Nexus One Priced Out in Teardown Analysis

About $174.15. That's the early estimate of what it costs to build Google's new Nexus One, according to a preliminary estimate by iSuppli, which regularly breaks down the cost of popular consumer devices as part of its teardown research service.

Kevin Keller, iSuppli's senior analyst for competitive analysis, credits Google (NASDAQ: GOOG) for including the most advanced features of recent phone designs in the sleek Nexus One.

"Items like the durable unibody construction, the blazingly fast Snapdragon baseband processor and the bright and sharp Active-Matrix Organic Light Emitting Diode (AM-OLED) display all have been seen in previous phones, but never before combined into a single design," Keller said in a statement. "This gives the Nexus One the most advanced features of any smart phone ever dissected by iSuppli's Teardown Analysis Service-a remarkable feat given the product's BOM is similar to comparable products introduced during the past year."

BOM stands for Bill of Materials and does not take into consideration other expenses such as manufacturing, software, box contents, accessories and royalties.

In June, iSuppli estimated the total BOM for the latest iPhone 3GS at $179. iSuppli bases its estimate on its own physical deconstruction of the device and estimates of component costs. Like other manufacturers, Apple's (NASDAQ: AAPL) costs decrease as it orders components in greater volume as it has with the surge of iPhone sales.

The Nexus One is being sold by Google using online-only distribution from its own Web site, but the phone is being manufactured by established smartphone maker HTC.

Google is slightly undercutting competitors on price with a two-year contract ($179 versus $199) for others). An unlocked version of the Nexus One sans contract is available for $529. With carrier T-Mobile, the Nexus One offers a service plan that is hundreds of dollars less than its biggest competitors over two years.

The most expensive item in iSuppli's breakdown is the Qualcomm baseband processor, a 1GHz CPU that gives Nexus One a speed edge over slower competitors. iSuppli's estimates the part costs $30.50. That cost is followed by $23.50 for the Samsung 3.7-inch AM-OLED display and $20.40 for Samsung memory.

iSuppli called the 3.7-inch display a "signature feature" of the Nexus One, "which is superior to the conventional LCDs used in most smart phone designs in a variety of ways. Compared to LCDs, AM-OLEDs deliver a larger color gamut, a faster response time, a thinner form factor and reduced power consumption."

It's the first use of a 3.7-inch AM-OLED display iSuppli said it's seen to date in a smartphone.

Another key component is a Synaptics multitouch, touchscreen which, at $17.50, represents about 10 percent of the device's total cost.

A different objective?

But Google doesn't have quite the same business plan of other phone providers, noted Creative Strategies president Tim Bajarin.

"The ultimate play for Google is to guarantee their search engine and other services are on these and any other Android phones and that it drives users back to their ad network. That's their business model," Bajarin told InternetNews.com.

Bajarin compares Google's support of Android and multiple devices to Microsoft's model of promoting an ecosystem of many varied devices. "But with a Google-branded phone, they're kind of hedging their bets, like Apple does by controlling the services," he said.

Dave Needle is the West Coast bureau chief at InternetNews.com, the news service of the internet.com network.


Google, Android, iPhone, nexus one, iSuppli