The word "premium" brings many thoughts to mind. Desire, exclusivity, and price occupy a large space in my id, if you will. Like anything else, there's a certain sense of elusiveness to anything we want. Some prefer BMW over Audi, others prefer platinum over gold. In this market, we're at a tipping point where individuals have identified and bought into the brand of smartphone they use on a daily basis. It's not unjustified, but it surely isn't rational. And I expect the premium devices from Apple and Samsung to be at the forefront of the battle for exclusivity, and premiumness.

No matter your preference in smartphone, it's impossible to ignore the build quality of Apple's iPhone. It helped shape the premium smartphone market to what it is today. It has somehow managed to remain a benchmark to every new device. If it wasn't compared to the latest iPhone, it hasn't yet made it to the top-most tier of devices. This is much less an opinion, than it is a characteristic of the smartphone market.

Putting your personal preferences aside, Samsung has managed to garner just as much attention (if not more) than Apple's aging iPhone 5. Where we have seen Samsung perform a minor bump in specifications over the Galaxy S III, including a larger screen, battery, and more powerful processor, Samsung's Galaxy S 4 has filled the void as well as anyone could have asked them to.

However, 2013 is a much different beast than previous years due in part to how high the bar was set in 2012. Last year, we saw just how far manufacturers were willing to go just to get their flagship devices in the hands of every consumer. And at any cost. Google cornered the budget smartphone market with the Google Nexus 4. HTC harbored the best showcase of just how well polycarbonate can be done with the HTC One X. And Apple set the bar in hardware design with the iPhone 5.

But, like I said, 2013 is an entirely different arena, and some manufacturers are about to get a swift kick in the pants with what's in store if they don't react.

If you look back at premium smartphones over the years, we have seen a steady increase in pricing. In my last editorial about the Nexus 5, I pleaded Google to keep the price at a point that allowed the company to have a marginal source of profit per device, and at the same time pack it to the gills with the best specifications. The reason I so desperately desire a smartphone that does not solely market itself based on price is simple.

The first reason is consumer loyalty. No matter your preference in device, if a manufacturer comes along and matches competing hardware features of another device, that consumer's brand loyalty has been reduced. The original manufacturer offering the more expensive device now has two questions to answer for their flagship smartphone: Why does it cost that much? And why is Device A that much better than Device B? Both questions deteriorate the smartphone market, and hurt competition.

Another dilemma the premium smartphone may encounter in the face of lower pricing is irrelevance. Now, this is a hypothetical problem that has not yet happened in the smartphone arena, but I foresee the issue being raised sooner rather than later. A decent example of irrelevance hurting a premium device's reputation is the Apple iPad Mini's success. The iPad Mini has been praised as one of the best medium-sized tablets in the market. With design cues from the iPhone 5, and thinness rivaling paper, it's no wonder the iPad Mini is as desirable as it is.

However, from Apple's perspective, there is a much larger problem at hand. The first is a simple example of macroeconomics. Demand for the iPad Mini, the cheaper and premium mid-range tablet offering from Apple, has exceeded demand of the newest iPad's. To top it off, supply chain manufacturers like Sharp have noted a significant decrease in demand for the 9.7 inch panels used in Apple's flagship "new iPad" line.

The second problem at hand for Apple with the iPad directly impacts the bottom line. In fact, it is the bottom line itself. The bill of material plus manufacturing cost of the iPad Mini equates to $198. This same 16GB iPad Mini sells for $329 which comes down to a 40% profit. Now, this is nowhere near the profit margin that the iPhone 5 achieves at around 70% per device, but it's a long-term issue that Apple cannot avoid with the iPad Mini due to demand. In the long-run, the iPad Mini is eating away at the profits of the company, and deteriorating sales of its flagship line.

This brings us back to premium smartphones and why they face a dilemma this year. The iPhone 5S, or whatever Apple decides to call their iPhone 5 successor, will be released around June, according to some reports. The iPhone 5S is coming in at an all-time low point for the company. Investors are expecting more than ever, as are consumers. In short, the iPhone 5S might not need to exceed our expectations, but it sure as hell needs to meet them.

The premium smartphone market has much to live up to in 2013, and if rumors of a budget iPhone come to fruition, much of the market's long-term viability lies with Apple. A rumor circling the Apple arena is the launch of a cheap iPhone targeted at emerging markets. Having said this, it would be unwise to bet against Apple selling it stateside, too. You'd also be insane not to bet that it will be priced significantly lower than Apple's premier iPhone model. Oh, and it will probably have a lower profit margin, too.

Like the iPad Mini, a budget iPhone looks set to do two things to the premium smartphone market. The first major impact it will have is decreasing sales of its big brother, the iPhone 5S. Like the iPad Mini, Apple could be inflicting itself with much more internal agony with a premium, budget-friendly smartphone. Lastly, the premium smartphone arena is set to have a wake up call like no other if Apple makes the market think twice about the pricing of smartphones. Most flagship devices come in around $600-$800 off-contract. If an extremely successful device were to come along and question every single device's pricing, the entire market would need to react to remain relevant. Like I said, brand loyalty rides the fine line of irrelevance when competitive pricing upsets the status quo.

In essence, the premium smartphone in 2013 will largely be affected by how much attention the first popular budget smartphone attracts. 

As an aside, if you're worried about the iPhone 5's successor dying on arrival, don't be. If there's anything we can learn from Apple's sales of a cheaper alternative to the iPad, it's that Apple is better off sacrificing sales internally (i.e. taking it away from the full-size iPad line), than having consumers purchase competing devices.

