Sony Ericsson Xperia X1 AU$1,499. 800x480 pixel 3in touchscreen, 3.2 megapixel camera, GPS, WiFi, Bluetooth, 7.2Mbps HSDPA, slide-out QWERTY keypad
HP IPAQ 912c AU$1,499. 800 by 480 3.8in touchscreen, 5 megapixel camera, GPS, WiFi, Bluetooth
XTC Touch HD AU$849. 320 by 240 pixel touchscreen, 3 megapixel camera, GPS, WiFi, Bluetooth, 7.1Mbps HSDPA, QWERTY keypadThis EDN article says iSupply estimated the iPhone 3G BOM (bill of materials) to be US$173 in 2008 and predicted it to decrease to US$148 in 2009. Some of the component costs listed in this article were (in US$)
- iPhone display $20
- iPhone CPU $13.50
- iPhone HSDPA digital baseband $15.00
- RF Transceiver $4.25
- 2MPix digital camera $7.00
- GPS $3.0
Even with the higher resolution displays and cameras on the Australian Windows phones, it is hard to see how BOMs could be more than US$200, which is around AU$300 at current exchange rates. So where does the remaining AU$650 -AU$1,200 in the phone prices come from?
This blog recently looked at the mobile device value chain . Mobile phone manufactures are the "OEMs" in this value chain. They sell devices with software installed and their products comprise
- Components and assembly (BOM)
- Operating system
- Software applications
- Integration, testing, usability.
- Marketing, sales, advertising
Components and assembly should be around AU$300 as mentioned above. The OS is unlikely to cost more than 10% of BOM. That makes the cost AU$330. Therefore the OEMs are charging 30%-110% of the cost of manufacturing, or AU$100 - AU$470 per handset, for software + integration + marketing + support
Considering how alike all smart phones are, specialized third party companies (e.g Wind River and Mobile Complete ) should be able to do integration, testing and support cheaply. It is hard to know what sales and marketing costs are but I will assume they are low for now. All in all it seems that smart phone prices are high compared to costs. Some possible explanations for this are
- List pricing does not reflect actual street pricing.
- OEMs are making big profits.
- OEMs are developing phones inefficiently.
- OEMs are adding a LOT of software to their phones
In a future post I will attempt to determine which of these factors are most important.