Palm Pre Smartphone Costs $170 to Produce, Report Says

The Palm Pre smartphone has been widely referred to as an “iPhone killer,”  but research group iSuppli has performed a virtual teardown of the Pre to see what it’s literally made of and offer a preliminary cost analysis.
 
The Pre, which Palm is expected to debut in May or June—though some speculated an arrival as early as April 30—will cost approximately $170 to make, which includes hardware ($137.83), manufacturing ($9.58), and software and IP licensing costs ($22.61).
 
(In 2007, iSuppli estimated that the bill of materials, or BoM, for the 4GB iPhone was $246, offering a 50.7 percent margin on each unit sold at the then-retail price of $499.)
 

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iSuppli says it arrived at the figures using a “cross-functional team” that included experts in memory, displays, baseband, component pricing, mobile handsets and wireless connectivity.
 
The company reports that the Palm Pre will combine a multi-touch display with an intuitive operating system for ease of use, and that the Pre is the only announced smartphone, besides the iPhone, to support a multi-touch display interface, which allows multiple simultaneous touch inputs.
 
“The similarity in features between the Pre and the iPhone clearly reveals the mark Palm is trying to hit,” wrote Tina Teng, an analyst with iSuppli, in the April 29 report.
 
“Outside of the user interface and software, the Pre’s other features match up well with the iPhone 3G and the other lineup of ‘iPhone killers’ including the BlackBerry Storm,” stated the report.
 
The display and touch-screen module were revealed as the “most expensive single subsystem” of the Pre, at a cost of $39.51. The 8GB of NAND flash memory was priced at $15.96, the dual-band CDMA EvDO air interface at $15.41, and the 3-megapixel camera was estimated at $12.39, or just 7.3 percent of the BoM.
 
Bluetooth is included for the bargain rate of just $1.83.
 
“iSuppli is projecting that Palm will try to sell the Palm Pre to Sprint Nextel at a price of about $300,” stated the report. Given subsidies by the wireless carrier, however, iSuppli expects the Pre will be available to customers for about $200.
 
Palm’s global handset market share fell to 2 percent in 2008, iSuppli reports, though it expects the Pre to help boost this.
 
“Just a glance at the Pre at CES has changed the industry’s opinions about Palm,” wrote Tang, “showing it is a company that can be competitive with Apple iPhone or any other leading-edge product in the global smartphone market.”