Google's (NASDAQ:GOOGL) biggest hardware partner, Samsung (NASDAQOTH:SSNLF), unveiled its latest flagship smartphone, the Galaxy S5, earlier this week. While the intricacies of the handset's hardware and software have mostly been revealed, there's still one major detail that hasn't been finalized: the price.
Samsung's prior Galaxy flagships have been just as expensive as Apple's (NASDAQ:AAPL) iPhones, but if recent reports are true, Samsung could be about to make a drastic change.
A more affordable flagship?
Samsung still hasn't announced an official retail price for its forthcoming phone, which has led to widespread speculation. Various reports (via BGR) have suggested that the Galaxy S5 could retail for as little as $399 off contract. Vendors, however, including Amazon.com, have begun to list the phone for preorder at prices consistent with Samsung's prior models.
Ahead of its unveiling, the Samsung rumor mill, fueled by reports from fairly reputable publications, had set lofty expectations for the Galaxy S5. Samsung's flagship was supposed to raise the bar, with major new features including a metal casing and an ultra high-definition screen.
None of that happened, of course, leading me declare the phone a major disappointment. However, if Samsung does offer the phone at a sharply reduced price, it would change things quite drastically.
Pricing pressure on the iPhone heats up
Around $400, Samsung's Galaxy S5 would be price-competitive with the growing number of cheaper Android flagships. Google's own Nexus 5 (manufactured by LG) retails for just $349 off contract, while Motorola's Moto X can be purchased for $399.
This trend toward cheaper smartphones is somewhat of a concern for Apple, as low-cost, "good enough" competitors could eventually rob Apple of its customer base.
In some developed markets like the U.S. and Japan, it isn't an immediate threat, as consumers continue to rely on carrier subsidies to purchase their smartphones -- most never see the full retail price anyway. Admittedly, this could change, as carriers have begun to push subsidy-free plans. But for now, less than 30% of the smartphones purchased at the four major U.S. carriers are done so with subsidy-free plans, according Consumer Intelligence Research Partners.
More broadly, on a global basis, few consumers have access to subsidies, which is why Google's Android has about 80% of the market. In a place like China, for example, where smartphone subsidies are relatively paltry or nonexistent, a cheaper Galaxy S5 could give Samsung the edge over Apple.
Waiting for pricing confirmation
Until Samsung confirms the Galaxy S5's retail price, it remains speculation. But based purely on the phone's features, the Galaxy S5 is far from a noteworthy release, and could give consumers a reason to consider phones from Google's other hardware partners.
But if Samsung decides to compete on price, and offers up this year's flagship at a sharply reduced price point, it would shake things up quite a bit. While most American consumers, still reaping the benefits of subsidies, would hardly care, it would continue to further the trend of less expensive, Android-powered flagships.
That could make things more difficult for Apple as it looks to expand the iPhone business worldwide.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.