You sometimes see headlines like "$999 iPhone only costs $400 to make". Generally these headlines are from calculating the cost of individual components. This is a significant part of the BOM but there are other parts. e.g. SW licenses may also have a cost per unit sold.
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There are labour costs too during assembly. An example: let's say you have a high end AR feature, well each phone now has a calibration step. Can be in BOM or COGS.
What about more overall costs that aren't per device? Some OEMs put it in the BOM, some put it in the COGS.
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What about more overall costs that aren't per device? Some OEMs put it in the BOM, some put it in the COGS.
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Tooling is something important to consider. Tools like plastic injection moulds can be $$$
Licensing. It costs money to use other's IP, e.g. access to a SoC platform.
These costs are generally spread out across a forecasted volume/tool's projected lifetime.
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Licensing. It costs money to use other's IP, e.g. access to a SoC platform.
These costs are generally spread out across a forecasted volume/tool's projected lifetime.
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Let's move onto COGS. COGS will include a lot of operational costs. Shipping is the one that jumps to mind. A device will generally have been freighted several times before it hands in your hands.
Usually factory to local warehouse is by sea and can take over a month.
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Usually factory to local warehouse is by sea and can take over a month.
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When it gets to a warehouse, it is shipped to a retailer, but can sometimes be direct to the customer if purchased through the OEM. Once you include shipping insurance, tariffs & handling, these costs add up.
What else? Certification. Those CE and FCC markings cost $$...
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What else? Certification. Those CE and FCC markings cost $$...
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There are some other mandatory certifications like GCF you need to include for some carriers (or their own mandatory certification). Pre-launch engineering samples and in-lab tests also cost time and money.
R&D costs are also usually thrown in here, not just HW but SW too
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R&D costs are also usually thrown in here, not just HW but SW too
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Warranty. Have to include that here as well. Once an OEM's tested the product's various failure rates over its lifetime, they will add those replacement, repairs, repair components, reverse logistics and customer care ops & labour costs here too (oh, and also fraud costs)
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Things like headcount, offices, and other operational costs can be included in COGS, but can also instead be included in the margin between COGS and the sell in price you sell to a retailer at.
In that margin you also include marketing costs.
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In that margin you also include marketing costs.
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Marketing budget is not just about ads, but also things like events or promotional activities. This also pays for the seeding units for journalists and influencers.
Lastly, there's channel margin. This is what a retailer makes between the sell in price & retail price.
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Lastly, there's channel margin. This is what a retailer makes between the sell in price & retail price.
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Channel margin is a tough one to put a % on, as it depends on the product category and segment. Frequently the margin also includes MDF - marketing development fund, basically a portion of that margin the retailer has to use on marketing the product.
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Also note a lot of countries have retail prices inclusive of tax (e.g. EU 15-25% VAT)
So yeah, that's a high level overview of the various costs involved in a device. None of this was based on anything specific to HTC or confidential, but a general overview of a device.
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So yeah, that's a high level overview of the various costs involved in a device. None of this was based on anything specific to HTC or confidential, but a general overview of a device.
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