LG slashes Android phone to $49

10/7/2010 3:21 AM EDT

This is interesting, 49$ is way to cheaper than mobiles costing 200$+ from samsung. Smartphones at the price of regularphones. I guess this will lead to a new fight between Samsung and LG and will force the samsung to reduce its price. I wonder why did i pay 220$ for Samsung Galaxy :).

10/7/2010 12:07 PM EDT

With $49 sell price I wonder how much money is allocated to electronics. Considering 50% Gross Profit margin it seems BOM should be less than $25. Not much for a bunch of ICs, PCBs etc. I would not want to be a supplier to LG, my margins would be non-existent...Kris

10/7/2010 2:04 PM EDT

$49 is the subsidized price. What's the true cost. If they can really build it for $49, then this beats the one laptop/child budget. They should just hand these out with a bluetooth keyboard.

10/7/2010 2:39 PM EDT

smaller display, slower response, less money. Makes sense to me...

10/7/2010 2:46 PM EDT

My impression is that these wireless carriers make most of their money on the monthly service, not the phone purchase itself. So the purchase "price" of the phone when the subscriber signs up for service doesn't really mean a whole lot in the end. Going with that, as a wireless user, I would gladly pay a $50 additional one-time fee to have a nicer device to use everyday.

10/7/2010 5:25 PM EDT

$49 is really a very competitive price or I would say its cheap for the features it offers. I would be curious to know are they making any money with that pricing or just for competition.

10/7/2010 5:28 PM EDT

I guess the base cost would be $49. there would be additional fees for internet plan.

10/7/2010 7:33 PM EDT

According to research, most consumers are still price sensitivity. A $49 smartphone will likely help to popularize Android based smartphone. Will the performance hurt the brand though? I can't wait to see the overall quality of the product.

10/7/2010 9:38 PM EDT

I think the title is misleading. 49$ is the price when you signup for a 2 year contract. i.e subsidized by Sprint, for the monthly fee you pay. If purchased without a contract it could be priced at ~300$

10/8/2010 3:11 PM EDT

Certainly lowering the price for these smart phones will help the Android market. Now if the service provides would just do a better job advertising the app/media stores...

10/8/2010 4:13 PM EDT

Cell phone math is kind of funny...and consumers are terrible at calculating the true costs of the things they finance, on which they make monthly payments.

Sprint's 'everything' plan is $70/month, so a 2-year contract is actually a commitment to spend $1680 on wireless service. Now add the cost of the phone -- a low-end Android smartphone for $49 brings your total cost to $1729, while a high-end Android smartphone for $199 brings your total cost to $1879.

One way to look at it is that the low-end phone is worth 3 weeks of service, and the high-end phone is worth almost 3 months of service.

Another way to look at it is the low-end phone costs $1729 and the high-end phone costs $1879, and either one will work for exactly 2 years!

Taking the latter perspective, how much is screen size, processor speed, camera megapixels, etc. worth to you?

10/8/2010 5:33 PM EDT

@Frank: Nice work on the math!

10/9/2010 8:54 AM EDT

Does anyone know the respective costs (roughly) of smartphone components: display, chipset etc. ?

10/9/2010 10:02 AM EDT

$49 for a 2-year contract. What should be the price without contract?

10/9/2010 6:42 PM EDT

As always, the hardware becomes a commodity and service sells. It is very strange how the hardware firms destroy the market. It rarely happens in software. By next year, the price comes down to $39.

10/9/2010 8:11 PM EDT

In reply to goafrit and KB3001:

I was once told, in all seriousness, by the procurement manager of a major PC maker that they would only pay 10% over the cost to manufacture an IC. They had spent considerable effort to understand IC manufacturing cost per die....and figured they could enforce their rule just because of the market position they held.

I told them they would not have a supplier from our company, and probably not many others with that rule in place. It seems they want $$$ for their engineering and R&D but were not willing to pay for their supplier's engineering and R&D. They have since been acquired.

Unfortunately, this type of attitude by OEM's, as well as the attitude and necessity to keep IC capacity as full as possible, leads suppliers to drive IC costs down. And...major OEM's always insist on second sources for key devices, which are then played off each other to drive prices down further.

