Something to ponder about smartphones

[charby]

Here is a link of what a phone costs to make vs retail price.

https://www.techwalls.com/production-costs-of-smartphones/

[Ben]

Here is a link of what a phone costs to make vs retail price.

https://www.techwalls.com/production-costs-of-smartphones/

Thanks for that. I was always curious, especially for  the vendor "break even" when they do the two year contract thing.

[makattak]

From the article:

The production cost is based on teardown of the device, analysis of specs and information from suppliers. The most costly parts are often the core electronics, display, memory, and camera.

Errr... care to include shipping, advertising, software development/optimization, other overhead?

That's a rather barebones "production cost" estimate there.

[Nick1911]

I wonder how much of that is unit vs fixed cost?

[KD5NRH]

Errr... care to include shipping, advertising, software development/optimization, other overhead?

All rather tricky to define; a lot of advertising is fairly unnecessary, and software optimization is commonly done all wrong.

How many iPhone 10s could have been sold by just including a "10 is coming" splash screen in iOS updates, with no other marketing?

Does anyone with more than two brain cells to rub together really think all the Android-based phone manufacturers constantly screwing with how SD cards are handled is even a remotely worthwhile expense?

[cordex]

Contractually obligated indeed.

[MechAg94]

All rather tricky to define; a lot of advertising is fairly unnecessary, and software optimization is commonly done all wrong.

How many iPhone 10s could have been sold by just including a "10 is coming" splash screen in iOS updates, with no other marketing?

Does anyone with more than two brain cells to rub together really think all the Android-based phone manufacturers constantly screwing with how SD cards are handled is even a remotely worthwhile expense?

On advertising, I would say the same thing about most TV advertising especially since these days most people record shows and skip through commercials.

[Hawkmoon]

Considering that you can buy off-brand Android smart phones on Amazon for $29, and unlocked versions for $49, I don't believe it really costs Samsung $250 to $350 to produce their phones. Are the Samsungs nicer than the $29 phones? Yes, they are -- but we're only talking production cost, not bells, whistles, and tweaks.

[RoadKingLarry]

Contractually obligated indeed.

I was thinking the same thing 

[Brad Johnson]

Why all the angst? Most consumer goods are hideously inflated if you consider only the "production cost".

Brad

[charby]

Why all the angst? Most consumer goods are hideously inflated if you consider only the "production cost".

Brad

many have a longer shelf life than a cell phone too.

[KD5NRH]

On advertising, I would say the same thing about most TV advertising especially since these days most people record shows and skip through commercials.

And a lot of them are for high-brand-loyalty items that people aren't going to abandon their regular brand of just because the competition has a funnier commercial.  I really have to wonder, for example, how many sales Budweiser would actually lose if they never advertised again vs. their marketing budget.

[makattak]

And a lot of them are for high-brand-loyalty items that people aren't going to abandon their regular brand of just because the competition has a funnier commercial.  I really have to wonder, for example, how many sales Budweiser would actually lose if they never advertised again vs. their marketing budget.

IIRC, advertising on things like beer are mostly for capturing new customers, not switching entrenched competitor customers.

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[Scout26]

The factory and the costs to operate it cost money, Labor costs money, shipping the parts in and finished goods out cost money.  R&D, sales overhead,

The story doesn't even begin to cover all the costs associated with manufacturing smart phones.  Especially when you consider all the functions included  in one hand held device.   At under $500 it's one of the best bargains in human history.  And if you don't need the latest and greatest, they can be dirt cheap on the reconditioned market. I paid $60 for my Kyocera.

[MillCreek]

And a lot of them are for high-brand-loyalty items that people aren't going to abandon their regular brand of just because the competition has a funnier commercial.  I really have to wonder, for example, how many sales Budweiser would actually lose if they never advertised again vs. their marketing budget.

I do love the commercials with the Clydesdales, but that still does not get me to drink Bud.

[KD5NRH]

IIRC, advertising on things like beer are mostly for capturing new customers, not switching entrenched competitor customers.

Mailing coupons to frat houses seems a lot cheaper, and that's where most of their new business comes from anyway.

[charby]

Mailing coupons to frat houses seems a lot cheaper, and that's where most of their new business comes from anyway.

The fail with that is many are becoming dry houses.

[MechAg94]

I was thinking more about the vast number of Chevy commercials I have seen this year.  If you are in the market for a new truck, are you going to skip over Chevy/GMC because you haven't seen a commercial lately?  Back when they were threatening to go out of business, I remember hearing their annual advertising budget was a good chunk of the money they owed and I wondered why they didn't cut back advertising.  It isn't like everyone would forget about their trucks if they stopped running ads for a couple years.  Or maybe just cut back to just radio or other less expensive advertising. 

[Firethorn]

Looks like a profit margin around that of Jewellry.

Also, the profit margins on a lot of stuff from China is actually pretty similar.  They aren't passing the savings off to you, well, some of it is eaten by increased returns, advertising, and such.

That's why harbor freight and amazon can offer free shipping on so much.  Especially for high value high density items.

[cordex]

Companies with large, long-established brands can surf on that for a little while, but ultimately advertising works. If it didn’t, companies would drop it as soon as they could.  I work with a company that does mail campaigns for businesses - especially restaurants. Even when they can demonstrate from the clients' own numbers a consistent net 2:1, 4:1 or even 6:1 ROI it can be hard to get them to maintain budgets. They really don’t like spending the money, but when they don’t maintain campaigns their numbers take a huge hit and they come running back.

Could Apple launch a new phone with a minimalist campaign, or Chevy skip a year of ads?  Sure, but sales would almost certainly be significantly weaker, and almost certainly would result in lost net profits.

As far as profit margin, take a look at clothes sometime. The unit markup on that industry is enormous.

[RevDisk]

60% margin on BOM and manufacturing is actually pretty slim. Software development, backend IT support (ie the cloud stuff), warranty, QA, R&D, logistics, compliance, legal teams and every other ancillary cost add up quick. I'm guessing they make a decent but not supreme profit off the phones, and make their bank off accessories. Just like everyone else.