Google Glass is more than the sum of its parts: IHS

Google Glass is more than the sum of its parts: IHS

Summary: Is Google is bankrolling a stratospheric profit margin of 90 percent – one that would make even Apple blush – on each Glass sale?

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(Source: Google)

A teardown of Google's Glass head mounted computer by analyst firm IHS suggests that the $1,500 device has a parts and manufacturing price tag on only $152.47.

Does that mean that Google is bankrolling a stratospheric profit margin of 90 percent – one that would make even Apple blush – on each Glass sale?

Not by a long shot, says an IHS report.

"As in any new product—especially a device that breaks new technological ground—the bill of materials (BOM) cost of Glass represent only a portion of the actual value of the system," said Andrew Rassweiler, senior director, cost benchmarking services for IHS. "IHS has noted this before in other electronic devices, but this is most dramatically illustrated in Google Glass, where the vast majority of its cost is tied up in non-material costs that include non-recurring engineering (NRE) expenses, extensive software and platform development, as well as tooling costs and other upfront outlays. When you buy Google Glass for $1,500, you are getting far, far more than just $152.47 in parts and manufacturing."

In essence, what you're getting is not just the parts, but also the know-how behind putting them together to make a new and innovative product.

But you are also spending your money on what even IHS admit is essentially a prototype.

"Today’s Google Glass feels like a prototype," Rassweiler said. "The design employs many off-the-shelf components that could be further optimized. If a mass market for the product is established, chip makers are expected to offer more integrated chipsets specific to the application that will greatly improve all aspects of performance, including processing speed, energy efficiency, weight and size. Future product revisions are sure to make strides in all of these areas."

Take the main processor as an example. This uses the Texas Instruments OMAP4430, a chip built using 45-nanometer architecture that even back in 2012 was used in budget devices such as Amazons Kindle Fire tablet. A newer part built using a 28-nanometer architecture would not only offer more power but also be more battery efficient.

IHS also points out that the frame of the Glass, which represents the single most expensive component of the device at $22.00, or 17 percent of the total bill of materials, gives the product a premium feel. I'm a bit doubtful about this. A frame is a frame, and while titanium brings benefits to the table, there are frames out there using alloys that have features that titanium does not, for example, memory metals which retain their shape and are high resistant to snapping.

While Glass is no doubt a clever and interesting product, it's hard to escape the fact that $1,500 is still a lot of money to pay for a warts-and-all prototype product.

Topics: Hardware, Google, Mobility

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11 comments
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  • IHS = shill

    Their explanation reads like hot air.
    LBiege
    • Prototypes

      the problem is we are talking about prototypes here, made in small numbers. The component prices might be cheap if you are buying millions of them, but the scale here is probably 10s of thousands, if that, so the component prices will be much higher.

      Then you have things like moulds which also cost a lot of money. Over several million units that works out at a few cents a unit, on small production runs that can add several dollars to the cost, but is "hidden" to IHS and co, because it is not in the BOM.

      Then the development costs, both hardware and software. Again, over millions of units it probably only accounts for a couple of dollars per unit, but on a small production run that can quickly mount up to hundreds of dollars per unit.

      Heck, I've worked on products where the programming cost $250,000 but only one person ever used it! Good, the software saved the company that commissioned it several million over 3 years, but that was a "relatively" simple project with just 3 developers. How many salaries does Google have to pay for Glass development?
      wright_is
  • Can't see the point ...

    "Google's Glass $1,500 device has a parts and manufacturing price tag on only $152.47" - IHS

    "But don't worry, that last sentence is meaningless" - IHS

    Either it's overpriced, or it isn't. "It is. It isn't. It is. It isn't. It is" Get over it.

    I paid £400 for my first VHS player; £20 for my last one (30 years later). I got over it in 3 seconds. If you want it, you buy it, if you don't, you don't.
    Heenan73
  • True cost

    The true cost of a Glass is far, far higher than $152.47. The physical parts may cost that much, but the majority of Goggle's expense in making these is R&D. Hint: R&D is not cheap when you're prototyping new technology.

    I don't know if the final "best" Glass-style product will be made by Google. Maybe it will, and maybe it won't. Just look at smartphones: first was the old crappy windows phones (nothing like the current one, mind you, I'm talking about 8 years ago), then the iPhone became popular, then Android finally began to gain market share. It took 3 iterations to get the smartphone right. It may very well take that many iterations by that many different companies to get the glass-style products right, but someone had to start it. I find that most people who dislike glass are either technophobes or extreme Apple fanboys who hate the fact that Google even exists. The rest are ones who have heard a story from someone who heard a story from someone who saw someone who happens to own Glass acting like a jerk. Guess what, Glass owners are humans too, and are just as messed up as the rest of us.
    AnomalyTea
    • Get over it, they aren't that good

      Have you seen and tried them? It's not that great. I think you and Google have been watching too many SciFi movies. End of the day, the glasses are a distraction to the user. Google has not done one interesting thing with the product, NOTHING! The same goes for self-driving cars. Two Google projects that are interesting yes, useful, questionable, but a waste of investors money, ABSOLUTELY. I really question Google's ability to run a large company. I forgot, throw in the 10 Billion dollar lost with Moto. I think Google is over its head and is losing Mojo even faster.
      Bob Trikakis
    • Ya but

      Google glass is nothing to write home about. its not that great, its implementation isn't that great and using it just isn't wonderful. Also you look like an ass with a computer on your face...
      Jimster480
  • Google Glass is not yet generally available

    Thus, it's too early for this type of analysis. And I'd bet that the lions share of the money (if not all of the money) is going to Google's OEM for Glass, not Google.
    Rabid Howler Monkey
    • Now It Is

      click on the Bing News Link. open this in News
      Crashin Chris
  • Have you bought a pair of prescription eyeglasses lately?

    Some of the brand name frames cost $200 or more.

    Of course those aren't the same frames as the plain black plastic BCGs the military issues.
    Dr_Zinj
  • Here come the google apologists

    protect that scroogle hive. scroogle is the problem, not the solution.
    hoppmang
  • Are they still around?

    I thought Google cancelled this project? I guess we can add this to Google's "My mouth is bigger then my ability." Or in common term, another Google Vapor project.
    Bob Trikakis