Galaxy S5: 699/799? Forget it

[Aquila]

Why are people comparing the Nexus 5 to the SGS 5? The specs on the SGS 5 tramples on the Nexus 5. Specs cost money.

I'm not sure that they do, but even if they did... is that spec difference even apparent on the BOM? On the S4 vs Nexus 5 it was not, meaning that specs do not cost money aside from the respective margins on each device. We obviously don't have a BOM on the S5 yet, but we can assume it's in the $200 - $250 range for now (most devices are, the iPhone is the only sub $200 device I recall from last year), the S3 was about $205, the S4 around $214 - $236, the HTC One $217, the Moto X was between $221 and $226, Note 3 is $232, LG G2 (most of what the Nexus is) $223... you get the point. Wildly different devices, almost all more or less the same specs on the most expensive components... The Nexus 5 probably cost slightly less than the G2, but lets speculate low end and says it's $210. The S4 that's $4 to $26 more to produce is worth $300 more? Don't forget the Nexus is better spec'd than the S4. No, that's a subsidy. So the cost difference is entirely on the margins.

As far as specs go, almost identical processors, identical RAM, significant difference on the camera (probably $8-15 per device), very similarly priced screens, same Bluetooth and WiFi licenses, Sammy does have to pay Microsoft for the micro-SD card slot (likely $4-6 per device), water resistant coating and a different charging port (USB 3.0 vs microUSB stanard). With that same low end $210, we add the itemized differences at their high ends, that's about $25-30 difference to produce. $240 is fairly in line with the increase seen between the S3 and the S4 ($205 to $214(up to $236) and matches very closely with the S4 price.... so again, that's not a difference in "specs" that cost money, it's just the impact of the subsidy.

Of all the devices listed there, we have a mean of about $215 and I'd estimate a standard deviation from mean of around $11, for which all but 2 devices fall in to. We would need to include more devices to make it statistically sound, but for these purposes we can safely say a flagship phone with current development technology costs about $205 to $230 to produce - and we'd be right on most devices, regardless of their "specs", size, thinness, software, etc. So do specs cost money? Sure, a range of around $20-25 per device. When we're talking about a price difference of $350, we're talking about 7% of that price difference (at max) being the "specs" difference. The only actual noticeable difference in end user cost is the sales approach, in which Samsung is profitable on mobile devices and Google is not (or if they are, it's barely and probably), seeking to merely reimburse their Nexus partner for their costs.

The Nexus without a subsidy is probably a $600 device, it's not an oranges to oranges comparison.

 

[Greg C]

Wow... you really know your stuff. I understand what you are saying and after reading your post I agree with you. Another consideration when pricing phones.. or really anything being sold is the cost of advertising. Samsung has quite alot invested in their advertising. Thanks for explaining it so well!

I'm not sure that they do, but even if they did... is that spec difference even apparent on the BOM? On the S4 vs Nexus 5 it was not, meaning that specs do not cost money aside from the respective margins on each device. We obviously don't have a BOM on the S5 yet, but we can assume it's in the $200 - $250 range for now (most devices are, the iPhone is the only sub $200 device I recall from last year), the S3 was about $205, the S4 around $214 - $236, the HTC One $217, the Moto X was between $221 and $226, Note 3 is $232, LG G2 (most of what the Nexus is) $223... you get the point. Wildly different devices, almost all more or less the same specs on the most expensive components... The Nexus 5 probably cost slightly less than the G2, but lets speculate low end and says it's $210. The S4 that's $4 to $26 more to produce is worth $300 more? Don't forget the Nexus is better spec'd than the S4. No, that's a subsidy. So the cost difference is entirely on the margins.

As far as specs go, almost identical processors, identical RAM, significant difference on the camera (probably $8-15 per device), very similarly priced screens, same Bluetooth and WiFi licenses, Sammy does have to pay Microsoft for the micro-SD card slot (likely $4-6 per device), water resistant coating and a different charging port (USB 3.0 vs microUSB stanard). With that same low end $210, we add the itemized differences at their high ends, that's about $25-30 difference to produce. $240 is fairly in line with the increase seen between the S3 and the S4 ($205 to $214(up to $236) and matches very closely with the S4 price.... so again, that's not a difference in "specs" that cost money, it's just the impact of the subsidy.

Of all the devices listed there, we have a mean of about $215 and I'd estimate a standard deviation from mean of around $11, for which all but 2 devices fall in to. We would need to include more devices to make it statistically sound, but for these purposes we can safely say a flagship phone with current development technology costs about $205 to $230 to produce - and we'd be right on most devices, regardless of their "specs", size, thinness, software, etc. So do specs cost money? Sure, a range of around $20-25 per device. When we're talking about a price difference of $350, we're talking about 7% of that price difference (at max) being the "specs" difference. The only actual noticeable difference in end user cost is the sales approach, in which Samsung is profitable on mobile devices and Google is not (or if they are, it's barely and probably), seeking to merely reimburse their Nexus partner for their costs.

