While surfing the worldwide web few days ago, on Google+ to be precise. I stumbled upon a very interesting status update from +Ethan Rossow, I couldn't resist the urge to +1 and reshare the status update. The update was all about a question many of us always have in mind but we often end up not asking maybe because we don't know who to ask and how to ask, while at the same time most of us have not even thought about the question before. Why do Smartphones cost a little amount to build and are being sold for a huge amount ? I will like to answer this question with the context of my friend's update.

Note that there are few reasons or circumstances surrounding this situation and I'll be using Samsung & the Samsung Galaxy S5 to explain and make my points clear in the illustrations within.

Samsung Galaxy S5 is built for $150 (which is within that range in reality) and sold for $800, that's now a $650 profit for Samsung, but there's more to it. Samsung now has to use $550 out of the $650 profit they made for advertising. We all know how powerful, efficient and sales-driving advertisements are, so if Samsung refuses to advertise this product and the company as a whole, then probably no one would know who they are or what they are selling, which means Samsung wouldn't sell anything.

Furthermore, designing of the phone, its engineering, packaging & shipping and also paying their employees are some other reasons why Smartphones are mostly built with a little amount and sold for a huge price. So, most of the money spent on Samsung and other flagships or high-end Smartphones are spent on its building, maintaining, processing and even advertising the product and the company itself. Back to Samsung's case study, at the end of that deal, building the phone for $150, spending $550 for advertisements & some other necessary stuffs and selling it for $800, they are still left with a $100 profit which is not too much for them as returns on investment.

Now, you've seen the main reason why high-end Smartphones are usually said to be built with just few hundred bucks and they always end up being sold for bigger amounts. What do you think about this ? please kindly share this post on your social network profiles and bookmarks. Blessings !!!

- See more at: http://www.stevenbergy.com.ng/2014/11/revealed-why-smartphones-cost-just-150.html

What about the low end guys? don't they advertise? or don't they have employees?

epoxide:
What about the low end guys? don't they advertise? or don't they have employees?

I wonder o so u are op is trying to say all this 15k tecno cost 3k to build abi?

What do u want me to think when you have said it all?

stupid reason.

The Samsung S5 should cost $250 at least to build.

I'd disagree on the Advert part. No way in hell is all that going for advertising.

Mistermamus:
stupid reason.

stupid but its actually true watch
m.youtube.com/watch?v=ZsxQxS0AdBY

Though advert takes junk of their income, it is research, support and unforseen cercumstance( legal battle etc) that takes most of their revenue. For instance Samsung may work on 10 concepts and ideas but only one or two will become useful after they might have spent billions on it. That is why small players sells at cheaper price and still make proffit( cos they copy) while big players sells more at high price and still made loss.

what? they use just $150 to make the fone? too cheap o! and then they want us to buy it for high amount? hmmm we ar nt picking money from three o

EroticAngelina:
what? they use just $150 to make the fone? too cheap o! and then they want us to buy it for high amount? hmmm we ar nt picking money from three o

Yea but we pick it from Four

flawless911:
Yea but we pick it from Four

lols, mistake, I meant tree

.

aywhy93:
While surfing the worldwide web few days ago, on Google+ to be precise. I stumbled upon a very interesting status update from +Ethan Rossow, I couldn't resist the urge to +1 and reshare the status update. The update was all about a question many of us always have in mind but we often end up not asking maybe because we don't know who to ask and how to ask, while at the same time most of us have not even thought about the question before. Why do Smartphones cost a little amount to build and are being sold for a huge amount ? I will like to answer this question with the context of my friend's update.

Note that there are few reasons or circumstances surrounding this situation and I'll be using Samsung & the Samsung Galaxy S5 to explain and make my points clear in the illustrations within.

Samsung Galaxy S5 is built for $150 (which is within that range in reality) and sold for $800, that's now a $650 profit for Samsung, but there's more to it. Samsung now has to use $550 out of the $650 profit they made for advertising. We all know how powerful, efficient and sales-driving advertisements are, so if Samsung refuses to advertise this product and the company as a whole, then probably no one would know who they are or what they are selling, which means Samsung wouldn't sell anything.

