What's Behind Google's Nexus One Price Tag Beyond Marketing
- by Laurie Sullivan @lauriesullivan, January 13, 2010
Sales during the week of the initial launch of Nexus One probably didn't go as well as Google had planned, but maybe at the least consumers will feel as if they bought a solid device.
About 20,000 Nexus One units sold in its first week -- a number that paled in comparison to the Android-based myTouch at 60,000, the Droid at 250,000, and the iPhone 3 GS at 1.6 million during the same period, according to estimates from mobile analytics firm Flurry.
Google's new direct-to-consumer sales model had an impact, the analyst firm notes. The no-contract $529 price tag, launch after the holiday season, and unusual approach to trickle out information about the phone on the Internet probably also contributed to soft sales. Consumers could always pay $179 with a two-year service contract from T-Mobile.
Since the phone went on sale, Trip Chowdhry, managing director at Global Equities Research, estimates Google sold about 30,000 as of Jan. 11. His research indicates the demand for Nexus One is high overseas, and consumers are buying multiple phones for friends. A faster processor, AM-OLED display and Android 2.1 operating system are some of the reasons why.
Nexus One, manufactured by HTC, includes many emerging smartphone innovations in one product, according to research firm iSuppli. A teardown by the El Segundo, Calif. company reveals that Google's Nexus One cost $174.15 to manufacture based on a preliminary estimate of hardware and components. The estimate does not take into consideration other expenses, such as marketing, manufacturing, software, box contents, accessories and royalties.
But if Google wanted to traditionally market the Nexus One, it could mention a few innovations other than the applications it loads on the phone.
At the heart of the Nexus One is Qualcomm Snapdragon baseband processor, about $30.50 each, which sports 1GHz clock speed, according to iSuppli. This processor gives the Nexus One some advanced capabilities, most notably high-definition 720p video playback. Android developers might want to know the speed when designing a marketing campaign for consumers who use the phone. The phone also has a 3.7-inch AM-OLED display from Samsung Mobile Display that costs about $23.70 for each phone.
The dual microphone design used for cancellation of background noise is also featured in Motorola's Droid, according to iSuppli. To implement the noise cancellation function, the Nexus One has a special audio voice processor chip from Audience Semiconductor. The research firm says it's the first time its teardown analysis team service has come across a part from this manufacturer in any electronic product.
Other components include Samsung Semiconductor's Double Data Rate (DDR) DRAM, employing 4Gbit; and a touchscreen from Synaptics for about $17.50 for each phone.
Since you are comparing phone sales across networks, have also have to considered it's not the phone. Simply, Google might have backed the wrong network?
Their is a finite amount of times people are willing to move from carrier to carrier to chase phones. Contracts and plain hassle are hurdles T-mobile is going to have to overcome.
Since the Iphone, and other Droid phones have popped up on other networks, the "tech nerds" have been pulled into recent contracts on their current providers. I image only a small percent of "gadget guru's" out there have waited for this phone with all the other options on the market right now.
How can T-mobile get people to switch is the real question.
And if the consumer needs help from Google, who are they going to call, Ghost Busters?
"Google's Nexus One cost $174.15 to manufacture based on a preliminary estimate of hardware and components. The estimate does not take into consideration other expenses, such as marketing, manufacturing...."
So that's what it costs to manufacture but the price doesn't take the cost of manufacturing into account?