The Nexus without a subsidy is probably a $600 device, it's not an oranges to oranges comparison.

 

[Aquila]

Wow... you really know your stuff. I understand what you are saying and after reading your post I agree with you. Another consideration when pricing phones.. or really anything being sold is the cost of advertising. Samsung has quite alot invested in their advertising. Thanks for explaining it so well!

To clarify, I'm not trying to disparage the S5 at all nor Samsung's need to be profitable on it, because their entire business model is different and it needs to be.

 

[Greg C]

I get what you are saying.

To clarify, I'm not trying to disparage the S5 at all nor Samsung's need to be profitable on it, because their entire business model is different and it needs to be.

 

[iN8ter]

Specs cost money. It isn't just about hardware cost, so BOM is misleading. Google avoids a lot if licensing in stock Android that OEMs pay for (FAT32 & exFAT, CODECS, etc.)

The basically don't market them and development in a lot of areas is slow as molasses so software development probably costs less than OEMS who do a bit more. The good camera software (for example) on the Samsung and HTC devices didn't write themselves, and we see how OEM skins have been catalyst to a lot if changes in stock Android lately, so they pay for a lot of R&D and "field testing" for features that Google gets to just implement later for very low cost.

The only advantage OEMS like Samsung and Apple have is that with such huge scale they can negotiate good prices for components and patent licenses (usually).

Apple keeps their margins higher because they don't license as much stuff and are good at negotiations with component vendors. They keep the manufacture cost of the phone down as well as the software/licensing costs. That allows them to keep their margins up higher. They do not pass those savings onto their users.

 

[Aquila]

Specs cost money. It isn't just about hardware cost, so BOM is misleading. Google avoids a lot if licensing in stock Android that OEMs pay for (FAT32 & exFAT, CODECS, etc.)

If we were talking about compatibility things, such as when the N4 didn't have LTE or CDMA, yeah, but I'm not aware of anything that TouchWiz is compatible that Android is not. On the camera front, I agree totally, however aside from that one, I'm not sure I would label software development as, "specs" nor imagine that HTC, Samsung or even Apple spend more on software development than Google does. The primary difference is that Samsung's software development is limited to their device ecology while Google is developing more broadly for Android, several other open source projects and their own app systems that are much more integrated with the global internet community and the interdependence of Android with the rest of Google's interaction with the web is impossible to sever.

 

[iN8ter]

If we were talking about compatibility things, such as when the N4 didn't have LTE or CDMA, yeah, but I'm not aware of anything that TouchWiz is compatible that Android is not. On the camera front, I agree totally, however aside from that one, I'm not sure I would label software development as, "specs" nor imagine that HTC, Samsung or even Apple spend more on software development than Google does. The primary difference is that Samsung's software development is limited to their device ecology while Google is developing more broadly for Android, several other open source projects and their own app systems that are much more integrated with the global internet community and the interdependence of Android with the rest of Google's interaction with the web is impossible to sever.

Software has to be developed to utilize the hardware. It doesn't matter if your SoC can record 4K if the software for it isn't developed for the phone.

Samsung devices have extra sensors and hardware to Utilize them.

The air flip features utilize a sensor to detect hand motion. So do the air view features. So does the S Pen digitizer. The IR Blaster and it's associated software.

Specs have associated R&D and software development costs chained to them so using a BOM is totally misleading when observing the cost of developing a smartphone.

The only time specs cone free is when you just throw in unnecessary un-utilized hardware into the device to bloat up the spec sheet. This sort of happened around 2.1-2.2 timeframe when android devices first started shipping with FFCs.

Samsung and others do not do that with their phones. They tend to develop differentiating features around these things. The hardware is a means to an end, not simply there for bragging rights like on a Nexus.

Sent from my Galaxy Note 3 using Tapatalk

 

[Aquila]

Software has to be developed to utilize the hardware. It doesn't matter if your SoC can record 4K if the software for it isn't developed for the phone.

Okay, but Samsung's entire R&D budget of approx $10 billion across only the sales of the Galaxy S4 breaks down to less than $250 per device, and that's not factoring in that it's also being allocated to laptops, speakers, microwaves, televisions, bluray players, tanks, robotics, Tizen, TouchWiz, the Galaxy Note line, the Galaxy Mega, Galaxy Mini, Tab Pro, Tab, (x5 sizes each), hundreds of millions of devices. At most, I'd allocate $25-40 per device to R&D. Google's budget is about $6.8 billion is spread out across far fewer physical products, and they're developing the under-layer of software that makes everything possible within that. I don't think we're disagreeing on your point, just the scale of how important it is to the final price.

 

[iN8ter]

Okay, but Samsung's entire R&D budget of approx $10 billion across only the sales of the Galaxy S4 breaks down to less than $250 per device, and that's not factoring in that it's also being allocated to laptops, speakers, microwaves, televisions, bluray players, tanks, robotics, Tizen, TouchWiz, the Galaxy Note line, the Galaxy Mega, Galaxy Mini, Tab Pro, Tab, (x5 sizes each), hundreds of millions of devices. At most, I'd allocate $25-40 per device to R&D. Google's budget is about $6.8 billion is spread out across far fewer physical products, and they're developing the under-layer of software that makes everything possible within that. I don't think we're disagreeing on your point, just the scale of how important it is to the final price.