Furthermore, designing of the phone, its engineering, packaging & shipping and also paying their employees are some other reasons why Smartphones are mostly built with a little amount and sold for a huge price. So, most of the money spent on Samsung and other flagships or high-end Smartphones are spent on its building, maintaining, processing and even advertising the product and the company itself. Back to Samsung's case study, at the end of that deal, building the phone for $150, spending $550 for advertisements & some other necessary stuffs and selling it for $800, they are still left with a $100 profit which is not too much for them as returns on investment.

Now, you've seen the main reason why high-end Smartphones are usually said to be built with just few hundred bucks and they always end up being sold for bigger amounts. What do you think about this ? please kindly share this post on your social network profiles and bookmarks. Blessings !!!

- See more at: http://www.stevenbergy.com.ng/2014/11/revealed-why-smartphones-cost-just-150.html

Aweh joorh na lie, adverts ko....shay for instance if dey re selling d s5 for 30k, with no adverts, won't dey sell more rather than selling it for like 150k...garri no sell pass indomie noodles?

The idea that mobile devices should be sold at a price point just over the cost of manufacture is based on fantasy and a poor grasp of the manufacturing process. OEMs don't just go to the market and start buying parts which they use for their products. These products are researched, designed, tested and in some cases where they have to use a patented technique royalties are paid. There is also the cost of setting up the factory where these products will be made. All of these don't show up in individual cost of the unit components of the products.

The reason why some Chinese companies can sell for cheap is because they may undercut some of the processes listed above by outrightly stealing manufacturing techniques or use low quality components - that is where they don't omit the component altogether. They may be also be bankrolled by the Chinese government like Huawei which has been linked several times to the Chinese military. The reason for the government support is largely economic and political so they can afford to sell at dirt cheap prices while they gain market share.

Of course this doesnt all mean that all premium charges are justified, or that some OEMs who sell at affordable prices are somehow beating the system. Premium charges also result from OEMs leveraging the power of their brands. There are also a few OEMs that sell at lower prices while maintaining good quality, here the comparative advantage that their regions offer reflect on their products.

aywhy93:
While surfing the worldwide web few days ago, on Google+ to be precise. I stumbled upon a very interesting status update from +Ethan Rossow, I couldn't resist the urge to +1 and reshare the status update. The update was all about a question many of us always have in mind but we often end up not asking maybe because we don't know who to ask and how to ask, while at the same time most of us have not even thought about the question before. Why do Smartphones cost a little amount to build and are being sold for a huge amount ? I will like to answer this question with the context of my friend's update.

Note that there are few reasons or circumstances surrounding this situation and I'll be using Samsung & the Samsung Galaxy S5 to explain and make my points clear in the illustrations within.

Samsung Galaxy S5 is built for $150 (which is within that range in reality) and sold for $800, that's now a $650 profit for Samsung, but there's more to it. Samsung now has to use $550 out of the $650 profit they made for advertising. We all know how powerful, efficient and sales-driving advertisements are, so if Samsung refuses to advertise this product and the company as a whole, then probably no one would know who they are or what they are selling, which means Samsung wouldn't sell anything.

Furthermore, designing of the phone, its engineering, packaging & shipping and also paying their employees are some other reasons why Smartphones are mostly built with a little amount and sold for a huge price. So, most of the money spent on Samsung and other flagships or high-end Smartphones are spent on its building, maintaining, processing and even advertising the product and the company itself. Back to Samsung's case study, at the end of that deal, building the phone for $150, spending $550 for advertisements & some other necessary stuffs and selling it for $800, they are still left with a $100 profit which is not too much for them as returns on investment.

Now, you've seen the main reason why high-end Smartphones are usually said to be built with just few hundred bucks and they always end up being sold for bigger amounts. What do you think about this ? please kindly share this post on your social network profiles and bookmarks. Blessings !!!

- See more at: http://www.stevenbergy.com.ng/2014/11/revealed-why-smartphones-cost-just-150.html

You have not included the cost of 'Research and Development', this runs into billions (dollars) also the cost of 'patents' they lease from other companies, etc.
Cheap smartphone makers neither pay for patents nor R&d and nobody sues them for infringement since they are so small that they are practically invisible.

