Palm Pre: $138 to build according to iSuppli
By Laura June 
posted Apr 29th 2009 10:49AM
posted Apr 29th 2009 10:49AM
With the economy in the tank (still) and the heat on, cost and profit margins are more important than ever to companies hoping to stave off the inevitable, apocalyptic doom of recession. Well, iSuppli's released an estimated report of how much its costing Palm to cobble together the Pre -- about $138, as it turns out. iSuppli has positively identified just two of the Pre's suppliers thus far -- that Texas Instruments OMAP chip, which runs Palm $11, and Qualcomm's wireless chip -- but they've formed a general picture of what's under the hood for the estimate. That price is about 46 percent of the $300 iSuppli suggests Palm will be charging Sprint for the Pre (a number that's completely unconfirmed at this point). To put it in perspective, the BlackBerry Storm costs about $203 to make and was sold for $199 initially, the G1 clocked in at $144, while the iPhone 3G costs Apple an estimated $174.33. Of course, we have no way of assessing the accuracy of the estimate yet, but if it's in the neighborhood of correct, Palm's profit margin should be pretty healthy.
I had a dream where I was on an airplane and this woman was showing her new Pre off to everyone. I really wanted to punch her and run away with it, but I was on an airplane... I really want this phone...
you sound like Jack handey
Built with $138 worth of parts, feels like a $13.80 product. Pay no attention to bean counters since they'll probably never use a Pre. Consumers will decide whether they're getting a solid product for their money. Palm is going to need to get high margins in order to save the company from bankruptcy. Let's hope Palm cut costs efficiently so that the product doesn't have a cheap feel or fall apart at a moment's notice. They may need to use some of those profits for customer support if the Pre starts to disintegrate in user's hands. Palm had better sell a lot of those Pres to get back their production costs. For better or for worse it's just a little while longer until the Pre hits the streets.
haha awesome
everyone...take whatever iphone rules says w/ a grain of salt. the whole time i was reading your comment (before i actually saw user name), i was thinking wtf is this guy so negative about the BUILD QUALITY (not the experience of the phone) before anyone has really touched it. and might i add, has already gotten favorable marks that i've seen.
jeeeezus i hate iphone fanboys. its funny, these are the same people who say, "who needs a2dp" "who needs bluetooth keyboard support" "who needs a removable battery"...but these are also the same clowns that brag about the features once they're added to the phone. must i EVEN mention copy n' paste and how many people brushed it off, and now they're jazzed about it. ugh
I had to look him up, but I read the joke about taking his kid to Disneyland- that's awful. :-)
I say if this is true they should sell it for $199 and build a bigger footprint. A lot of people(especially nowadays) are counting their pennies and may or may not budge due to a hundred bucks.
I still hope the final prices will be less than $200.
I hope they make a little money off the phone... Palm certainlly needs it.
My magic number (price) is $199.
It cannot be much more than that if they really want to compete with the iPhone.
I like the phones face but the feel of the slide out key board is a bit too plasitc(cheap). They should have improved this if they intended to match the quality of the iPhone. It does run multiple apps very nicely. That is a plus but they do take a few seconds to load after you select it. iPhone it more instant gratification when you select something its right there. Over all its a pretty nice phone. It will do well but I don't expect it to wipe out the iPhone market.
@Rick
Of course this phone won't wipe out the iphone market, there's too many apple fanboys running around.
http://blog.nextnewnetworks.com/2009/01/05/apple-reinvents-the-wheel-the-onion/
I totally agree with SimbaDogg.
@Rick,
Many apps on my iPod touch also take a few seconds to load, but where Apple is smart is that they designed for the basic interface background of the app to pop up right away (sort of acting as a splash screen), making the appearance of an instant launch. Whereas on the Pre, the lag happens before any element of the app interface pops up, but once it does pop up, the app is ready to go.
u guys are dumb. the final cost to the consumer in no way relates to what palm sells it for. carriers subsidize the cost to the consumer and then recoup their expenses by locking people in with a contract.
Nice, I just hope this profit will help them expand the device with other application partners. Hulu?
Can't wait to get mine!
I think $199 would definitely be a good price for the phone. I hope they don't allow all the positive hype about the phone to make them think they can stick a ridiculous price tag on it.
Yeah, like $499 for 4GB and $599 for 8GB with a contract. Best part is they actually went for it, too.
You know who you are.
Yeah, but that was not subsidized. the 200$ price now is subsidized, like 600$ unsubsidized. It mainly depends on the provider and the price they will accept.
Hmm, cheap production costs...I hope they don't cut it down to a point where they sacrifice quality materials for materials that are cheaper and will result in cracks, scratches, etc. Cause if that were the case, I'd feel really bad for the early adopters of the phone (*cough*Kraxperia anyone?*cough*).
