Why Are Smart Phone List Prices so High in Australia?

This article from The Australian IT gives the following prices for the following Windows Mobile phones

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 keypad 

This 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$148 in 2009. Some of the component costs listed in this article were (in US$)

1. iPhone display $20 
2. iPhone CPU $13.50
   
3. iPhone HSDPA digital baseband $15.00 
4. RF Transceiver $4.25 
5. 2MPix digital camera $7.00 
6. 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

1. Components and assembly (BOM)
2. Operating system
3. Software applications
4. Integration, testing, usability.
5. Marketing, sales, advertising
6. Support

This makes up the prices that sales channels pay. Distributors and retailers will mark up these prices to get the retail prices for the three phones listed above. Dealer markups of ,say, 50% would give dealer pricing of   AU$430 - AU$800 for the three phones

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

1. List pricing does not reflect actual street pricing.
2. OEMs are making big profits.
3. OEMs are developing phones inefficiently.
4. 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.