What makes a phone expensive?

just looks at galaxy a70 and asus zenfone 6, a70 will be $649 and will have 6'7 oled (probably most expensive component of a phone and i like huge screens). the asus doesn't have price yet but has SD855 and 6'4 screen. the a70 seems way better bang for buck than s10+ which is only 6'4 oled and $1.5k at release. are the cpu/memory worth that much? obviously only comparing AU models not cheap chinese flagship greys with no gst and selling at a loss. sorry if this is off topic im phone noob.

Comments

  • +53 votes

    The Apple brand.

    • +19 votes

      You mean: people who are willing to pay.

    • +2 votes

      Came here to say this too!

    • +3 votes

      Interesting that this turned into an anti-Apple thing when OP did not even mention Apple. Fandroids are so insecure.

      • +4 votes

        I'm not sure you could just broadly lump this into an anti-Apple thing. Actually, I'm not seeing anti anything here, so not sure where you're getting that from.
        I'm an Android user, but I also have an iPod, so I'm probably biased, but maybe not as much as some.

        The way I see it is Apple have their brand and it's expensive. A lot of people associate expensive with luxury and quality, even if it's not always so. Regardless of where your affiliations lie, to compete with that you have to do something similar, or offer a 'viable' alternative in the eyes of the consumer. So even if it doesn't cost as much to make your product (it might, I don't know), to compete with gigantic brand A, you have to place yourself in the same ballpark. So of course your flagship model is going to cost an arm and a leg if you're competing in the same market. You are pricing out a lot of people, but you've got the 'I must have this now' crowd and you can probably make up any difference in the lower tier markets.

        Anyway, vote with your wallet and your head. Be happy with what you choose and don't place too much importance on the status of your electronic device, odds are you'll be replacing it pretty soonish anyways (unless you're still rocking your Nokia 5800 - damn that was a great phone!).

        •  

          Exactly right, Reason why phones got so pricey and went above the 1k and now 2k mark is due to the Apple phones deciding to constantly increase their prices. The other big brands had to follow suit for their flagships to make them look like they are on the same tier / quality and also because they figured if there were enough crazies to spend 1.5k on a phone then why not cash in on them.

          • -2 votes

            @lonewolf: Lol fandroids will literally make out everything is Apple's fault. Global warming? Apple. Flesh eating bacteria outbreak? Apple. George Pell's sexual assaults? Apple.

            •  

              @lunchbox99: If you have an intelligent rebuff of above explanation/theory we'd love to hear it.

              •  

                @AncientWisdom: Rebuff what? Someone posted a thread asking about the price of Samsung phones. You seem to be suggesting Samsung is ripping you off by artificially inflating their prices? If so, I agree with you.

                What OP didn't ask is why Apple phones are expensive.

    •  

      What does that have to do with the S10+ the OP mentioned?

  • +73 votes

    high end phones costs 300 to make

    but then you have millions of RnD to recoup

    RnD costs like, removing headphone jack, removing SD slot, removing fingerprint scanner, design non-replaceable glassback , design proprietary nano sim slot, etc.

    • +1 vote

      Money well spent ;-)

    • -18 votes

      This is a myth created by big business to justify high prices.

      Most R&D gets done in universities and is then licensed for use.

      • +5 votes

        But they have to pay for the license don't they? So that's the R&D cost?

      •  

        They still have to design the phone and write the software. There's a lot of work that goes into it, I suggest you give it a crack and let me know how it goes.

      • +1 vote

        All of the top three phone manufactures design their own CPUs. It is often argued that Apple has faster CPU's than Intel at the same power.

        Two of the top three phone manufacturers can also manufacture their CPU's on their own leading edge process. Samsung even licenced their fab tech to Globalfoundries. Their are 5 leading edge CPU fab companies I know of. Two of them exist 'just' to provide phone parts to their parent company.

        All the public research in the world didn't help Apple with Antennagate. Intel has had speculative execution issues for around two years now.
        These errors can only exist because all the development part of R&D occurs in house at the technology provider, not at some university.

        •  

          Tbh I think samsung’s Exonys chips if Samsung just use it for all this rphones instead of slowing it down to accommodate the slower sd chips, then Samsung phones will be a lot faster now

          •  

            @dsw460p: based on this the exynos seems to be underperforming compared to the s855 by quite a bit.
            https://www.anandtech.com/show/14031/samsung-galaxy-s10-firs...

