If you're amongst the many people - myself included - that just love to complain about the high cost of smartphones, you've probably used the old chestnut about the massive purchasing power of the manufacturers and how they must be making bucket loads of profit on crappy plastic devices that cost them hardly anything to make and then break so easily. Well, you're right.
A market research firm by the name of IHS has done a component teardown on the Galaxy S5 and come to the conclusion that the 650 USD flagship from Samsung costs about 256 USD to put together. ''Aha!'' I hear you say, ''they are ripping me off!'' Of course they are. Samsung doesn't get an advertising budget equal to the GDP of a small country by selling cheap smartphones. That's Google's job with Nexus devices. Considering a Nexus has similar hardware to many flagships and costs half as much should have given this away long ago.
It's not all bad news though, the actual build costs for the Galaxy S5 are higher than previous Samsung flagships, if that makes you feel any better. According to IHS, previous smartphones from Samsung were more around the 200 USD mark to build with a 600 USD price tag, so at least the S5 is only 60% profit. I'm not sure exactly how accurate IHS' pricing is for the volumes and discounts Samsung would be getting on their components, but it's safe to say that Samsung are rolling around in beds made of money as they laugh their way to the bank for these grossly overpriced chunks of ugly dimpled plastic.
The scariest part is when you think about how much these parts would cost you to repair if you did it yourself. The most expensive component is the display module, which IHS price at around 63 USD. Replacing an S5 display yourself would run you at least double that. The problematic finger scanner costs a whole 4 USD (that probably explains a lot). As an IHS analyst in charge of the teardown said:
“Inside we see mostly a lot of recycled components that we’ve seen before. There’s really nothing special inside where Samsung is pushing the envelope. There’s no breakthroughs, there’s nothing earth-shattering. It’s really just a continuation of what has come before.” - Andrew Rassweiler. Senior Director, Materials & Cost Benchmarking, IHS Technology
And that sounds exactly like Samsung to me.
Did you have a vague idea just how cheap it was to manufacture a smartphone? Do you think the markup up is reasonable considering the warranty, updates and service you get?