"When you buy Google Glass for $1,500...
"...you are getting far, far more than just $152.47 in parts and manufacturing"
You're getting the right to be laughed at by everyone else who can see through the Emperor's New Clothes...
Yet another analyst firm has placed a low price tag on the hardware comprising Google Glass headsets. Researchers with IHS said in a teardown analysis of the augmented reality platform that each headset contains a bill of materials (BOM) of $152.47. According to IHS, Google uses parts that cost $132.47 per Glass headset, …
I was going to make a scathing remark about supposed IT experts being so out of touch that they dismiss something which is clearly going to be huge, but then even industry leaders consistently fail to predict what seems utterly obvious in hindsight (the famous Bill Gates mis-quote for example).
Stop being so unbelievably arrogant as to think that because you don't find a prototype product immediately useful, that the concept won;t be of interest to the wider market.
But I'm wasting my words. I'm talking to the community who though the iPad would never take off and that tablets were just a gimmick, and (IIRC) that touch-screen phones would not replace physical keypads.
"they dismiss something which is clearly going to be huge"
ORLY? Still watching films on laser disc? Listening to Quadrophonic music? Experiencing Virtual Reality? And how are you getting on riding your Segway to pick up your flying car?
Maybe you can call me on your Windows Phone and tell me...
Great counter-argument. Laser discs didn't make it but CDs and DVDs and other optical media did. Glass is a similar earlier forerunner of wearable tech. Saying Glass won't make it is a fair point, saying that this is the same as wearables not taking off is asinine.
To be fair, the iPad in its original form never did take off. They had to add a lot of the features that were missing in the iPad 1 before the sales numbers took off. Just like how the original iPhone barely sold until Jobs made the corrections that Balmer suggested.
Anyway, I'd buy a glass in the $200-$300 range, but don't see the value at $1,500.
I'd buy one if it had a retina laser projection system, but it doesn't, so it is lame. It "projects" a 1/2 inch screen onto a tiny piece of plastic at half brightness. So much future, such wow.
I have a sneaking suspicion that at some point the plot of the movie "The Jerk (1979)" is going to become a reality for Google.
Ah, but it's not any sand. As I understand it, it has to be very pure, and currently places like Spruce Pine, NC provide a lot of the high quality quartz for the production of chips, and the raw cost of this is very high.
As the scale of integration increases, so does the importance of the purity of the wafers.
If a BOM had any bearing on manufacturing costs I would be living a vastly different life and airfare would cost about $3 per orbit of the planet.
The total number of Google Glass that have been produced would have cost less to hand assemble in a Manhattan retail space and be packaged in unique boxes each made by Sipho Mabona than it cost to develop the equipment to reproduce Google Glass in quantity.
When people talk about 'economies of scale' it's nearly guaranteed they have no idea what's actually involved in that phrase. You've got to crank out unbelievably huge quantities of identical widgets before any of those economies start to work. A few thousand won't cut it. Nor will just a few million. You've got to have many millions of absolutely identical widgets going down a nearly ceaseless production line full of really expensive equipment manned by lots and lots of people to drop production costs more than a few dollars per unit.
If you're turning out just a few thousand, or few hundred thousand, of anything the costs aren't going to look anything like what you'd expect. That's why say, a house, with 10' ceilings costs less than a house with 9' ceilings or an odd size battery costs 10x over a more powerful battery with better life and performance. Until you get into really big quantities, anything that isn't basically a copy of something else is effectively a custom, one-off product.
It's crazy expensive to make low numbers of something entirely new.
There's a nail squarely struck.
I recently went through this with some folks at work over a quote for a laminated 22" x 17" poster because everyone who saw the quote couldn't believe the cost of "one lousy print", it was $1000 by the way. Of course saying it was a color print from a 200+ MB photoshop file didn't help much but what did help was pointing out that this wasn't just an inkjet job but a press print that was going to take someone a full day or two laying out the colors, setting the platens, etc and at the end that person was going to punch in the number of copies. I went on that it didn't matter if the number was 1 or 37 or 200 because the setup work was all the same. Tossing out some numbers I said it cost $500 for that persons 2 days of work plus the hour of vacation time they earned, the fractional healthcare and insurance cost, any retirement plan, the companies profit and let's not forget Jerry Brown's and Barack Obama's cut so that probably brings it right around $995 and the actual poster material hasn't been paid for yet. The clincher is when I run my finger to the opposite side of the quote where it says Qty: 200 = $2100 and the clever one in the group, there's always at least one, broke out the calculator and showed using the previous numbers show each copy actually cost about $5.50 after the setup charge. Granted, the numbers were a total SWAG but believable, all things considered.
