Google Glass teardown puts rock-bottom price on hardware A teardown report on Google Glass is raising eyebrows over suggestions that the augmented reality headset costs as little as $80 to produce. Researchers with the TechInsights' teardown.com service placed the bill of materials (BOM) of the device at a mere $79.78. The report, which considers the cost of components ranging from …
If a customer (read guinea pig) can stump up the cash, I'd guess that the device is going to get used & talked about incessantly. The big G need some affluent human data points, they found them.
Then surprise the masses a bit down line, with a significantly improved version for about 500 units of your chosen denomination, whilst still having a fat margin.
So the hardware might only cost <$100, but what about the cost of development? That'll be very expensive.
Still not as much as $1500/unit, but if you want to quibble about prices of items look at perfume and fashion products. All goods are priced at the value which the buyer is happy with, be it a cheap tin of tomatoes from Lidl or a Gucci hand bag.
R&D is an NRE and isn't reflected in product costs, for anybody or anything, nobody does that.
Incidentally, the NRE bit is why you can repatriate overseas funds (in the US anyway) to apply to R&D without the tax penalty. Unlike repatriating funds for other purposes.
Because R&D really is non-recoverable, shortsighted investors just absolutely hate it. They look at it just like IT and how they used to view legal: As a cost center that spends money but doesn't directly generate revenue.
It's an extraordinarily dumb way to look at things, especially for investors who put money into the 'fast paced developments in tech'. But what can you do?
R&D as a non-recoverable expense. Well...technically, I suppose you could say that. But the final price you sell something at HAS to take in to account how much money it cost to develop. You have to 'recover' the development costs. Otherwise, total outgoings > total incomings. And that, unless you a re a bank or a car maker, is a bad thing.
No. The final price you sell something at does not include R&D. Any R&D, zero. Nothing technical about it. If it did very few people would be able to afford even the most common household things like shampoo, much less consumer tech. The money is gone the same way utility bills go.
It's not optional. The funds are gone, never to return. You have to replace those funds with incoming revenue, so it should be fairly evident why R&D is unpopular.
My entire little empire is built 100% on the fact that internal R&D is a massive NRE and you can't amortize it. But if you pay 3rd parties to do the expensive R&D for you, those costs are amortized across the lifecycle of the product and recovered in the sale of the product.
As recently as 20 years ago my company simply could not have existed at the size it is now. Internal, cloaked R&D was considered crucial to remaining competitive. That's no longer the business case. Now all that R&D is done by specialty companies like mine and we're responsible for creating and keeping the secrets of how something is made. That's why our facility looks like a prison. We've got everyone's secrets locked up inside.
The last 10 years have seen just crazy growth as everybody gets on the 3rd party R&D train. A mature company could do their own R&D for 4,5,6x, or more, cheaper than having me do it, but then they'd have that huge expense on their books and the income hit because the funds were forever gone. I can charge so much for my services because those costs are ultimately picked up by their customers (you're welcome) instead of being absorbed by investors.
Yeah that's my impression too - that the $1500 is to ensure that only people (developers, journalists etc.) who are actually going to do something with them will try and buy a pair. For $1500 you're less likely to want to see how well they blend, and more likely to do something useful...
Oh come on! Are you seriously telling me that they sold these things without making people sign a licence agreement (probably in blood) that they wouldn't try to take the things apart or examine them or attempt to decompile the code or do *anything* that the Chocolate Factory wouldn't approve of...?!
Not sure if your post was a joke or not so apologies if it was.
Assuming not then you would appear to be one of many that feel EULA's and the like can say anything while ignoring things like consumer protections and first sale doctrine? You can put anything you like in your terms and conditions but they don't (yet) override the laws of the land.
A much more interesting thing for the general public to see are finished good component costs. Raw components are stupid cheap. The wee caps on rolls are so cheap you can use them as packing material for Christmas presents.
But the .7 cent part that isn't prepackaged on a roll or in a tray is going to cost you .80 cents, or more, by the time the widget is completely assembled. Comparing the cost of raw components to the price of a finished good is like saying the wholesale cost of gasoline can give you insight into the production cost of a new car.
Those who paid $1500 for it are not complaining, so what does it matter whether it cost $10 or $10,000 for Google to build? How is it the business of anyone other than those who have actually purchased one what it costs Google to make?
These tiresome complaints come up each fall about Apple, when the teardown shows that the latest iPhone costs about $200 to build and people whine about how they're selling them for $649. So what? No one is forcing anyone to buy a particular product, and you don't have to buy any product if you think the seller is making "too much" money on it.