In summary, budget devices have a lot going for them, but it won't be at the expense of the premium smartphone market. The premium smartphone faces a tough challenge this year if any manufacturer were to successfully market a budget device with top-tier specifications. I'm quite eager to see how it pans out, starting with the iPhone 5's successor, and its little brother.

Would you buy a competitively priced smartphone with similar features over a flagship device like the Apple iPhone 5S, or Samsung Galaxy S 4? How much power should the price of a smartphone play in its success? Do you think 2013 will be the year we see a change in smartphone pricing? I look forward to talking to you all in the comments below!

Images via Pocket-lint and iSuppli.

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39 Reactions to this post

"Would you buy a competitively priced smartphone with similar features over a flagship device like the Apple iPhone 5S, or Samsung Galaxy S 4?"

Please limit your reaction to 140 characters or use comments for a longer reply :)
Thanks for your participation! :)

Nikola Dzoni Tbsd
Nikola Dzoni Tbsd iphone 5 or htc one ? be real please
Jamille Browne
Jamille Browne android is best of both worlds competitively priced and the flagship. iPhone is just over priced garbage.
Jamille Browne
Jamille Browne There will be
Teron Facey
Teron Facey IPhone 5S...I think you mean iPhone 4 same phone to me just half an inch taller and extra row of column my RAZR MAXX HD puts the 4,4S and 5 to shame.
Wilmer Barreto
Wilmer Barreto These guys of can never stop mentioning the stupid iPhone, fanboys, hands down
Recce Carlyon
Recce Carlyon Depends on what the iPhone 5S Offers, besides what Apple is known for. Build quality.
Mark Greentree
Mark Greentree Would never touch an apple phone, but other wise I go with the best on the market. At the moment it's the HTC One, awesome & loving it.
Adrian Salazar
Adrian Salazar I won't cause it probably won't be supported by and i needs to get my cyanogenmod...
Kenneth Maneeley
Kenneth Maneeley Hey since your an evo lover such as myself. Would you like to the the HTC one tweaked a bit? A kick stand. A dedicated camera button. Micro SD card slot. Bigger removable battery and wireless charging capability.and call it the ULTIMATE EVO 4GLTE? What do you think?
Kristopher Davis
Kristopher Davis Nothing other than than flagship HTC products for me...can't wait till the ONE drops, but until then my EVO LTE rocking Sense5 will do :)
Kristopher Davis
Kristopher Davis @Jason Jones..HTC has definitely stepped up with updating time lately. And tbh the portrayal that they have bad updating that people have is wrong. They actually have better updating than Samsung, LG, Sony, and any other Android device. There's multiple write ups about it here's one.
Kenneth Maneeley
Kenneth Maneeley No stick with the flagships! Go lower in phone technology and your below the food chain.
Jennifer Urieta
Jennifer Urieta no
Eric Magana
Eric Magana HTC 8x lumia 920
George Ling
George Ling Yes. I would support n wish to see the pricing of flagship smartphones get controlled in the near future.
Alvaro Sanchez
Alvaro Sanchez iPhone all the way.....
Ken Reil
Ken Reil Note 3...
Jason Jones
Jason Jones I want the HTC One. I currently have the GS3. The only thing stopping me from going One is HTC's updating history. I had the HTC Evo 4g before the GS3 so I love HTC devices, but support is none existent.
Stewart Tan
Stewart Tan My Samsung galaxy note is far way better than iphone. Especially with android 4.1 on the note, iPhone will never be my choice. Samsung and HTC is the top
Mars Ray
Mars Ray My phone is better than yours
Leo Baxter
Leo Baxter I did when I got the Lumia 820 for $50. Had I waited 2 months, I could have had the 920 for the same price!
Mason Fant
Mason Fant I did when I bought my DROID RAZR M!
Adam McWilliams
Adam McWilliams S4
Eric Mitchell
Eric Mitchell What you mean by the a competitively priced with similar features over a flagship device like the Apple iPhone 5S? The phone yet exists.
Lawrence Lepes
Lawrence Lepes I have the Galaxy Note 2. IT IS already better than the Iphone 5S
Michael Balk
Michael Balk Samsung is half a year ahead of everyone else.... competition needs to step up before samsung is everywhere ... I do not own the htc one but it seems to be the closet competition to samsung..... I will be getting the note 3 on tmobile when it comes out I currently use the note 2 and have owned the s3 and the nexus 4 (for a whole day) samsung knows the phone biz
Marwan Ahmed
Marwan Ahmed sure
Yahya Ghanem
Yahya Ghanem change your pro pic
Yahya Ghanem
Yahya Ghanem Gay rights? Gays can kiss my asss!.... Get it! lol
Mark Moreno
Mark Moreno one reasion. build quality.
Emmaretta Aurora Evans
Emmaretta Aurora Evans I would love to get the HTC One, but if it doesn't come to Verizon I may go with a Samsung Note.
Yahya Ghanem
Yahya Ghanem HTC One is a flagship...
Herbert Salamánca Ramos
Herbert Salamánca Ramos But ofcourse.
Lauren Ashley Nash
Lauren Ashley Nash Damn I'm loving the look of that HTC.
Alberto Garcia Flores
Alberto Garcia Flores I didn't know there was an iPhone 5s
Samantha Brown
Samantha Brown girls carry aids
Jeffery Dee Smith
Jeffery Dee Smith HTC
Gary Bollinger
Gary Bollinger I will only buy Samsung nothing else!!!!!
Jaideep Wadali
Jaideep Wadali i only love SAMSUNG :)

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