I wouldn't take iSuppli's numbers too seriously. I'm a little puzzled about why they think that a device that's much more powerful (faster processor, more memory), and much more complicated (slider, physical keyboard), can be produced for $40 less than an iPhone 3G.
Furthermore, production costs, even if accurate, are not a good way to assess final build quality. If the fit-and-finish were something to be concerned about, I'm pretty sure that Josh Topolsky would have said something by now.
Palm's recent devices (Treo Pro, Centro) are pretty solid. I doubt the Pre will feel as solid and brick-like in your hand as an iPhone (which is basically a solid slab), because it does have moving parts and a removable battery. That doesn't mean it won't be a great device.
$199 with contract would sound ok. Without SERO or tethering, I probably won't get it. That's just a rumor though.
hit the ground running at 199 or less.
I really think Sprint is going to continue to try to undercut the competition and offer this phone @ $149.
I actually think this will come in at $299 with contract. I dont remember the exact quote from Palm's CEO, but he was asked about the $199 price point to compete with iPhone and his response was something like, "why would we do that when we have a signifigantly better product?" Sprint traditionally charges you a lot for the expensive smartphones when they come out and still makes you renew your contract.
Everyone get ready for the $299-new /$599-msrp price tag on this thing when it hits mid-June. Oy vey. I'll still be getting one, lol.
These numbers are interesting to compare phone-to-phone but it doesn't speak to profit margins on the device at all since they don't address R&D costs, post release support, on-going software updates, etc., etc.
The biggest cost of this device are the squishy folk taking up desk space at Palm.
It's easier than that: it's no good to compare the prices because component prices have changed since those numbers were calculated. The iPhone price, for example, reflects the cost of the phone when it was launched. The components are now much cheaper, so the iPhone price would appear to be higher than it is for Apple right now. The Pre's figure, being more recent, takes those lower component costs in to account.
I'd expect the Pre to cost more than an iPhone (manufacturing costs) as it has a sliding mechanism, keyboard, and removable battery. Apple also probably makes money on the AppStore and iTunes Music Store, which offsets the price of the phone somewhat.
damn, is this going to be a worldwide release? or just US first? HURRY UP
I think its going to be on sprint only, at first. They did announce there will be a GSM version released (presumably for other countries) but Im thinking that will be 6 months after the US release.
I'll happily buy one without a contract for €399-499.
Guesstimating much, iSupply? How do they come up with an exact price without "definitely" knowing what is in the Pre (other than main processor and baseband chip)?
"...released an estimated report..."
Personally I reckon this is gonna go out at more than $199 as Palm will want user to perceive this as a luxury good rather than a toy.
One good thing is that their kit has always been pretty solid (my opinion), so hopefully this will too.
Yeah! It's not like ICs for cell phones are a commodity or anything... oh wait...
$199 or less along with Sprint's competitive date plan prices are making this an amazing looking package.
I guess Palm does really need the money, but I have to admit I won't be happy if the Pre clocks in at $299.
But I suppose my opinion doesn't matter, as I simply can't switch from Verizon Wireless...
I can't wait to put my iPhone on eBay or craigslist so I can slam this
Build cost is meaningless blather. What frickin diff does it matter what it costs to build? Means nothing to the consumer at all.
They'd be nuts if they tried to sell this at $299...only a nincompoop would buy it.
touché
The phone will probably be $299 with a $100 MIR making it $199.
Just trying to be a realist here.
@ Tony: I was thinking it might something similar. $100 (mail or instant) rebate first month or two to maximize launch numbers, then a reduced $50 rebate for the next couple of months.
If iSuppli's numbers are a fair guess Palm has some wiggle room to play with.
Who wants to switch to sprint anyway, werent they having financial problems and the stupid push to talk chirp thing they adopted from nextel is the most arrogant thing one can do in public. Who wants to hear your conversation or that horribly annoying beep chirp thing. I feel like punching anyone using that in public. As for this phone i am not sure what makes it so special. its a nice descent phone but nothing extremely revolutionary like 16 gb hard drive built in
"Who wants to switch to sprint anyway"
People who want to save money.
"the stupid push to talk chirp thing they adopted from nextel is the most arrogant thing one can do in public. Who wants to hear your conversation or that horribly annoying beep chirp thing. I feel like punching anyone using that in public"
Right, blame Sprint because the tasteless construction hoosiers choose to use Nextel in their personal life.
"its a nice descent phone but nothing extremely revolutionary like 16 gb hard drive built in"
I cant think of a single phone that has a 16gb hard drive...
