The inevitable rise in the cost of smartphones, the continuation of the story

Hey.

A little more than a month ago, we talked about the fact that the cost of flagships should inevitably grow, since these devices acquire completely different capabilities, for example, the number and quality of cameras is growing. It will be useful to familiarize yourself with this material before reading this article.

I will leave out the comments in which people simply argued that everything should become cheaper, and this is the law of life, since there is little reasonable in such a position. Why should this be happening? Because you want to?

But it was hard to disagree with one of the comments, our reader suggested making a comparison between the modern flagship and the model from the past to show how the prices of components have changed. Disassemble smartphones by the bones, see what they have inside and how the cost of components has changed. I will give a table with retail prices for Samsung flagships in order to understand which devices to take for comparison.

Year Basic version price, USD Comment
Galaxy S3 2012 599
Galaxy S4 2013 639
Galaxy S5 2014 649
Galaxy S6 2015 669 Two flagships, not one
Galaxy S6 EDGE 2015 779
Galaxy S7 2016 669
Galaxy S7 EDGE 2016 779
Galaxy S8 2017 749
Galaxy S8+ 2017 849
Galaxy S9 2018 719
Galaxy S9+ 2018 839
Galaxy S10 2019 899 There was also the S10e model, but this is a simplified version of the flagship
Galaxy S10+ 2019 999
Galaxy S20 2020 999 Three flagships, a family! 
Galaxy S20+ 2020 1 199
Galaxy s20 ultra 2020 1 399
Source: Mobile Research Group, AT&T data, T-Mobile, Verizon

In theory, it was possible to take very old models so that the differences were striking, but decided to follow the principle of time. The last device we will compare with will be the S20 Ultra, but the first is the S6 EDGE (2015, $ 779, for the first time there were two flagships at the same time). It will also be interesting to see how the S20 Ultra differs from the previous generation, for example, the S10 +, here the differences will also be interesting.

It is important to understand that when considering BOM (bill of materials) for devices, we are only talking about the cost of components and their assembly. This price does not include the cost of development, logistics and sales, marketing.

There are several independent BOM estimates for each device, I like the detailed reports from Tech Insights, but they are freely available only for S10 +, S20 Ultra. Looked at the IHS report for S6 EDGE, the numbers are the same as in the Tech Insights report, which is not publicly available, so I will use them. Having dealt with the sources of the numbers, let’s see what they give us.

BOM, $ release year
Galaxy S6 EDGE 290,45 2015
Galaxy S10+  420 2019
Galaxy s20 ultra  528,50 2020
Sources: IHS, Tech Insights

Five years ago, the BOM list for the flagship looked exactly the same as it does today, the smartphone did not have any fundamentally new functions – there is a screen, a battery, a radio part. Generations of technologies and technological processes changed, but everything else remained more or less the same. Let’s take a look at the BOM sheet for the Galaxy S6 EDGE.

The inevitable rise in the cost of smartphones, the continuation of the story

And this is how the BOM sheet for the Galaxy S10 + looks like.

The inevitable rise in the cost of smartphones, the continuation of the story

And finally, for the Galaxy S20 Ultra.

The inevitable rise in the cost of smartphones, the continuation of the story

For ease of discussion, let’s summarize the cost of the main components in one plate.

Galaxy S6 EDGE Galaxy S10+  Galaxy S20 ultra
The cost of assembly, testing no data  25 27,50
SENSORS 14,75 14 11
Radio part 17,90 31,50 33
Power, audio 5,40 7 9,5
Mechanical parts of the device 35 29 30,50
Memory 52,50 50,50 67,50
Screen 85 86,50 67
Камеры 21,50 56,50 107,50
Battery 3,50 10,50 7,50
Modem 15 20,50 26,50
Processor 29,50 50 81

It is important to note that IHS separately considers the cost of the box and the delivery kit; Tech Insights does not provide this data. I also removed them from the comparison, and also reduced the number of points, discarding those that are completely irrelevant in the context of this material (it does not pretend to be absolutely accurate in the calculations, I want to show the main trends and for this the given data is enough).

To begin with, the cost of assembling smartphones has changed over the past ten years. This is a process due to the fact that the assembly itself has become more complicated, the number of operations on the conveyor has increased. The number of components that make up the smartphone has also grown, now it is necessary to test not one camera module, but several, which results in more time and, as a result, money. This is just one example of how production is changing. All manufacturers are trying to limit the growth of production costs, but this is an inevitable compromise between quality, product yield without inherent production problems. For example, the cost of assembling a Galaxy S3 in the BOM list was about $ 15. At present, this is the cost of assembling a simple smartphone, in fact, the flagship of that time is the current budget device, they are comparable in terms of assembly complexity, the number of components.

