Samsung Galaxy S5 Has $251 Bill of Materials, Pushing a Pricey Trend

 
 
By Michelle Maisto  |  Posted 2014-04-17 Email Print this article Print
 
 
 
 
 
 
 

Slowing global smartphone sales have companies spending more to impress. But it's consumers who will pay in the end.

The Galaxy S5 is the latest Samsung device to suggest that the company has never met a feature it didn't like. But features don't come cheap, and the GS5 carries an "astronomical" bill of materials (BOM), according to an April 15 report from IHS iSuppli, which performed a teardown of the device.

While the 32GB Apple iPhone 5S has a BOM of $207.00, the 32GB GS5 costs Samsung $251.52 to build.

The high cost is "becoming more typical of Samsung's flagship Galaxy line," Andrew Rassweiler, senior director of cost benchmarking services for IHS, said in a statement.

"The S5 exemplifies a conservative evolutionary design approach. There are no revolutions or giant steps forward in this design," added Rassweiler. "There's a lot of similarity and commonality between the S5 and other recent Samsung smartphones IHS has torn down … however, there are many small changes throughout the design."

Ken Hyers, a senior analyst with Strategy Analytics, said that given Samsung's "everything plus the kitchen sink" approach—the phone includes a heart-rate monitor and is water and dust resistant—it's not a shock that the BOM is so high.

"The premium smartphone segment is becoming more cutthroat as sales growth slows and vendors look for ways to differentiate their flagship offerings. With genuine innovation slowing, Samsung is clearly looking to add as much capability to the devices as possible, hence the very big BOM," Hyers told eWEEK.

Other vendors, meanwhile, are cutting corners where they can. Samsung chose a plastic housing rather than metal, while HTC went with metal but didn't go for the 10+ megapixel camera, Hyers pointed out.

That said, he expects costs for premium devices to keep rising and—certainly in the case of the Apple iPhone 6, whenever it is released—for those costs to be passed on to consumers.

"The question is whether other vendors will have as much leverage for price increases as Apple does. If not, margins and profitability will shrink. While Samsung, with its huge volumes, can weather those increases, smaller vendors like HTC cannot," Hyers continued. "The GS5, in more ways than one, is turning up the heat on competitors. Meanwhile, the iPhone 6 is likely to bring those pressures to a boil."

The priciest elements of the GS5, according to the teardown, are what IHS iSuppli calls "integrated circuit"—the Qualcomm processor and the Samsung DRAM and NAND flash. Together, these come at a cost of $102.37.

Also pricey is the touch screen and display, which features 1,920 by 1,080 pixels and has 432 pixels per inch—and a price tag of $63.

Other high-priced items are the cameras ($18.70), batteries ($11.00) and WiFi connectivity modules ($9.00).

The GS5's BOM contrasts "starkly" with those of smartphones at the lowest end of the cost spectrum, said the report, offering examples of ZTE and K-Touch devices with BOMs of just $35. And still, it's not Samsung's most expensive.

IHS has torn down four Galaxy devices in the last year, one of which, it said, has a BOM of $280.

 
 
 
 
 
 
 
 
 
 
 
 
 

Submit a Comment

Loading Comments...
 
Manage your Newsletters: Login   Register My Newsletters























 
 
 
 
 
 
 
 
 
 
 
Rocket Fuel