            I don't think it makes much sense to slow it down so much. its more likely that samsung's exynos chips just aren't good anymore compared to s855.

            •  

              @keishton: Previously on 10nm, Exynos were a lot better, but now Exynos is 8nm while sad855 is 7nm, makes a huge difference in terms of performance, if Exynos is 7nm then it is much faster. Also singed you are releasing same phones but different chips in different markets, don’t you have to make phone performance approximately the same otherwise good luck with customers complaining that they got a shitter version of same phone due to their region.

          •  

            @dsw460p: From memory it is Samsung's sub optimal translation lookaside buffer bottle necking their excellent APU's.

            Anandtech blamed software. It was their conclusion. AMD had the same problem with Bulldozer. Intel's slow IPC increase has more to do with a lack of recent innovation in TLB than a slowing of node shrink (thanks to their constant wave of speculative execution problems.

            APU's are tiny. Look how small the cores (which include the APUs) are in Intel's latest quad cores(Icelake overview).

            Apple, Samsung and HiSilicon (Huawei) all use ARM cores. Apple is only so far ahead because they bought Intrinsity, which specialised in IP that feeds ARM cores (Samsung's older, when new competitive, Exynos chips licensed the Intrinsity IP if I recall correctly).

      •  

        So you either think the actual software and hardware (both electronics and mechanical) design/layout are either done in a university, or for free.

        Please pass whatever you're smoking.

    • +1 vote

      you forgot to mention the profit margin part

    • +6 votes

      Those features drive behaviours in people, who may decide to pay the extra $. That doesn't mean that the features are actually worth that much.

      In all purchases, not just phones, the perceived value is with the buyer only. The sellers will charge as much as they can.

    • +11 votes

      How many people do you really think buy Apple for those reasons? They buy Apple because its Apple and they think its cool. I guess it was, in 2007.

    • +8 votes

      I think they also spend more money polishing their features and services than Google does

      Are you sure about that? It takes me about 10 tries speaking very clearly to get Siri to do something, but ok google can understand that same sentence straight away when I’m mumbling.

    • +1 vote

      Apple also don't orphan your product after 12 months. iOS 12 supports the iPhone 5s, which was release in Sept 2013.

  • +2 votes

    R&D, the expense of buying and/or manufacturing OLED screens, the cost of producing or buying the chip on the phone (and again R&D associated with that), the cost of memory, storage, camera.
    Overhead if they have a store presence, marketing, etc.
    If in Aus some of the cost would be for things like warranty, complying with local taxes and whatnot.
    Some certifications they have to pay to earn (e.g. IP67/68)

  • +12 votes

    Greed Courage

  •  

    The brand

  •  

    Just on the top of my mind I'd say brand, R&D, sales, increase of wages, building costs, factory costs, excess supplement money incase of issues (like the note and the fold) and probably one of the biggest is appetite for a person to purchase a product (or basically how much can they charge before it turns too many people away).

    If a company can charge more and know people will pay for it, they definitely will.

  • +10 votes

    Prices are artificially high and whatever the market will bear. The internal complexity hasn't changed much over the last 10 years and would be getting cheaper to manufacture.

    • +1 vote

      whatever the market will bear

      Yes, but the complexity has increased - they're now doing things like burying parts inside layers of the PCB, which requires seriously expensive CAD tools and manufacturing processes. Fingerprint sensors behind the screen sound like a fun (expensive) R&D adventure. Also, I do not envy the people designing 5G parts at 60GHz.

      • +4 votes

        all of that stuff is evolution. you could almost say that complexity has decreased, because they are now building off solid platforms they developed in previous years. r&d always takes place, and they arent reinventing smartphones every year.

        costs will fluctuate, but it's kinda silly to say that the current product is more complex, and therefore more difficult and expensive than previous products. todays r&d builds off yesterdays.

        you might not wanna be designing 5G parts today, but would you rather be developing 3G parts 15 years ago or whenever that was? would it make any difference? I think if anything it would be even harder, because you'd be missing out on the last 15 years of supplementary tooling and systems improvements that would benefit design at any stage of development

      • +1 vote

        OK, a couple of years ago Apple sold around 220 million phones a year and the R&D budget was about $15 billion. Around about $70 per phone in R&D. At a guess, maybe about the same or less for manufacturing capital improvements. It's a not a lot for the expensive phones and distributing costs across 200+ million. Materials and actual manufacture for the top end? $300-$400. Advertising $10-$20.

