How Much Your Smartphone Really Costs

Contributed by Joule Group Member Francis Syms, CTO. Follow the Joule Group on Twitter @thejoulegroup.

Many of us at The Joule Group were working on the Bold 9000 at BlackBerry when the first iPhone launched with AT&T back on Jun 29, 2007. Of course, Blackberry was working on the AT&T launch of the Bold right around that same time – a release that wouldn’t happen until early 2008. For a couple generations, BlackBerry had enjoyed a giant lead in the smartphone race, but this was the beginning of the decline. There were widespread rumours that Steve Jobs personally had something to do with the large gap between the iPhone’s AT&T launch and when the Bold was able to join the network. Both devices used new 3G technologies at the time and had comparable specs. Had these devices been launched at the same time, would things have turned out differently? Who’s to say? What we do know for sure is that current leaders in today’s smartphone climate continue to create a far greater and ever increasing margin on their devices while the real cost to the consumer (not to mention the environment) is disrespected by both the carriers and the companies that manufacture your phone.

The smartphone industry has seen lots of change in the last seven years. And now, in the latest shift, it would appear Apple has lost its advantage over Android devices – especially Samsung. We know what it cost to launch and market The Bold. What follows is a breakdown of what Apple, Samsung, and Sony pay for their devices. We thought you’d like to know how your carrier could afford to give you a device that’s seemingly so valuable and present it as a simple perk

So, how much does your smartphone really cost?

Ever wonder why these smartphone companies have such high valuations? Just look at the margins they make and you’ll quickly see why.

For the iPhone, the top component costs are:

Memory: $30
Display and touch screen: $44
Processor: $18
Camera: $18
Wireless (Bluetooth, WIFI, Cellular) $34
Housing: $33

The remainder in the expense is in designing the devices and paying celebrities and athletes to use them – so you can thank ­­­­­­­­Zooey Deschanel for your iPhone costing more than a round-trip flight to Iceland.   

Also, you can see that as the premium smartphone, Apple is well positioned to capture a larger margin than its competitors (about $600 per phone compared to less than $500 for both Samsung and Sony). 

In 2012, Cole Brodman (T-Mobile’s Chief Marketing Officer) was quoted as saying that if he had a magic wand, he’d use it to eliminate carrier subsidies on mobile phones. His point was that, because the consumer is paying less than $200 per device on a subsidized two-year plan, people are treating phones as throwaway devices. Maybe if we were all forced to pay the full price for a smartphone, we wouldn’t buy a new one every couple of years. Only adding fuel to the fire, Rogers just introduced a plan whereby you can upgrade your phone yearly without paying an additional upgrade fee whatsoever. In the end, we promise that everyone ends up paying the full price for their phone – even if it seems like a deal upfront.  

Where’s your smartphone made?

As we know, none of the smartphones we use are made in North America. Do we care? There’s been a lot of press in recent years about working conditions at Foxconn (where the iPhone is made). After spending much of our working life living in and travelling to Asia, we can personally attest to the difficult conditions that some (not all) employees live in. This is not unique to the smartphone industry, however; many construction workers in China come to the cities looking for work and, in many cases, live in poorly equipped housing directly on the construction site. Other industries in Asia have similar challenges. This is not a justification but rather an observation – it may be a problem but it’s not one that’s unique to this industry. So don’t get caught up in the idea that it’s only Apple who’s destroying the world, ‘cause everyone is. To really unpack this inequity we’d probably need to be writing a 200-page paper about socio-economic imbalance or making a film with a really cute title. What follows here is where your phone is made. You decide if you think these regions are worth your margin.

How big is the carbon footprint of your smartphone?

Answer: 4 trees

According to the Ecologist, the carbon footprint of the iPhone 5S is 70kg.  Trees are expected to offset a 1 tonne carbon footprint over their average 100-year lifespan – that’s about 10kg per year.  Assuming you buy a new phone every year, you need about four trees to offset the footprint. So the next time you’re thinking about getting an upgrade, you should probably also consider if you feel like chopping down a tree that day too.

In 2013, approximately one billion smartphones were sold. Assuming that the two-year average holds, this translates to four billion trees. To offset this emission, you’d need to have five tree-planters planting 15,000 trees per week, every week of the year. Like, forever.

So from now on just try to keep in mind that your need to play Fruit Ninja and check Twitter as fast as possible isn’t just giving Apple a cool $600 a pop, it’s also systematically helping to destroy the environment. But hey, at least you’re helping to employ tree-planters along the way.

It’s like the peacock says.

#LYNL | (Live Your Notable Life)


Cover image from: Mashable

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