Smartphone hardware economics

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I came across an interesting article in The Economist highlighting the de-constructing of smartphones. Like all electronics products manufacturers need to know the competitiveness of a new product relative to their own products. Taking a device apart, counting and estimating the cost of its components is becoming an outsourced option from third parties too, showing the maturity of the marketplace for these class of services.

Observing the estimated costs of each of the elements of these leading smartphones shown in this graph (from Economist) shows that there are few if any, cost advantages in consumer electronics. In the article, the authors point out that the cost of electronics continues to fall. The original iPhone cost $218 while the more sophisticated 3GS cost only $170.07.

Assembly for these classes of highly engineered devices is only $6.50.

However, the real value is inherent in the software controls and features that make these clumps of silicon, metal and plastic so useful to people that they'd be willing to pay big bucks to own one.