Mikkyboy10:

Aweh joorh na lie, adverts ko....shay for instance if dey re selling d s5 for 30k, with no adverts, won't dey sell more rather than selling it for like 150k...garri no sell pass indomie noodles?

For where? That was then. Now indomie sell pass garri. By the way op, do your research well. The S5 cost 264 dollars to build. It's S4 and below that cost about $150.

francis247:
For where? That was then. Now indomie sell pass garri. By the way op, do your research well. The S5 cost 264 dollars to build. It's S4 and below that cost about $150.

So, u mean if it's sold for $264, dey ll sell lesser than selling it for $800?

Okay

Quite interesting..

Your opinion is valid if and only if, all s5 phones are advertised separately....
Advertisement can never cost that much for a unit... After all,most things are done in bulk

I only agree with the fact that s5 ad will take a large chunk of the cash the s5 ad was mad gan ronaldo messi elsharawy moses Oscar casillas donovan gotze falcao Rooney Na money o plus the match gan gan great animation

flawless911:
Yea but we pick it from Four

be nice na.

Op wat about iPhone, i have not seen their advert on TV before oo,but the price of their fones de cut eye

a good wine needs no advert.

epoxide:
What about the low end guys? don't they advertise? or don't they have employees?

They do advertise and they also pay employees. But don't you know there are different types of advertisements ? Do you want to compare Samsung's advertisements with Tecno's ad, for example ? Also, I'm sure you know they are targeting different size of areas !!! Samsung is targeting everywhere in the world while Tecno is only targeting few countries in Africa thus they spend different amount of money for adverts. BTW, the amount of money Samsung and some other giant Smartphone manufacturers spend on Ads annually is even more than the net-worth of some other smaller smartphone manufacturers we all know.

Also, as an employee working with Tecno in Africa... Let's assume you get paid #120,000 monthly. Do you also expect another employee who works with Samsung in the States to be paid $720 which is equivalent to the aforementioned salary ? NO, it's impossible... They get paid in thousands of dollars (>$10,000) because of their economy.

brainyack:
I wonder o so u are op is trying to say all this 15k tecno cost 3k to build abi?

I guess the reply to his own question will also help you understand how things work in the Smartphone industry. The total breakdown of most flagships and high-end smartphones are just a little bit LESSER or MORE than $200. So that simply means that the low low-end phones such as Tecno which you used as an example was also built for a little bit lesser or higher than #4000 per 1. Or do you think they are completely foolish and they don't know what they are doing or they are making no profit with those phones. The screenshot below will help you and you can also make your own research about it. Cheers !

spartoo:
What do u want me to think when you have said it all?

LOL... At least, say what's on your mind. Your opinion !!!

2ndOGA:
The Samsung S5 should cost $250 at least to build.

I'd disagree on the Advert part. No way in hell is all that going for advertising.

Maybe, I need to make this clear. The post is about Smartphones being built for a very low price and selling for high prices. I stated it in the post that I'll use Samsung and Galaxy S5 as example which I did, I represented ALL expensive high-end phones with the Galaxy S5. It's not that ALL the flagships were built with exactly $150, some were built for <$150 and some >$150. And on the advert part, they spend very close to that on it, in fact, more than that. In 2012, Samsung spent $401million dollars on their Galaxy Brands only. And in 2013 alone, Samsung spent up to $14billion USD on Advertisement. Where did they get that amount to spend on Ads ? You think it's from Rituals ?? NO, it's from their products price tag, which smartphones is the first on that list.

Their Advertisement is not just displaying "Buy the new Galaxy Note 4 here". It ranges from hiring Lionel Messi to lead a team of footballing superstars again a race of aliens, to being one of the main sponsors of the Olympics, FIFA World Cup and X-Factor, Samsung's name is just everywhere.

Flye:
Though advert takes junk of their income, it is research, support and unforseen cercumstance( legal battle etc) that takes most of their revenue. For instance Samsung may work on 10 concepts and ideas but only one or two will become useful after they might have spent billions on it. That is why small players sells at cheaper price and still make proffit( cos they copy) while big players sells more at high price and still made loss.

Wow !!! You just hit the nail on the head.

EroticAngelina:
what? they use just $150 to make the fone? too cheap o! and then they want us to buy it for high amount? hmmm we ar nt picking money from three o

LOL... Abi naoo