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Google claims that prices have fallen and that the supply chain is efficient enough to bring down prices: http://www.droid-life.com/2012/11/02/googles-director

Google claims that prices have fallen and that the supply chain is efficient enough to bring down prices: http://www.droid-life.com/2012/11/02/googles-director-of-business-strategy-for-android-calls-299-nexus-4-revolutionary/ http://www.droid-life.com/2012/11/02/googles-director-of-bus... We have seen over the last 20 years that computers not only get faster but also cheaper. The fact that the top phones have stayed at 600-700 for the past several years suggests that they are padding costs or simply have no compulsion to be efficient in their supply chains. Google says this is definitely the case and they are still making money on the Nexus 4, even though it costs much less than other flagship phones. Also note just how horrible Motorola built-in UI is, for example. Something's wrong if they can make an inferior project and not expect to get killed. There's a lot of inefficiency at these companies and they don't care and they don't have to care. Google is trying to change that. The Galaxy Nexus was sold at $399 unlocked (some time after release). The Nexus 4 is $299. Google is trying to bring the cost down further. When top-line phones hit $150-200 unlocked, people will be able to upgrade once or twice a year. This will actually encourage even higher quality phones. Once all the topline phones fall to $299 or less, it opens up a space for someone else to make a really, really nice phone at the old $600 level. This is not crazy talk. This is exactly what happened with PC laptops over the last 5 years. Now the better Ultrabooks that are now jockeying for the position of "high-end PC laptop." So there are a lot of benefits and I believe the drop in prices will lead to better phones and tablets across the board.

phaus 14y ago
I know that miniaturization is pretty tough, but I hope that we get to the point where I can buy something as nice as a Galaxy Nexus for about 200 off contract. 600-800 for a cell phone is tough to swallow when I can buy an awesome laptop like a thinkpad X230 for the same price range, the latest iPad for 100-300 cheaper, or a macbook air for just 200 more. Is there really 600-800 dollars worth of technology in a smart phone, or are the margins really high? I honestly don't know one way or the other. I do know however, that the Galaxy Nexus is the best phone I've ever used, and the fact that it was 349.00 when I got it played a large part in my decision.
orangecat 14y ago
When top-line phones hit $150-200 unlocked, people will be able to upgrade once or twice a year. Not to mention that it would finally break the carrier subsidy/contract model. If you're looking for business practices that harm consumers, that should rank many places above the "problem" of phones and tablets being too affordable.
- 2muchcoffeeman 14y ago
  I think that would be pretty terrible. What happens to all the waste? Is this price inclusive of the original manufacturer or retailer taking my old electronics back and trying to recycle it?
  - mseebach 14y ago
    Refurbished smartphones for developing countries.
    - viseztrance 14y ago
      I don't think refurbished means what you think it means.
- Camillo 14y ago
  Why would it break the contract model? A carrier could still pay a $150-200 subsidy and give you the phone for free, and people would lap it up. I think people are looking at this from the wrong side. In the US, they don't sell you a phone with a service contract attached: they sell you a service contract with a bonus phone. Yes, Google or Amazon could give away phones for free to eliminate the value of the bonus phone, but you still need a strong alternative to contracts for service. Currently you have carriers like T-Mobile that offer semi-decent prepaid service, although it's been hampered by technological issues (the band they use for 3G is incompatible with iPhones, although supposedly they're in the process of changing it). Why are so many people still buying contracts, though? Is it really just because of the subsidized phones? I'm not convinced. Furthermore, Europe already has a very competitive phone service market, with extremely popular prepaid plans that are far cheaper than anything you can get in the US, and no locked phones; and they achieved all of this without resorting to phone dumping. For all these reasons, I think selling phones at or below price has nothing to do with disrupting the American carrier model (which hardly makes sense for Google or Amazon anyway - they're not even in that industry!).
mdasen 14y ago
I think part of the disconnect here is phones vs. tablets. Intuitively, phones seem to have kept a premium price probably being propped up by carrier subsidies (in the States). However, there's a part of the link you provided that sounds a bit hollow. We simply believe there’s a better way of doing it without extracting that much payment from end users, because there are other ways to drive revenues. That line in particular basically says, "we'll find other ways to get margins off of consumers". It also rings slightly hollow in that Motorola is losing money, LG just swung to profitability this quarter after losing money for a few years (as well as exiting the tablet market because of the inability to profit), and HTC has seen its ability to profit plumet. There are certainly inefficiencies and some companies have kept good margins (Apple and Samsung), but it's not as if most players are doing so well. In tablets, we see really hard price competition. Amazon is selling the Kindle Fires at cost. In short, tablets are cheaper than phones with much smaller displays and smaller batteries. In a certain light, why is the Nexus 4 a full $150 more than a Nexus 7 (assuming the same 16GB storage)? Sure, miniaturization probably has to do with the cost difference, Also, I think the comparison to laptops might not be so great. Ultrabooks aren't doing so well and we've seen huge consolidation of competition in the PC/laptop market. Heck, we nearly saw HP leave the market. Dell generates less than 5% of its income from the consumer market. Yes, we have some Ultrabooks coming in, but they aren't selling so well and seem more driven by Intel than by the manufacturers (excluding Apple here). In a lot of ways, Laptops are actually showing how this is a problem: I hate that 1366x768 resolution, but everyone uses it because it's cheap and everyone is focused on price. Yes, I can spend over $1000 and get a nice resolution, but there's this gap in the middle. I remember reading an article lamenting how Dell would try every couple years (in a half-hearted sense) to create a MacBook Pro competitor line just to get hit by a complete lack of sales as people only cared about price. And that's ok in a certain way, but it also leaves little room for innovation and risk taking (what Engadget was commenting on). If I want a Windows version of a MacBook Pro 15", what is there? Certainly, there is no Retina MBP competitor. Really, I don't want Apple to take the high end and have every Android vendor compete on price alone like laptops devolved into. Heck, laptop vendors compete so much on price that poor quality keyboards and trackpads are the norm. Any hidden place they can save a cent gets hit. I'm sure the Nexus devices have fine touchscreens, but if price becomes the only object, things like the touchscreen quality could get hit in the future. We want the lowest price for good stuff. It's easy to read processor and RAM specs, but we also want to make sure that the non-listed stuff works well. And we want to make sure that we don't get to a point where we aren't improving because we've programmed ourselves to be so cheap that we won't spend an extra $15 for something much nicer - I feel that way about trackpads. We'll see over the coming years how it all plays out, but LG already exited the tablet market. Motorola's last tablet was a year ago? There certainly are vendors struggling and some giving up. That's not to say that there isn't some bloat in there and not efficiencies to be had. Google is a great company - great companies push the bounds. At the same time, I'd like to be sure that the level of competition will stay high - that there will be many companies able to remain competing. It's hard for us on the outside to be commenting because we don't have complete information. Google is saying things to the effect of, "well, prices are sorta coming down and we think we can make up the money in other ways like making sure that people continue to think of Google for search". According to the link, even Google's Motorola division seems to think Google's vision for pricing isn't quite fully realizable. You might be totally right and in 5 years we'll have awesome competition at better price points than we have now and I'll have been the silly spoil-sport raining on the parade. I was mostly trying to point out that these prices may not be sustainable (at the same time, they may well be). Even if companies aren't purposefully trying to corner the market or anything, this could happen. Amazon might think that they'll make $x off of content for each Kindle Fire only to find out that people just don't buy on them, but were buying them on price alone. Then, a few years later when many companies leave the market due to price, we're left with less competition. Low prices are certainly good. We want to make sure that the prices and innovation keep going into the future.
bitcartel 14y ago
Costs are coming down. This is what a retail price of 999 yuan ($160) gets you: "ZTE U950 smartphone packs a 1.3GHz Tegra 3 chip, 1GB of RAM, 4GB of internal storage and a 2,000mAh battery beneath the 4.3-inch display." http://www.engadget.com/2012/10/29/ztes-u950-tegra-3-phone/ http://www.engadget.com/2012/10/29/ztes-u950-tegra-3-phone/

