Wednesday , August 23 2017

The 32GB Google Pixel XL Costs US$286 To Manufacture

google_pixel_xl_chart_exploded_version_two_revised

The Google Pixel XL is not a cheap phone, as my credit card will attest to. Google have so obviously priced the phone exactly the same as the high end iPhones, aiming at the premium market. It also seems that the cost to manufacture it is on par with the iPhone and the Samsung Galaxy S7 Eddge according to a preliminary teardown estimate from IHS Markit.

In a breakdown of the parts inside the phone the cost of all the parts is just US$278, including all the cables etc included in the box. Add on just under US$8 to put it all together and it comes out at US$285.75. Considering the retail is US$769 it may seem an unfair markup but the markup is in line with that from Samsung and Apple for their phones. 

As you can imagine most phones have very similar components, especially at the high end and thus their costs to make are also very similar. By the time you take into account the marketing budget, and let’s face it, the Google marketing for these phones is unprecedented for them in its extent, the legal costs and distribution. A lot of people also tend to forget about the product development and R&D that go into developing a phone, or any product for that matter.

Google are marking up their Pixel phones, there is no doubt about that, but when you take into account the marketing budget they seem to have plus distribution costs they are certainly in line with the other manufacturers of high end phones.

Do you consider this too much of a markup by Google?

 
Source: IHS Markit.

Scott Plowman   Associate Editor

Scott is our modding guru - he has his finger on the pulse of all things ‘moddable’, pointing us towards all the cutting edge mods hacks that are available. When he’s not gymming it up, or scanning the heck out of Nexus devices, you'll find him on the Ausdroid Podcast.

Outside of Ausdroid, Scott's a health care professional and lecturer at a well known Victorian university.

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18 Comments on "The 32GB Google Pixel XL Costs US$286 To Manufacture"

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GregAndo
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GregAndo

Discussions such as these really annoy me. The article is wrong and so are most of the people below. The truth is no one here has even a remote clue how much it costs to produce a pixel for its lifetime, including software development and updates. They only think they do. So they should not pretend they do know. Thanks to this article we have an IDEA how much the components cost, but it is only a piece of the puzzle. Someone got it right though, it is either acceptable or not acceptable to each person. Nothing else is relevant.

Rod
Valued Guest

Good luck to them. They have done their market research and think they can do it. As a Nexus 5 user it was a bit annoying they they went all premium like but there are other, cheaper phones out there which deliver 95% of the experience for half the cost.

RC
Valued Guest

Most phones from apple have a similar price.

Google is happy to charge the same as Apple for their phones. Without many of the features that keep people using their iPhones in the first place.

Personally won’t be buying one. One for price and two for design. I’d rather buy a iPhone that at least i’ll know will hold it’s value and i can walk into a store and have any issues dealt with on the spot.

jdt1986
Valued Guest
jdt1986
So they reckon ONE 32GB Pixel XL costs over $370 AUD to make? Yeah, righto… The Pixels are still an absolute rip off for what you’re getting, in my opinion. There are plenty of other phone companies who sell decent (and in some cases, excellent) phones for under $500, how have they survived, if manufacturing costs are apparently so exorbitant? I am so sick of all the posts and articles trying to justify the ridiculous price point of the Pixels, which puts it out of reach for A LOT of people. Or is that why it’s popular with certain people?… Read more »
Jackson Grant
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Jackson Grant

This is why the Nexus was much more appealing to us tech readers, why do we care about their marketing budgets? We knew about the Nexus line, we know about the pixel line, there is now no logical product for us to buy since we like value, open source software and quick updates.

Shakeel Ali
Valued Guest
Shakeel Ali
You raise a valid point about the other companies who can seemingly sell us a top of the line phone for half the price of mainstream brands. The one thing that they do differently to the Apple’s, Samsung’s and Google’s of the world is marketing and distribution. Apple, Samsung and Google all have massive worldwide distribution networks and multi-billion dollar marketing budgets. While im not trying to justify the absurd prices they charge for their flagships, it does give some context as to why they are charging these prices. Google have clearly put a lot of money into marketing this… Read more »
Fred
Valued Guest
Fred

As I pointed out below, even ‘hundreds of millions’ on marketing (which is what’s claimed) only accounts for $10-20 of margin. Distribution is no worse than the Nexus phones.

It’s kind of simple, google is playing apple – they went full evil. Time will tell if they can make that stick (I’m betting not).

Member

If Google went “full evil” they wouldn’t allow other manufacturers to run Android on their handsets which will continue to be available at whatever price point works for you. Hating for Google for pricing the Pixel high and seeing it as a bad sign for Android is like hating Microsoft for making and pricing their Surface line. You don’t like it, continue to get whatever cheaper device from whatever manufacturer you like. Isn’t freedom great?

SachmoJoe
Valued Guest
SachmoJoe

This article is just click bait aimed at generating dismay from folks that don’t understand business. What’s worse is that the author knows better, and explains it as such, if you read the full article, but didn’t hesitate to put a provocative headline on it. Disappointing.

Member
Adam J

Eh? How does a factual statement in a headline count as clickbait?
A provocative headline might have been “Pixel XL owners paying 240% premium to fund Google’s billboards”

Member
They need to pay for licencing of patents, product certification for each country, frequency band, electrical standards (Australia has its own certification on top of every other country), safety regulations, not just on the phones but the chargers, and cables they sell with it as well. There’s heaps of other factors to consider other than “here’s the parts plus marketing, wow we’re being ripped off” claim most people make. Do they make a margin? Of course, otherwise why bother. I’d ridicule them if they didn’t. The margins are slim on these type of products, the only way to make money… Read more »
Fred
Valued Guest
Fred
You neglect to realise that those costs are the same as for the Nexus phones which were half the price. In fact as they assume more sales on the pixel phones, the per unit costs are less on the pixel. There’s margin, and there’s price gouging. And nope, the margins are NOT slim. You only have to look at apple’s cash pile to see that’s not the case. In fact you tend to accept it by saying the LG G5 at $500 is at cost (whereas the RRP is over $1000). And I’d say that everyone is still wetting their… Read more »
David Anderton
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David Anderton

Considering Google owns the majority of its advertising medium I think it’s a ridiculous Mark up

sebe
Valued Guest
sebe

With Telstra offering the pixel 32gb model on their $95 for only an extra $4 per month for phone repayment, I wonder what the wholesale price is. Maybe someone from jb or telstra could leak the wholesale price.

Member
There is no such thing as an “unfair” mark up. The price of any item in a free market is completely arbitrary and is the result of so many variables. Every customer has a choice to buy basically any item on sale. Even if the actual thing is not discretionary ( eg food ), we generally have choice about WHICH thing to buy.. if a company can, through good marketing or sales processes, sell their phones for more $$, then good for them… ( ahem APPLE ) … any margin they make is the reward for any number of things…..… Read more »
ozvic
Valued Guest
ozvic

Does that price include HTC’s markup/cut?

Member
Darren

Of course not, HTC made them for free.

Fred
Valued Guest
Fred

Here’s an idea.

Rather than just saying “well it looks like a massive markup, but there’s these other bits”, how about actually putting a number on those other bits?

For instance, the talk is of ‘stretching into the hundreds of millions’ spent on marketing. However if you assume google want to sell at least 10m pixel phones (the Nexus ones could touch that with no marketing), then we get $10-20 per phone marketing costs, and much of that dual use.

Go through the rest of your additional factors – and come up with what margin have left over…

wpDiscuz

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