Sure, the BOM is, of course, relevant when working out whether to go with the production of something but this is just another case of clickbait trying to provoke nowtrage that Google is going for even bigger margins than Apple, ignoring that it already has these in many parts of its business due to lower capex. It also completely ignores how expensive glasses can be, especially if you want to be fashionable.
When it comes to fantastic profit margins it's still hard to beat coffee with a BOM of about € 0.10.
All good points if the intent was an Apple like premium consumer product play. However if the intent is to take whichever elements of the Google Glass development work are compelling into new platform/services (ie advertising and data capture) it does suggest that it can be done at commodity like pricing rather than premium. In turn it proves that Glass derivations are viable as a platform play.
@everyone who isn't JDX.
He's right you know.
It costs a lot to manufacture stuff in large quantities.
But what I want to know, is why the analyses seen here don't got the whole hog and then do the BOM's for all the subcomponents.
For example, they quote this chip costing this, the frame costing that. But they don't give BOM's for their manufacture. A mobile chip running a device like this will probably be making 30-50% profit for the manufacturer, and the raw materials cost bugger all (The fab to make it? $8B). The optics? Just a tiny bit of plastic, made from some crude oil somewhere (But a plant to refine and make the plastic?). The raw titanium, a couple of dollars. (But the foundry to produce the titanium?)
So, total actual BOM for a device like this is probably a few 10's of dollars. If that.
What an utter waste of time!
You can put any price tag you want on a pile of rubbish but it's value is only what someone will pay ... initially, if you can find the muppets, you can get massive profit then reduce the price as the market shrinks until you stabilise at a profit margin that suits your cashflow requirements and the bank.
...specs are ALWAYS overpriced - particularly in this country. Those of you who don't have to wear glasses would be appalled at what we short-sighted people have to pay out.
What you pay for a pair of glasses (particularly the frames) does not come close to reflecting the actual cost of the materials.
"Those of you who don't have to wear glasses would be appalled at what we short-sighted people have to pay out."
Indeed - a true story: take one pair of plasic sunglasses costing £2. Hot-press your name on the side (total cost per item including all tooling and packing £1) as you're a 'reputable' fashion designer. Sell them at £60 ...
People obviously paid for the name not the goods. It'll be the same with Google Glazed-over ...
Of course that is why the customs teams & trading standards have such difficulty identifying good fakes.
The raw materials are similar, moulds are fairly cheap, cost of cheap plastic versus expensive plastic are only a few pence so if you are worried about being caught you might pay more for top quality fakes.
As per the article the frames were costed conservatively at $20 and top quality, so any glasses are probably a similar cost, To then cost new plastic glasses at £450 (as I was quoted for my last pair) seems like a generous mark up.
Its not like bespoke items its fairly easy to make good fakes of mass produced goods if you have a big enough market.
Proper molds are unbelievably expensive and knowing how to spot the differences between an article produced in a proper mold vs a cheap mold is the best way to spot most consumer product knockoffs.
Proper molds are often the single most expensive piece of equipment in a factory. A single mold for those shitty plastic chairs that live on every continent costs more than most people's homes. Molds are incredibly complex to make as well. It's a specialty discipline and the three I employee here are some of my highest paid staff.
Knockoffs are almost always made from a DIY silicone direct molding method where an authentic article is put on little risers in a box and a two part polymer poured in. After hardening you cut the block in half, remove the authentic article and you've got a mold to make other molds, or actual product (fakes) with. It's perfectly fine to do this, it's fun too if you're into that sort of thing. But the size isn't going to be right.
Molds made this way don't allow for material shrinkage during curing so your fake is always going to be just a bit different in every dimension from an authentic version. The best place to check is where holes for fasteners are at. The holes in the fake won't line up with the holes in the authentic article.
With glasses a good place to look is at the hinges, the holes for the hinge pins in the fakes won't be in the same place as a genuine version. In such a small space the difference is easily visible with the naked eye. Granted, you really need an authentic version for comparison, but the official manufacturer will give you dimensions if you ask.
Really good fakes are often made with expired molds from the factory where the authentic versions are made. You'll notice fit & finish differences. Edges will be soft (blurry) instead of crisp and in glasses you'll notice a gap at the hinge between the arms and the frame. Expired, out of spec, molds are supposed to be destroyed, but it's big business to sell them out the back of the factory.
Extremely good fakes, most all come from China, are made on the official molds, on the official production equipment and unknowingly paid for by the brand name company paying the factory. It's illegal as shit, and guaranteed prison time if they are caught, but that sort of large scale corruption is hard to stop. Controlling the packing materials tightly has become the going way to mitigate the practice. The extremely good fakes have limited prospects without the proper packaging. Those sorts of fakes are the same as the authentic article anyway, unless you need warranty or repair.
Just thought I would share. As you note, the customs guys don't really stand a chance.