phaus 14y ago

I know that miniaturization is pretty tough, but I hope that we get to the point where I can buy something as nice as a Galaxy Nexus for about 200 off contract. 600-800 for a cell phone is tough to swallow when I can buy an awesome laptop like a thinkpad X230 for the same price range, the latest iPad for 100-300 cheaper, or a macbook air for just 200 more. Is there really 600-800 dollars worth of technology in a smart phone, or are the margins really high? I honestly don't know one way or the other. I do know however, that the Galaxy Nexus is the best phone I've ever used, and the fact that it was 349.00 when I got it played a large part in my decision.

orangecat 14y ago

When top-line phones hit $150-200 unlocked, people will be able to upgrade once or twice a year. Not to mention that it would finally break the carrier subsidy/contract model. If you're looking for business practices that harm consumers, that should rank many places above the "problem" of phones and tablets being too affordable.

2muchcoffeeman 14y ago
I think that would be pretty terrible. What happens to all the waste? Is this price inclusive of the original manufacturer or retailer taking my old electronics back and trying to recycle it?
- mseebach 14y ago
  Refurbished smartphones for developing countries.
  - viseztrance 14y ago
    I don't think refurbished means what you think it means.
Camillo 14y ago
Why would it break the contract model? A carrier could still pay a $150-200 subsidy and give you the phone for free, and people would lap it up. I think people are looking at this from the wrong side. In the US, they don't sell you a phone with a service contract attached: they sell you a service contract with a bonus phone. Yes, Google or Amazon could give away phones for free to eliminate the value of the bonus phone, but you still need a strong alternative to contracts for service. Currently you have carriers like T-Mobile that offer semi-decent prepaid service, although it's been hampered by technological issues (the band they use for 3G is incompatible with iPhones, although supposedly they're in the process of changing it). Why are so many people still buying contracts, though? Is it really just because of the subsidized phones? I'm not convinced. Furthermore, Europe already has a very competitive phone service market, with extremely popular prepaid plans that are far cheaper than anything you can get in the US, and no locked phones; and they achieved all of this without resorting to phone dumping. For all these reasons, I think selling phones at or below price has nothing to do with disrupting the American carrier model (which hardly makes sense for Google or Amazon anyway - they're not even in that industry!).