  •  

    S10+ can be bought for a more reasonable ~$970. obviously a high profit margin but when you're at the top you can charge a premium.

  • +4 votes

    You're only looking at it from a materials perspective. People underestimate the cost of R&D.

  • -1 vote

    Tax & labors

  • +4 votes

    Marketing and advertising costs
    Executive pay which usually goes in to the millions

    At the end of the day these would easily surpass the cost of manufacturing the phone.

    •  

      Yeah, but Domino’s ceo pays himself 30 million a year and still sells pizzas at under 15

  •  

    From my part, I believe the high device cost comes from R&D and cost of components as ‘mobile’ technology has joined conventional (desktop) technology at the forefront of development.
    A few years ago if you wanted the best and most up-to-date consumer device, you were looking at a desktop computer. Things have changed and there is a very large market for small / portable technology therefore a lot of the market is creating demand for ‘the best performing & most up-to-date’ components in small mobile form.

    Soon the portable efficient battery powered technology will probably be in higher demand & out perform desktop architecture (thanks to advances & optimisation), and I think this is where we are headed.

  • +5 votes

    It's just brand. Ignore RnD, Marketing, advertising, etc.

    If a company charge you more because they invest more money in RnD, Marketing, advertising, etc., the profit margin for each phone would remain the same throughout the years. When it earns more money even though it's selling less phone, means the profit margin for each phone has increased. So it's just branding.

  • +4 votes

    Q: What makes a phone expensive?
    A: marketing

    If only all human stand together and refused to buy a newly released product at premium prices. Someone need to punish those corporations taking big profits.

  • +1 vote

    what makes anything expensive.

    why is a LV wallet expensive

  • +1 vote

    RnD costs like phunkydude said. For example, see this article

    https://www.anandtech.com/show/13277/globalfoundries-stops-a...

    I think it said there's only 3 companies that manufacture high end silicon chips, and globalfoundries has never actually made a profit

    "Meanwhile, having spent well over $20 billion on GlobalFoundries over the last 10 years, Mubadala, the owner of the company, is not inclined to lose more money or invest tens of billions in the hopes of becoming profitable one day. The investor wants GlobalFoundries to stop bleeding and start generating profits."

    It's getting more and more expensive to shrink the size of a transistor, the process that has been driving the increase we see in computer performance and efficiency

  • +1 vote

    80% Brand. 20% Components. Could be closer to 90/10 split for high-end flagships

  •  

    I like being able to go to the apple store and have them fix my phone (usually for free) if anything happens to it. It's been a godsend numerous times for my entire family of iphone users.

  • +1 vote

    The Price Tag

  • +11 votes

    just looks at galaxy a70 and asus zenfone 6, a70 will be $649 and will have 6'7 oled (probably most expensive component of a phone and i like huge screens). the asus doesn't have price yet but has SD855 and 6'4 screen. the a70 seems way better bang for buck than s10+ which is only 6'4 oled and $1.5k at release. are the cpu/memory worth that much? obviously only comparing AU models not cheap chinese flagship greys with no gst and selling at a loss. sorry if this is off topic im phone noob.

    Like with anything else, it's the fact that a market exists for those goods.

    You could ask the same question about any industry. Why is a Mercedes more expensive than a Toyota? Why is Ralph Lauren more expensive than Target? It's no different with phones - aside from the increased costs of a flagship (which I'll talk about below), part of it is the fact that it's a status symbol for those who can afford it. There's nothing inherently wrong with this, phone manufacturers are in the business to make a profit and they do have significant sunk costs (e.g. R&D) they need to amortise. You could even make the argument that the reason why they can offer more budget phones is because of the trickle down features from the flagship devices and the subsidisation of some of the most expensive sunk costs associated with producing phones. (Source - I was an economist in private industry, not phone manufacturing, but the idea of using expensive products to subsidise cheaper products is almost universal in any industry).

    In regards to the specific breakdown of the parts in general - yes, the CPU/RAM are both quite expensive, especially given that most Android manufacturers are buying them from 3rd parties (e.g. Qualcomm) and Apple spends quite significant amounts on development of their in-house silicon. You're also not being quite fair on the Galaxy A70 vs. S10+ - the panel on the S10+ is a much higher quality panel than on the Galaxy A70, higher resolution (and I would hazard a guess) better colour reproduction and brightness. There's also many other factors like build quality, materials, IP certification…etc. which all add to the costs.