Why has the cost of the radio part changed? The answer is to be found in the fact that the number of supported technologies and frequencies has grown dramatically. A modern smartphone has a large number of antennas, they require correct positioning in the body, as well as control. This is an objectively changed factor, so the cost price is growing here.

Let’s take a look at another component, the display. It is common knowledge that the screen is the most expensive part of a smartphone, and it is. In S6 EDGE, the screen was innovative, due to the bends it cost significantly more than conventional flat-panel displays. The technology was just entering the wide market and was not readily available to everyone, including the Samsung that developed it. However, we can see that the screen price in the S20 Ultra has decreased, although it is the best display available on the market. Mass production works wonders and you can make components cheaper. All other things being equal, we can safely say that the quality of screens increases, but their cost remains plus / minus at the same level.

The inevitable rise in the cost of smartphones, the continuation of the story

How much a modem costs in your smartphone directly depends on the supported technologies, for example, 5G gives a high cost, and the differences are many times over. But this difference is described by patent royalties, it is not visible in the cost price. However, the complexity of modems is increasing, as is their price. But you do not see this in the plate, since patent royalties are individual and here they are not taken into account.

What happened to the cameras? The Galaxy S6 EDGE had one main camera and one front camera.

The inevitable rise in the cost of smartphones, the continuation of the story

How the number of cameras and opportunities in both photography and video has grown, I think you should not be reminded.

The inevitable rise in the cost of smartphones, the continuation of the story

This is an objective factor in the growth of the cost of components, it is impossible to achieve the same capabilities with one camera that are in modern smartphones. For example, the implementation of optical zoom with one camera is de facto impossible (in theory this can be done, but any fall and the camera will say goodbye to you, any moving mechanical elements of the optics are fragile).

When we talk about the cost of processors, we always say that the technological norm is changing, today the last squeak is 7+ nm. But in the cost price, each transition gives a tangible increase in price. The fresher and better the processor is, the more expensive it is. The life cycle of smartphones has become such that new technological norms appear faster than old ones have time to pay off. Therefore, manufacturers increase the cost of components, they need to recoup billions of dollars in production and technology development.

Interestingly, the cost of batteries jumped a few years ago, but has since remained roughly in the $ 8-12 range depending on the model. This can be clearly seen in the table, there will be no changes as such in the near future.

Pay attention to the memory cost, in 2015 the S6 EDGE had 3/32 GB in the base version, and it cost $ 52.50. In 2019, the base version of the S10 + had 8/128 GB at a similar cost. Just as the screens were affected by mass production and the fact that Samsung controls this technology, they can develop it independently.

Even looking at the cost of components, you will understand that the price of everything that is associated with a quantitative increase in characteristics (as a variant of an increase in the number of cameras) is growing, but this is not always the case. For example, having increased the number of sensors in modern smartphones, we did not get a sharp rise in prices for these components in general, they fell in price due to competition.

The main contribution to the growth in cost is made by those technologies that do not have high competition – modems, processors. You have practically no choice from different suppliers, competition is very limited. But more importantly, these calculations do not include patent royalties to other companies, they can be as high as $ 60-70 per flagship! And this is the minimum deduction, the upper bar for manufacturers who do not have a strong patent portfolio in 5G (Samsung has one) reaches $ 120 per device! Intangible, intellectual property is becoming one of the most expensive components in modern smartphones and you will have to live with it.

One of the questions that arises in this connection is: “Is it possible that now the cost of smartphones will always only grow and it is impossible to reduce their price in any way?” In my opinion, the cost of the flagships has already hit the ceiling (I will leave smartphones with flexible screens outside the brackets, I’m not talking about them). This means that all manufacturers will continue to try as much as possible to reduce patent payments to third companies, and the easiest way to do this is to invest more money in development. And also to increase its own production, which, using Samsung’s example, shows how profitable it is for the entire market, without exception. If there were no competition in the memory or display market, or if it happened to the same extent as in the development of 5G modems for smartphones, and we would see a completely different cost of smartphones, it would be higher, which would slow down the development of the market and, as a result, devices …

Related Links

Share




we are in social networks:

Anything to add ?! Write … eldar@mobile-review.com

 

Related Posts

Leave a Reply

Your email address will not be published.