You are talking as if the fact that Google isn't an OEM changes anything. Their smaller budget goes primarily to non-Android projects. Cars, Robots, Data Centers, Search and Advertising, Web Services.

OEMs can deliver equivalent solutions with their own OS like Samsung did in the new Gear watches. The fact that Google does Android doesn't make it any more or less important. If they want to do what they need to do on any underlying platform, they have to invest in it. It doesn't just happen itself.

Don't think R&D factors in salaries and things like that, unless we are to assume IBM Watson is doing all of this for these customers.

It's kind of like people who seem shocked that high oil prices causes food prices to increase.

In any case this is just details

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[Soundtrack to Chaos]

Why are people comparing the Nexus 5 to the SGS 5? The specs on the SGS 5 tramples on the Nexus 5. Specs cost money.

There is no valid reason to compare the two


Sent from my Apple iPad Air using Tapatalk

 

[Premium1]

Wow... you really know your stuff. I understand what you are saying and after reading your post I agree with you. Another consideration when pricing phones.. or really anything being sold is the cost of advertising. Samsung has quite alot invested in their advertising. Thanks for explaining it so well!

Not to mention google can subsidize the phones because they are not a hardware company, they just want their services in as many users hands as possible so they can recoup it in the long run. Samsung, moto, htc, lg, etc do not have that luxury. They are hardware companies first and that is where they make most of their profits.

 

[A895]

Not to mention google can subsidize the phones because they are not a hardware company, they just want their services in as many users hands as possible so they can recoup it in the long run. Samsung, moto, htc, lg, etc do not have that luxury. They are hardware companies first and that is where they make most of their profits.

Moto X and G disagree with you. X went on sale for $329 recently and the Moto G is as low as $99 from Verizon.

Sent from my XT1060 using Mobile Nations mobile app

 

[dpham00]

The $99 moto g is subsidized. Verizon will sell it at no contract pricing but unlocked is much higher

dpham00, Android Central Moderator
Sent from my Verizon Samsung Galaxy Note 3 via Tapatalk Pro

 

[A895]

The $99 moto g is subsidized. Verizon will sell it at no contract pricing but unlocked is much higher

dpham00, Android Central Moderator
Sent from my Verizon Samsung Galaxy Note 3 via Tapatalk Pro

Still they don't sell it for much, which was my original point. There are devices that are just as good as Nexus devices and priced similarly.

Sent from my XT1060 using Mobile Nations mobile app

 

[dpham00]

Still they don't sell it for much, which was my original point. There are devices that are just as good as Nexus devices and priced similarly.

Sent from my XT1060 using Mobile Nations mobile app

Sure and look at Motorola mobility finances. They were 25% in the red. So it isn't a good example, imo.

Also, the $329 was a promotional price not the regular price. Moto X originally sold for quite a bit more on release and dropped a few months later. Heck I got my note 3 on release day directly from the carrier for less than what the Moto X was selling for at the time. But I got a promotion on my note 3.

dpham00, Android Central Moderator
Sent from my Verizon Samsung Galaxy Note 3 via Tapatalk Pro

 

[Soundtrack to Chaos]

Sure and look at Motorola mobility finances. They were 25% in the red. So it isn't a good example, imo.

Also, the $329 was a promotional price not the regular price. Moto X originally sold for quite a bit more on release and dropped a few months later. Heck I got my note 3 on release day directly from the carrier for less than what the Moto X was selling for at the time. But I got a promotion on my note 3.

dpham00, Android Central Moderator
Sent from my Verizon Samsung Galaxy Note 3 via Tapatalk Pro

They definitely aren't a good example as they were purchased by not one but two larger companies, any company can survive in the red with a bigger one backing them

 

[MrScarface32]

Ridiculous

 

[Premium1]

Moto X and G disagree with you. X went on sale for $329 recently and the Moto G is as low as $99 from Verizon.

Sent from my XT1060 using Mobile Nations mobile app

I wouldn't use a company that has been in the red the past how many years? Anyone can sell it at near cost when a huge company is backing you..

 

[A895]

I wouldn't use a company that has been in the red the past how many years? Anyone can sell it at near cost when a huge company is backing you..

Disregard it then. I have nothing else.

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[dpham00]

Samsung has a 20% operating margin, so let's say that they break even, that would be $520($650 x. 8). Now Motorola has a 26% operating loss, so $385($520 x. 74).

I realize that there is more to this than that - Samsung could reduce its advertising and other cost cutting, but one could argue without advertising, they won't be as big as they are now.

Really, I don't see a high end smartphone at $350ish on release on a company that plans to profit from hardware sales , unless something drastically changes.

dpham00, Android Central Moderator
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