I don't really see this trend changing for commodity, or even some application specific parts, used in high volume. Part of the reason for it is that non-US IC makers who will work with smaller margins are eager to try and fill any supply gaps created by other IC makers trying to raise margins.

I have even know some off shore suppliers to deliberately buy into the market with low prices in the beginning to carve out a niche product area from a US maker, who shortly afterward, abandons it.

This is not to say you cannot raise margins and keep customers. You can..over time, but only with a continually cultivated, close, and necessary relationship with your customer base that includes your best in engineering and R&D, as well as volume, trouble free manufacturing and delivery. The real problem being solved is ultimately the customer problem, and in doing so, the supplier problem gets solved.

Those companies that do this well will survive.

10/10/2010 12:21 AM EDT

That price point sounds more like a play to try to get some market share in an already very crowded market than anything else. As Frank pointed out, the price differential to the consumer over two years is almost inconsequential. However, if the cellphone manufacturer isn't sharing in that, where does that leave them?

10/10/2010 11:29 PM EDT

Aha, so LG finally thinks it needs to be in the Android game now dominated by HTC and Samsung. They are gambling by throwaway a few million $ and see how it pans out. The thing about Android phones is that they need very good response time to be appreciated and if all LG is doing is dumping android stack on cheap hardware without caring for end user experience then they are harming themselves.

10/11/2010 8:42 AM EDT

Cell service pricing is little less than predatory. Consider Big V. A phone can be "free". Like lunch, I suppose. But what goes on? The cost of the glorified walkie talkie is amortized in the various monthly costs, and locked-in by the outrageous early termination fees. How else could Big V offer a "free" phone every two years?



OK. That said, the best strategy is to replace your handset every two years. Batteries strangely seem to last about that long, and it's not trivial to find new ones that are actually new, and not "reconditioned" (what does that mean, anyway) or just old stock.



I used to use a Palm Pilot extensively. I picked up a Palm Centro on V, and combined two functions. Wasn't as good either a dedicated phone and dedicated Palm Pilot, but I managed.




Now comes the killer. The Centro is 2 years down the road. There's no replacement, at any cost, that doesn't require either a $9.99 or $29.99 "data plan". I don't want a "data plan", but tough.



Why, oh why, can't I just pay as I go? Despite the reasonably decent connectivity that I have had with Big V, I may just dump it all and go with some cheap-o outfit.




$49 for an Android, indeed.

10/11/2010 10:50 AM EDT

I just had the pleasure of helping two relatives who just bought the LG Ally phone from Costco (they have it prices at $0.01 with 2-year contract). I was surprise at how well it ran. The Droid operating system ran very well, even though it was a slower processor than current state-of-the art. Apps all ran a bit slower but than my HTC Incredible, but if you did not have a comparison you would have never known. The hardware is designed for a slower price, smaller screen, slower processor, lower res camera, much smaller memory storage, etc. but ran pretty well. It has the slideout QWERTY keyboard, which many older generation first-time non-tech people seem to favor, but also the touchscreen keyboard. Software was also a bit lacking in comparison, but OK for this phone. One unusual software problem was the lack of ability to change the number of rings before the caller went to voicemail. Only way to change it is to bring it to the Verizon store... Not so great....

I believe we are starting to see an attempt to lure in those non-smartphone users away from their regular phones by competitively pricing a lower-end phone that is no longer state-of-the art. Most new smartphone users will be thrilled with this phone, if for nothing else the ability to have apps through the Google Marketplace and not have to buy am iPhone.

10/11/2010 11:07 AM EDT

Smartphones should be priced lower. My HTC incredible cost me $150 as an upgrade, but Verizon wrote it as $599 with a discount. iSupply prices the phone at about $160 in parts so there is clearly some dishonesty going on here. Most phones sell for $199 and lock you into a $40 voice plan and a $30 data plan at a minimum. This made some sense when they actually cost 600 to make, but now they don't and the customer does not see any of that benefit. If a customer does not see any benefits from a drastic decrease in costs, then there must be severe lack of competition, i.e. collusion.

One of the worst things that happened recently was the failed experiment of the Nexus One. Had this phone been offered at a reasonable price instead of at the fake price Google's partners are selling the devices, then maybe there would be more of a market for no contract services such as Metro PCS. Instead the industry can just claim that the customer does not want a contract free smartphone.