AAPL Apple Inc

By David Pierce 

I have two phones right now. They're both glassy rectangles with large screens marred only by a big honkin' notch at the top. They have a few small differences -- only one has a headphone jack, only one is waterproof -- but they both last all day with high performance.

One costs twice as much as the other. What gives?

The more expensive of my two devices is Apple Inc.'s iPhone X, which starts at $1,000. The cheaper -- and larger -- model is the $530 OnePlus 6. Apple you've surely heard of. OnePlus is a Chinese company that has been making phones since 2014.

OnePlus doesn't embrace new tech or attempt things nobody has ever seen before. It just tries to make great phones, and sell them cheaper than the other great phones.

In pure bang-for-your-buck value, the OnePlus 6 is difficult to beat. While its specs may not always match what you can get from Samsung or LG, they exceed the "super good" threshold that phones hit a few years back. Even the camera, which had been OnePlus's Achilles' heel, is finally at least good enough.

It appears time to ask the question that has been lingering ever since Apple announced the price of the iPhone X: How much should a phone cost?

High-end, low-cost

The OnePlus 6 feels more high-end than any of the company's previous models, largely because its all-glass body looks and feels like something Samsung and Apple would make. I don't care for all this glass on any phone: It makes big phones even more slippery, and becomes a magnet for fingerprints. Still, the soft, rounded design oozes class.

OnePlus's primary audience is the sort of tech-savvy user who likes big phones with beefy specs: The 6 has a 6.3-inch, 2280x1080 screen. It runs on Qualcomm's new Snapdragon 845 processor, 6GB of RAM and 64GB of memory. You can upgrade to 8GB of RAM and 256GB memory for an extra $130.

It's easy to accuse OnePlus of copying other smartphones. The notch at the top of the 6.3-inch screen does look a lot like the iPhone's. It lets you unlock your phone with either your thumb or your face, similar to Samsung's Galaxy S9, and it has a fast charger similar to Samsung's.

But there are little ways in which it stands out. It has a small, handy switch on the right that shifts from ringer to vibrate to totally silent, for instance. And in an era when headphone jacks are increasingly rare, this one is welcome.

The 6 matches up to other flagship phones in most ways, but not all. It isn't waterproof, for one. OnePlus declined to specify how much water you'll need to kill it, but it can handle splashes, and it survived a dunk in my kitchen sink. I'd also like wireless charging: OnePlus says it didn't include the feature because it charges too slowly, but it's more about convenience than speed. Another issue: OnePlus says the phone isn't compatible with Sprint or Verizon in North America.

The bigger trade-off is the camera. The 6 has a good one, usually capturing clear, crisp photos. But OnePlus can't keep up with all the advanced features other top-tier phones offer. The phone has two rear-facing lenses and can use them to capture soft-background photos, but the results look like a bad iPhone knockoff. Samsung, LG and others can automatically apply filters, shoot awesome-looking slow-mo footage, or even use image recognition to figure out what's in your photo. OnePlus does those things not as well, or not at all.

What you pay for

The cost of all the parts inside a phone -- the screen, the memory, the processor, the motherboard, everything -- is known as the "bill of materials." For the $1,000 iPhone X, analysis firm IHS Markit estimates it at $367.67. IHS hasn't yet tested the OnePlus 6 but estimated last year's OnePlus 5T, which started at $500, at $268.93.

So Apple must be taking home hundreds in profit on every phone and just gouging buyers because it can, right? Yes. But that isn't the whole story.

When you buy a phone, you're helping pay for research projects, software engineer salaries, fancy coffee in the micro-kitchen. You're also paying for often-exorbitant marketing costs -- the "Shot on iPhone" ads you can't miss. OnePlus and other lower-cost manufacturers keep prices low by reducing all those costs. OnePlus doesn't buy Super Bowl ads; it relies on word-of-mouth. And it sells through its own website, not carriers or Best Buy.

"They run a thin operation," says Wayne Lam, a mobile analyst at IHS Markit, "but they have a loyal following." A OnePlus spokesman said the company is profitable, even selling at such low prices.

Still, this approach puts OnePlus at a disadvantage. It isn't in a position to, say, acquire a company that created amazing facial-recognition tech to build the best front-facing camera. It can't corner the market on top camera components by ordering them in outrageous quantities. It also can't integrate its phone with other devices, or build a software platform around it: Apple Music, iMessage and the Apple Watch are all great reasons to buy an iPhone.

OnePlus mostly leans on Google's services, which are excellent, but it isn't invested in creating its own. It can make a great phone but has few ways to differentiate from the long list of other companies -- Huawei, Oppo, Motorola -- doing the same.

In the end, Mr. Lam compares OnePlus and the big smartphone makers with a hot-dog stand and high-end restaurants: The best hot-dog stand in the history of hot dog stands still isn't a fancy restaurant.

I'd certainly recommend the OnePlus 6 over the iPhone 7 or Galaxy S8, because it will probably feel better longer. (Apple's older devices don't always keep up with its services.) The iPhone X, on the other hand, is a better phone. But you have to ask yourself: Is it $470 better?

Maybe you're looking for haute cuisine. Or maybe you're just hungry. Maybe a hot dog -- cheap, easy and delicious -- would hit the spot.

(END) Dow Jones Newswires

May 29, 2018 12:50 ET (16:50 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.