You cant think of a 16 gb phone, uh the iphone duh. Unless you dont count that as a hard drive, or whatever they use in it. Let me drop some actual facts on you. You do get what you pay for and i had sprint before. It may be cheaper but the service was sub-par. Palms stock was valued so low just months ago that they were barely staying in business.They made a phone like the pre a very good phone but by the time it catches up to the iphone the iphone will have new features and a new model and billions more apps than palm with ever have. The pre is a nice phone i dont dispute that but it wont ever be able to catch up to the iphone especially since its on the smallest major network carrier behind verizon and att. Not everyone can afford a phone like the iphone and its too bad cause your all missing out on the best phone in the world and you know it. in the words of NAS you can hate me now
@johnny. You said "nothing extremely revolutionary like 16 gb hard drive built in." There aren't ANY phones out there with a 16GB hard drive. 16GB of STORAGE, but not a hard drive.
Johnny.
The Pre is looking to be a very good phone. I use sprint here in a non-city area, and the coverage is great. (Of course we do use a repeater here at work to boost coverage). I am planning on switching to the Pre when it comes out on the 17th, as my current phones 2 year lifespan has come and gone and i'm looking to spend my nice discount they give out.
I don't care what you think about hard drive capacity, as it will be an upgrade from my current 2gb micro-SD phone and my 4gb iPod.
As for Palm themselve's, they may be in the tank finance-wise, but that doesn't change the fact that they put out quality products. I've used their PDA's for years. Here's to hoping that the Pre turns them around and they can keep putting out better stuff.
@johnny
Perhaps you will let me "drop some actual facts on you."
1. Its not a HD
2. 16GB is not revolutionary, its evolutionary
3. "Wireless carrier _____ has crappy service" comments have no validity. Where you live Sprint may indeed have "horrible" service, but that is not going to be the case everywhere. In Manhattan AT&T has decent service, but Sprint has better coverage, in Brooklyn AT&T has NO service indoors.
Sprint also offers free roaming onto Verizons network.
4. The Pre in many respects has surpassed the iPhone. Neither phone is "behind" the other.
5. The Pre is not exclusive to Sprint permanently. GSM versions are being released in Europe and will make their way here as well.
6. Palm already has a catalog of software, and a very extensive catalog when you include what is possible through the emulator.
7. There is no "best" phone in the world. It depends on what a user wants. Some people want a phone that is only a phone, some want the best camera possible included, other push email. It all depends on your needs.
@rayminj, you said -
4. The Pre in many respects has surpassed the iPhone. Neither phone is "behind" the other.
...
7. There is no "best" phone in the world. It depends on what a user wants. Some people want a phone that is only a phone, some want the best camera possible included, other push email. It all depends on your needs.
It seems to me that less than 10% of commentors have accepted those facts (and they are facts). Idiots besetting us on all sides continue to use the line, "my fave phone has feature X therefore it is the best therefore all others suck" as though any one feature (or, indeed, set of features) is universally appealing to all consumers.
I wish, I do really wish, that every time someone made a comment that mentioned a smartphone platform, the Engadget comment system would pop-up your points 4 and 7, and ask again if the user really wants to post their comment.
iSupply and their useless estimates reported by Engadget: Worth $0 according to me.
I agree.... I would not believe anything that comes from an iName.... specially on the PRE...
Also, STOP teasing us with this useless information...when I saw the picture of the PRE and a $number and said YES!!! it is out... but then... what a disappointment....
STOP giving us feathers... WE WANT THE CHICKEN MEAT!!!!!!!!!!!!!!!!!!!
I think 299 would be too high, HTC Fuze is pretty nice phone but 299 is a very high price for that type of a phone, with competition from iPhone and the G1 priced around 199. Not too many people would be willing to drop 299, especially in this type of an economy.
Well, these stories just kill me. If they are JUST looking at the cost of ONE (1) phone then fine but that is not indicative of the full cost. Economies or Scale. I don't think they ever talk about this. The TI chip might be $11 dollars but how much does it cost for a million of them? Pennies a piece and that goes along with all the other parts. Also not included is the margin that all the manufacturers make on each part they sell. And that is just for the phone. There is R&D which includes HW/SW builds and first articles and labor hours, all that I'm sure reaches into the tens of millions. All of that is factored into the cost and utimately the selling price of the phone. Trust me, they wouldn't sell anything that wasn't making at least a 5-10% profit margin or maybe more on each phone.
Economies of scale... that's exactly how they're pricing them actually. They're not stupid. And they don't claim to include R&D. The point is to provide a number for comparison, not break down the entire business plan... you have to pay for that report.
Oh, and Re: the TI chip costing $11 but pennies for millions. I work with the same family of TI chips. They're ~$50 for 1, so $11 is definitely a price based on those economies of scale you're ranting about.
