching to a rival drops, and use of the ecosystem—such as app stores, cloud and AI services—continues naturally. Some in the industry also say the transition is accelerating from smartphones as "products you buy once and use for a long time," like cars, to "services where you pay a monthly expense to use the latest model." For manufacturers, how long they can keep customers inside their ecosystems has become crucial.
Bang Hyo-chang, professor in the Department of Smart IT at Doowon Technical University (policy committee chair at the Citizens' Coalition for Economic Justice), said, "It is true that consumers' burden for smartphone device prices has grown, so manufacturers like Samsung Electronics and Apple want to attract customers through smartphone rentals or residual value guarantees," and added, "However, while Samsung Electronics has focused on product sales from a hardware perspective, Apple can earn additional profits not only from hardware but also from the app ecosystem, so it will market more aggressively."