    Basically, there's no real point in trying to understand why more expensive products cost more by breaking down its parts - as an economist, I think cost breakdowns (of the type they do in those mainstream tech publications) are meaningless because they don't take into account a huge number of costs. Sure, it's a great headline to say an iPhone "costs" $250, but what about the hardware engineers, the software developers, the marketing costs, the testers, the management costs, transportation and logistics, R&D, after sales support…etc. If you don't think the S10+ is worth the additional amount over the A70 (and I generally agree with you), then you should get the A70 - that's why the options exist.

  • +2 votes

    Apart from the stuff already mentioned above/marketing higher end phones also have larger profit margins to subsidise cheaper more inexpensive phones to drive volume or generate market share.

    Budget brands sacrifice the large profit margin to gain market share and brand awareness. Personally i do enjoy budget xiaomi seven if their cameras aren’t as great as flag ships but they offer exceptional value

  •  

    research and development, I imagine.

  •  

    Each new model of phone is just that little bit smarter. This costs money. I reckon most people would pay a tidy sum if the could up their IQ by five points every couple of years.

  •  

    At the high end, it's mostly the market correcting itself to what people are willing to spend. That's the reason I suspect flagship phones are x1.5-x2 the cost they used to be (and you can see that Apple probably pushed prices too high judging by their phone sales in the last year). Companies try to guess what that figure is, and then invest accordingly in the phone development and marketing, leaving them (hopefully) with a healthy profit margin.

  •  

    Court cases alleging patent infringement are expensive.

  • -1 vote

    Socialism for the rich (Share holders) , capitalism for the poor ( customers )

  •  

    After sale service (ie Apple Genius Bar) is also one of the costs to be considered

  • +3 votes

    I like that a bunch of people went off on their Apple rants when the OP never mentioned iPhone.

  •  

    It's not just in phones, look at appliances for a example. Miele V Omega for an example, whilst Miele is is a better build quality out of Germany, Miele spend a lot on R&D, have lots of technology that helps repair the unit for a repairman etc.

  •  

    Marketing

  •  

    Why is a Prada bag expensive? A fool and their money are soon parted

  • +3 votes

    People make it expensive.

    Willingness to pay top dollar for flashy looking brands which effectively do the same thing as the mid/lower market tier phone. More demand controlled supply = top $$$.

  •  

    Nokia 8210

  •  

    will have 6'7 oled
    6'4 screen
    6'4 oled

    Whoa! That's so cheap for such a massive screen. But why are they using TV screens in these phones? It's so impractical, you'd need a trolley to move these phones around. Surely you'd just hang these from your lounge room wall as a cinema screen? /s

    Oh how cute, the millennial meant to say it's a 6.7" OLED, and not "6 foot, 7 inch". :P

    You use the prime symbol to denote feet and the double prime for inches. You do not use the prime symbol as some sort of "decimal separator".

    Source: crusty old fart, get off my lawn!
    And: https://en.wikipedia.org/wiki/Foot_(unit)#International_foot

    :)

  •  

    R&D, manufacturing, logistics, tariffs, disti & supply chain margins…

  •  

    It's not cheap to ship all those rare metals from African slave labour mines to China and then to your local store, ya know.

  •  

    How much people willing to pay for it makes the phone expensive.

  •  

    Weak AUD

  •  

    Might be worth looking at what happens with the recent US tariffs on Chinese imports, which might affect Apple products. It will be interesting to see how much gets passed on to the consumer.

  • +3 votes

    Flagships get the latest parts with the lowest yields and the highest risk of failure. Early adopter tax funds R&D, marketing, warranty of risky parts, failed products, other mistakes (Note 7) and profit.

    For example, Samsung soft launched their Galaxy Fold, but had to delay the physical launch as even at $2000USD they could not afford to support it's warranty at projected failure rates.

    It's not unusual for a manufacturer to pay a supplier a large sum to build capacity for the manufacturer. This parts expense is largely ignored in part tear downs.

    So flagships cost so much because they are paying for factory upgrades, paying for the parts that failed in testing, they are budgeted to pay a load to cover failed or faulty product lines and they are expected to cover business costs, like R&D, marketing and profit for share holders.

  •  

    No.1 reason is Profit Margin / greed / Upper Management bonuses. whichever way you want to look at it.

    R&D, Marketing etc will be a distant second compared to the profit they make from the phones especially the flagship phones.

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