Back in 2006, Computer World ran a story which stated.....
The market for ultra-low-cost handsets (ULCH)has taken off. The ULCH initiative then was to get the Bill of Materials for a typical cell phone down under $30, heading to under $20 for GSM phones. TI and Infineon then indicated they were working on chips which would enable that price. The major chips in that case would be the CPU, Radio, and the Power Management IC, with everything else below those item's costs.
Fast forward to 2010, and in Feb. 2010 article in UK's "The Independent" we see....
The sub-$15 Vodafone 150 and sub-$20 Vodafone 250 (ULCH) handsets will make technology affordable for millions of consumers living in third world countries.
Elsewhere, I can find references which basically read...."working with mobile-phone companies to bring down prices for handsets that can handle data, voice and multimedia services to between $30 and $40"
NXP previously advertised a ULCH solution under $20. NXP is now out of that business. Infineon earlier had ULCH phone solutions advertised, the last one being the XMM™1010 GSM system solution based on 2nd generation X-GOLD™101 single chip targeting the Ultra Low-Cost Handset market. The complete modem functionality consists of only 50 components and fits in 4cm 2 PCB area.
Based on all this plus other personal knowledge, I would say that the BOM of the LG larger screen smart phone is not very far from $69.
Iniewski, you might be surprised that the gross margin is more than 50%. Electronic chips can be manufactured with such remarkable economies of scale that they cost so little.
Besides the $49 price tag is integrated into the wireless price plan. With a price plan of $70 as indicated by Frank, there is a few more dollars to be shared between the phone manufacturer and wireless provider.
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 $1879, and either one will work for exactly 2 years!
Taking the latter perspective, how much is screen size, processor speed, camera megapixels, etc. worth to you?
I think the title is misleading. 49$ 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$
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.
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