Google has astonished the smartphone industry with its $199 offering, the 4.5-inch Moto G. TechInsights has now calculated that Moto G components cost nearly $123, leaving Google a tiny margin of less than 5%.
Most smartphone vendors such as Samsung and Apple are squeezing huge profit margins out of their popular products. Apple is able to bag a cool profit margin of 30% to 35% on its flagship iPhone 5S and 5C handsets. Samsung, being in the same league, gets 28% profit margin on its high-end handsets such as Galaxy S4.
While Google has dished out more expensive smartphones, such as the Moto X, the company has brought down its profit margin rather drastically when it comes to Moto G. The smartphone’s components cost $123, according to a detailed teardown. Adding other incurred costs on the smartphone means that Google gets under of 5% operating profit on each Moto G sold.
To further highlight why this move by Google is quite extra-ordinary, consider this: Samsunsg’s Galaxy S4 components cost about $214 while the company sells it for more than $440 without a contract. This marked drop in the price means that Google is ramping up the competition in the smartphone arena which, in the long run, will force other tech titans such as Samsung and Apple to trim down their profits.
Moto G itself will barely be a profitable product for Google but the company stands to gain a lot from it. For a start, Google will finally be able to get a seat in the smartphone hardware industry. At the same time, the company will be able to gain entry into developing markets where Moto G is already emerging as a holiday best-seller.
Courtesy: WSJ
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