Sounds like the sweet spot is $199 or a little under in order to compete with the iPhone on price, especially considering that Sprint would be subsidizing that cost so Palm would make a little more. However... fact is that both companies need a pretty big lifesaver right about now. Something like over 50% of Palm's operating budget (just a random guess) went towards R&D for the Pre for the last few years - they've got a lot of money they need to recoup, most probably more than other companies would. Sprint is hemmoraging subscribers and they need a little buffer to make sure they can weather the rest of the company before ensuring long-term survival. Also keep in mind that this is rumored to be a rather short exclusive so they need to make what they can from this, now.
On the other hand, we're in a full-blown recession right now... the percentage of people who can't afford your phone as you increase the price increases dramatically in a recession. I know they said something like $399 but I'm thinking $249 or $299 might be a little more likely.
The phone should be next to free. It's about the contract.
Including data I pay $91 a month for my iphone.
So far my phone is worth $1291
never mind the 199 bucks to start it off.
It might be 599 because i can see a law suit once this phone is released
This phone with the unlimited data plans are relevant to my interests.
Never had Sprint before. Are they decent or sucky?
I plan on demoing the phone (and service) for a month in October when my tMobile contract is up. I've been told that you can cancel your contract within 30 days if you aren't satisfied.
You can check out anytime you like, but you can never leave.
Drew is correct, you can demo any of Sprint's phones for 30 days without being locked into a contract (just have to pay for that month's service).
I've personally only ever had a problem at one location (indoors at parents house, exactly between two towers). There's lots of reports on their network quality (esp the data network) out there.
sprint service depends on where you're at.
in the los angeles area, according to consumer reports, sprint and verizon are tied for best coverage. and from experience, that's true. i get better service than my friends with at&t and t-mobile.
your mile will obviously vary though. i really haven't had problems with sprint; everywhere my reception was crappy, other providers had crappy reception too. with the exception of outside the US (like Canada where ATT worked and Sprint didn't). Honestly I've only had sprint and verizon and reception wise, I had a much bigger problem with Verizon than with Sprint. In fact Verizon was almost unusable from my condo until they finally built up another tower in the area.
Verizon: No problems w/calls, but that customer service...
AT&T: Got majorly hosed with them in an emergency. Will NEVER use them again.
Virgin: pre-paid. Decent coverage. Lame phones.
T-Mobile: current pre-paid. Dropped calls a-plenty.
Customer service on the phones which I've had contracts have been remarkably bad, however the pre-paid phones' stores/web services have been lackluster and the phones themselves stink (using a RAZR right now, these were trendy at one time?). I guess I'm willing to go into Contract Hell again if the phone and service behind it is decent.
Maybe I should just buy a Chinese knockoff and keep T-Mobling for as long as I can stand the dropped calls...
I really get tired of these "cost to build it" stories. I work for a company that manufactures consumer electronics, so I can tell you that saying that the cost of the PARTS of a product represents the cost to MAKE that product is about like saying that the cost of a Speedo bathing suit represents the cost of training to become an Olympic-class swimmer. I'm an iPhone user, and I don't have any interest in the Palm Pre. But using the cost of parts as a measure of ANYTHING only causes some percentage of people to believe they're being ripped off when they see the retail cost of it. Here's a test for 90% of all Engadget readers: when you finish your work day, is there a physical object in front of you that you personally created that day? No, of course not.. you get paid for the WORK you do, not the direct physical result of it. The same is true at Palm, Apple, or any other company. Companies that truly innovate pay more for their people to spend the time necessary to innovate. It doesn't just arrive as a light bulb over someone's head. People have to try out new ideas, discuss them, refine them, define them, and then ultimately, the cheapest part of the process is nearly always building them. A site like Engadget, which produces NO physical product, should know better than anyone that it's not the cost of the parts, but the cost of DEFINING those parts that makes an excellent product.
Ugh! Can't wait...
waiting patiently
That's $138 more than I currently have in my pocket!
Really interested in this phone--right now it's between the Pre or the new iPhone--but the only thing that might keep me from going with the Pre is the 8Gb storage. I really wish that they would have added external storage up to 32Gb. Would have made this phone a killer. Oh well, might be so great that the storage won't matter.
we can't wait
Useless. ISuppli giving estimates without even having seen the components inside.
Of course, they wouldn't bother with such stupidity if sites wouldn't print it.
Yet another pointless report by the stupidly named iSuppli (how cool, like, that's so web 2.0). Now they don't even bother to take stuff to pieces, they just guess. And still no-one cares.
Wow... If this thing really only costs $300 unsubsidized, then it might be worth it going without a contract rather than with.
Anyone know if you buy this phone unsubsidized, do you still need to have Simply Everything Plan to switch to it?