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4/16/2014
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Samsung Galaxy S5 Build Cost Examined

Samsung calls early sales brisk for new smartphone, which costs $256 to build. By comparison, 32-GB iPhone 5s costs Apple $207 to manufacture.

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"The Galaxy S5 is selling faster than the S4 so far, though it's difficult to share specific numbers as we're still at early stages." Those are the words of Yoon Han-kil, senior vice president of Samsung's product strategy group, who offered some thoughts to Reuters in a wide-ranging interview. The Galaxy S5, Samsung's flagship smartphone for the year, went on sale April 11 in 125 countries. "S5 sales should be much better than the S4," Yoon predicted.

Samsung had hoped to sell more than 100 million Galaxy S4s last year. It fell far short of that goal, which is why the company is pitching the Galaxy S5 as a back-to-basics device. Rather than going overboard with high-technology, Samsung opted to make the phone waterproof and improve the quality of the materials and manufacturing. "With the S4, we thought smartphones shouldn't just focus on hardware. They also had to come with a lot of software and services, and that line of thinking did lead us to cram many services into the device," Yoon said. "We still feel the same way but this time around, we decided not to put in so many things and only include what the user really needs, so I cut out a lot of services and software."

Most major wireless network operators, including AT&T, Sprint, T-Mobile, US Cellular, and Verizon Wireless, are selling the GS5 in the US. Pricing ranges from $25 per month through an installment plan to $200 with a contract or $649 at full retail.

Samsung's focus on the hardware bumped the cost of the GS5 up when compared to the GS4. IHS iSupply estimates the Galaxy S5 (32-GB model) costs Samsung $256.52 to manufacture. This dollar figure includes the bill of materials and the assembly costs, but not engineering, software, shipping, or marketing costs. By way of comparison, the 32-GB iPhone 5s costs Apple $207 to manufacture. Samsung is paying almost $50 more to make each GS5. Samsung believes volume will make up for the higher bill of materials.

[But does Samsung make glasses? Read Google Glass: 5 Reasons I Won't Buy.]

The most expensive single component is the GS5's display. The 5.1-inch panel, which offers full HD resolution, costs a whopping $63, or 24.6% of the total. The processor-memory-storage integrated circuit is a combined total of $107. The processor is the latest from Qualcomm, a Snapdragon 801 with four cores at 2.5 GHz each, but IHS didn't say how much these three components cost individually. Together, the 16-megapixel main camera and 2-megapixel user-facing camera cost $18.70. The battery costs $11, the Bluetooth and Wi-Fi module costs $9, assorted PCBs cost $5, the heart-rate monitor costs $1.45, and other individual parts total $41.

"The S5 exemplifies a conservative evolutionary design approach," said Andrew Rassweiler, senior director, cost benchmarking services for IHS. "There are no revolutions or giant steps forward in this design. There's a lot of similarity and commonality between the S5 and other recent Samsung smartphones IHS has torn down, such as the Galaxy Round and the Note III. However, there are many small changes throughout the design."

Samsung clearly hopes the small, evolutionary changes add up to big sales. The company probably won't offer a specific number of unit sales until they cross 10 million. It took the Galaxy S4 one month to surpass 10 million. Samsung's Yoon thinks the GS5 will reach that benchmark faster.

What do Uber, Bank of America, and Walgreens have to do with your mobile app strategy? Find out in the new Maximizing Mobility issue of InformationWeek Tech Digest.

Eric is a freelance writer for InformationWeek specializing in mobile technologies. View Full Bio

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Lorna Garey
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Lorna Garey,
User Rank: Author
4/17/2014 | 9:46:58 AM
Re: 2 for 1
Robert, I know it would be smart to keep the phone and get a lower-cost plan. But all those snazzy new features! Cameras and lovely new screens and ...

It's just too tempting. I've never not upgraded. In my defense, I always donate the older devices to a shelter -- it's a great way to help and somewhat assuages the guilt. 
RobertB183
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RobertB183,
User Rank: Apprentice
4/16/2014 | 7:42:11 PM
Re: 2 for 1
Lorna,

 

If its subsidized with a two-year contract, the purchaser is subsidizing the $100.  Part of the monthly rate on a two-year contract is toward the hardware.  If you keep the phone more than two years, the best option is to find a carrier with a lower monthly contract and separate charge for the phone that ends after the hardware is paid off.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
4/16/2014 | 7:04:30 PM
Re: better mousetrap
Is it waterproof or water-resistant? Waterproofing would be awesome -- you could make underwater mobile calls.
Laurianne
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Laurianne,
User Rank: Author
4/16/2014 | 3:51:21 PM
Re: 2 for 1
High display costs affect most mobile devices, not just this one. Not a terribly competitive part of the supply chain.
danielcawrey
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danielcawrey,
User Rank: Ninja
4/16/2014 | 2:56:03 PM
Re: 2 for 1
Over 25% of the phone's cost is because of the screen? Is HD really worth it? 

Look, I get that Samsung wants to be a premier brand on the level of Apple, and that's commendable. But I don't think I need a huge HD screen on my phone. I'm not using the thing to watch movies. 
Whoopty
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Whoopty,
User Rank: Ninja
4/16/2014 | 1:04:10 PM
Re: better mousetrap
It's definitely a feature that should have been introduced on all phones a long time ago - especially considering how the cost of them has risen over the past few years. 

That said, with phones like the Xperia Z, it does lead to having annoying covers on every single port, which makes charging a pain in the neck. Worth it for the safety, but I'm sure there's better ways to do it.
Lorna Garey
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Lorna Garey,
User Rank: Author
4/16/2014 | 12:10:47 PM
Re: better mousetrap
The waterproof feature is huge. I have another year or so with my HTC One, but that will definitely be a buying consideration when upgrade time rolls around.
BillB031
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BillB031,
User Rank: Strategist
4/16/2014 | 11:16:53 AM
Re: better mousetrap
It cost money to build a better mousetrap.  Even to make the S5 water resistant had to cost something.  These phones have built in barometer, humidity, and temperture sensors.   Walking weather stations.

Last summer while boating with my kids, I jumped into shallow water and forgot I had my phone in my shorts pocket.  The bottom of my shorts barely got wet, but it was enough to ruin the phone.  The new S5 doesn't need that bulky ugly waterproof (expensive) phone case.
Lorna Garey
100%
0%
Lorna Garey,
User Rank: Author
4/16/2014 | 10:28:17 AM
2 for 1
Verizon is offering this phone buy one get one for $199 with the standard two-year deal. Someone is eating a big chunk of hardware cost at $100 per device.
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