mdasen 14y ago

I think part of the disconnect here is phones vs. tablets. Intuitively, phones seem to have kept a premium price probably being propped up by carrier subsidies (in the States). However, there's a part of the link you provided that sounds a bit hollow. We simply believe there’s a better way of doing it without extracting that much payment from end users, because there are other ways to drive revenues. That line in particular basically says, "we'll find other ways to get margins off of consumers". It also rings slightly hollow in that Motorola is losing money, LG just swung to profitability this quarter after losing money for a few years (as well as exiting the tablet market because of the inability to profit), and HTC has seen its ability to profit plumet. There are certainly inefficiencies and some companies have kept good margins (Apple and Samsung), but it's not as if most players are doing so well. In tablets, we see really hard price competition. Amazon is selling the Kindle Fires at cost. In short, tablets are cheaper than phones with much smaller displays and smaller batteries. In a certain light, why is the Nexus 4 a full $150 more than a Nexus 7 (assuming the same 16GB storage)? Sure, miniaturization probably has to do with the cost difference, Also, I think the comparison to laptops might not be so great. Ultrabooks aren't doing so well and we've seen huge consolidation of competition in the PC/laptop market. Heck, we nearly saw HP leave the market. Dell generates less than 5% of its income from the consumer market. Yes, we have some Ultrabooks coming in, but they aren't selling so well and seem more driven by Intel than by the manufacturers (excluding Apple here). In a lot of ways, Laptops are actually showing how this is a problem: I hate that 1366x768 resolution, but everyone uses it because it's cheap and everyone is focused on price. Yes, I can spend over $1000 and get a nice resolution, but there's this gap in the middle. I remember reading an article lamenting how Dell would try every couple years (in a half-hearted sense) to create a MacBook Pro competitor line just to get hit by a complete lack of sales as people only cared about price. And that's ok in a certain way, but it also leaves little room for innovation and risk taking (what Engadget was commenting on). If I want a Windows version of a MacBook Pro 15", what is there? Certainly, there is no Retina MBP competitor. Really, I don't want Apple to take the high end and have every Android vendor compete on price alone like laptops devolved into. Heck, laptop vendors compete so much on price that poor quality keyboards and trackpads are the norm. Any hidden place they can save a cent gets hit. I'm sure the Nexus devices have fine touchscreens, but if price becomes the only object, things like the touchscreen quality could get hit in the future. We want the lowest price for good stuff. It's easy to read processor and RAM specs, but we also want to make sure that the non-listed stuff works well. And we want to make sure that we don't get to a point where we aren't improving because we've programmed ourselves to be so cheap that we won't spend an extra $15 for something much nicer - I feel that way about trackpads. We'll see over the coming years how it all plays out, but LG already exited the tablet market. Motorola's last tablet was a year ago? There certainly are vendors struggling and some giving up. That's not to say that there isn't some bloat in there and not efficiencies to be had. Google is a great company - great companies push the bounds. At the same time, I'd like to be sure that the level of competition will stay high - that there will be many companies able to remain competing. It's hard for us on the outside to be commenting because we don't have complete information. Google is saying things to the effect of, "well, prices are sorta coming down and we think we can make up the money in other ways like making sure that people continue to think of Google for search". According to the link, even Google's Motorola division seems to think Google's vision for pricing isn't quite fully realizable. You might be totally right and in 5 years we'll have awesome competition at better price points than we have now and I'll have been the silly spoil-sport raining on the parade. I was mostly trying to point out that these prices may not be sustainable (at the same time, they may well be). Even if companies aren't purposefully trying to corner the market or anything, this could happen. Amazon might think that they'll make $x off of content for each Kindle Fire only to find out that people just don't buy on them, but were buying them on price alone. Then, a few years later when many companies leave the market due to price, we're left with less competition. Low prices are certainly good. We want to make sure that the prices and innovation keep going into the future.

bitcartel 14y ago

Costs are coming down. This is what a retail price of 999 yuan ($160) gets you: "ZTE U950 smartphone packs a 1.3GHz Tegra 3 chip, 1GB of RAM, 4GB of internal storage and a 2,000mAh battery beneath the 4.3-inch display." http://www.engadget.com/2012/10/29/ztes-u950-tegra-3-phone/ http://www.engadget.com/2012/10/29/ztes-u950-tegra-3-phone/