Just be careful what you wish for, if all consumers were "educated" about the cost to build stuff and refused to buy anything selling for more than 10% more than it cost to make, we wouldn't have any smartphones and would be lucky to even have desktop computers. The ability of investors to make significant profits is what spurs the type of risky investment that moves technology forward. Sometimes you sell a product for a lot more than it costs to make and you make a billion dollars. Other times they sit on the shelves and you write off a billion dollars (just ask Microsoft how Zune and Surface have done for them)
Low yield runs on manufactured items cost ridiculous amounts of money.
I can easily see google being charged $400-$500 more per unit manufacture at present considering they have only had a limited run of around 3000-4000 units, as they ramp up manufacture to 10,000 units plus per year then the price of manufacture will fall drastically.
Something I haven't seen the detractors take into consideration.
As per usual I await many downvotes for pointing this out, talking sense seems to bring out the morons as evidenced by prior sensible replies in this thread.
I grew in a communist country (although I have to admit that it was a long time ago ;)). But isn't it obvious to everybody that the price has nothing to do with the costs for making the good?
The price is made by the market. The entrepreneur that is able to call the highest price with the lowest cost is the most successful. So why do so many people complain? Nobody is obliged to buy the product on this price. And if it is so easy to build as some people suspect another company will offer a similar product at a lower price soon.
My opinion on the high price tag. Google just doesn't want Glass to be a mass product at the current point in time. They wanted it to be available for sale but not to everybody. Many product categories start in the luxury market with high price tags and become a commodity with reasonable prices eventually (see PDAs, smartphones etc.).
And to be honest considering the effort to develop such product (I work in development/product management myself) I think 1500$ is no too much at the time. They will barely make a profit with this currently.
Google: Cheapest quality phones & tablets on the market
Google: Cheapest fibre broadband to certain American cities
Google: R&Ding driverless cars, voice 2 text, TV services and more exciting future stuff...
Google: Free software inc mapping, Earth, Mars, Browser, Apps - cost to you: Advertising.
They don't eat children, they fight against SOPA and they're joining in the fight against the FCC destroying net neutrality and Hollywood hates them. Are they self interested like all corporations? of course, but for once that self interest seems aligned, mostly, with what we want.
Google Glass aren't on general sale, they're pushing them onto developers, seing what they bring to the table - all it takes is one developer to create the 'must have' app for them and bingo! a massive seller - @ whatever price (which I'm betting will be in the $200 - $300 range).
Currently working on a consumer product here.
Currently, each prototype costs $10,000 to make. That figure does not include any R&D or other one-off costs like software development, just the material (individually 3D printed parts) and labor (bolting the parts together and hand-wiring lots of cables at $$$/hr).
The BOM for the final product is around $100, but that requires millions of investment for the high-volume assembly lines. And it does make a large price difference if you buy 10 vs. 10 million units.
So they may both be right.
I'm sure the Glass will be priced at $0 eventually, if you don't mind your data being mined for the advertisements constantly hovering at the edge of your vision.
There are many appliances and devices being sold that cost much less in pieces than the asking price. When taking something apart to estimate the cost of the pieces, it is not possible to know the development cost for each piece, the design cost for the device, and also the cost of development of the software it will be using to function.
We can look at a piece that is part of something, and it can appear to look like it does not cost very much to manufacture. Then if you consider that maybe only a small number of the specific part was manufactured in relation to the development cost the total cost can be huge.
About twenty years ago I was involved in the development of a device for controlling the phasing and delay of sound. The cost to produce each unit was not too expensive if not including the R&D that went in to it. When the R&D and setup for production was included in relation to the sell price the cost per unit manufactured was huge. In the end the product did not succeed very well because the industry changed too quickly before all the costs were able to be retrieved.
To add to all of this, when the first LCD monitors came out in mass production they started to be produced slowly. At the beginning when they were targeted to be mass distributed during the first year or so many of the models were selling at below the actual manufacture price. The manufactures were putting these out on mass as an investment to get the cost down over the volume of sales for a targeted time duration. They were looking at after two years they should be starting to have a profit.
Back in 1996 a 14 inch LCD monitor with a contrast ratio of 250 was selling for over $8000 US. In the year 2000 an equivalent which was improved a bit was selling for about $1600. Now we can purchase a far superior LCD screen at 24 inches for a few hundred dollars. The R&D to develop this technology was in the billions of dollars. The cost to bring these in to mass production was at a huge cost, but in the end they did it.
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