There is no cellphone more anticipated this year than the next generation of the Apple iPhone. But for some high rollers, the ultimate iPhone is a diamond-encrusted version from London jeweler Amosu. At 20,000 pounds ($39,600), the creation ranks among the world's most expensive phones.
Even a $40,000 iPhone seems tame compared with the 8800 Arte from Austrian designer Peter Aloisson. The luxury Nokia (nyse: NOK - news - people ) phone is posh to begin with, featuring designer ringtones and wallpapers and an 18-karat white gold finish. Encased in more than 680 pink and white brilliant-cut diamonds--sparing only the screen and slide-out keyboard--the embellished phone is a marvel. And, at 85,000 euros ($134,000), it's also the price of a college education.
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These super high-end cellphones are a fascinating anomaly within the cellphone industry. While handset makers like Nokia, Samsung and Motorola (nyse: MOT - news - people ) churn out millions of $40 phones for developing markets such as China, Russia and India (see "Cellphones Your Wallet Will Love"), smaller firms like Amosu and Peter Aloisson focus on serving a much smaller population at the other end of the market.
It's a trend that shows no signs of halting. Fashion firms and automakers continue to show interest on the designer side. Last week, Christian Dior (other-otc: CHDRF.PK - news - people ) unveiled a $5,000 phone that resembles a sleek cosmetic compact. Watchmaker Tag Heuer is coming out with a $6,000 phone with a crocodile leather back. Porsche (other-otc: PSEPF.PK - news - people ) and Lamborghini have phones. Ferrari collaborated with Vertu, a U.K.-based luxury phone manufacturer owned by Nokia, on a special-edition phone last year.
Luxury firms say the steady march of cellphones across the globe is further expanding the market by popularizing the notion of luxury phones. "Mobile phones are becoming more and more an object of desire for people," says Alberto Torres, president of Vertu.
So what does a multi-thousand-dollar phone have that a $100 or $200 phone lacks? In the case of Vertu, whose phones range from $4,000 to $300,000, the difference begins with materials. Its handsets are crafted using scratch-proof sapphire glass screens, titanium frames, ruby bearings (for minimal wear and tear), fine leather and, in some models, gold and platinum.
Design inspirations are similarly highbrow. The brand's "Signature" line features details from jewelry and watchmaking. Its "Ascent" line is based on luxury automobiles and incorporates carbon fiber and rubber. (Torres uses a red Ascent handset.) Vertu's newest phones, the "Constellation" line, are meant to evoke images of classical aviation.
Then there is the painstaking construction. Though Vertu phones incorporate Nokia technology, they are developed and manufactured separately. Some models have more than 500 mechanical pieces, all assembled by hand in Europe. Torres compares the process to that of other luxury goods, such as cars, watches and handbags.
The phones are manufactured with longevity in mind, both in terms of tough construction and classic design. Vertu tests some phones by running a car over them. The goal, says Torres, is to make the phones functional for 20 years, even if users are likely to swap phones long before then.
The combination has attracted high-profile fans, such as former Ferrari Chief Executive Jean Todt, Beyoncé, Gwyneth Paltrow, Catherine Deneuve and Michelle Yeoh. Strikingly, most of these people shelled out money for their Vertu handsets. "We are very careful about gifting phones," says Torres. "We think it's more important that people buy into the brand and have a commitment to it."
According to luxury phone firms, plenty of people can afford to buy their wares. Vertu had triple-digit growth in 2006 and 2007 and is now in expansion mode, opening more stand-alone boutiques, including its first U.S. shops, in the Wynn Las Vegas and Plaza (New York) hotels. Despite a slowing economy, Torres says, the U.S. is the brand's fastest-growing market.
He thinks luxury phones will eventually ring up billions in sales. But some luxury analysts say upscale cellphones and other electronic gadgets will never be as popular as designer watches, handbags and cars. The rapid pace of innovation in cellphone technology means phones don't appreciate in value the way a Rolex does, notes Pamela Danziger, a luxury marketing expert. And phones, which most people carry everywhere, but rarely secure to their bodies, can be easily lost or misplaced, making them risky investments, she adds.
"It is a very, very limited market," says Danziger.
The two exceptions, she says, are young men, who are increasingly forgoing luxury watches in favor of using cellphones to tell time, a habit that could make them more receptive to spending thousands on a phone. The other: wealthy people she calls "exfluents" (or "extreme affluents"), who "go for the best of the best in everything they purchase."
In the end, as with any extremely expensive accessory, buying a $10,000 phone isn't about logic. Torres compares luxury phones to vintage Ferraris. "They might not last forever or have the latest technology, but they're beautiful things to drive."
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