Palm Pre: $138 to build according to iSuppli
By Laura June 
posted April 29th 2009 10:49AM
posted April 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 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?