Google Glass worth more than the sum of its parts
- 14 May, 2014 05:55
The $US1500 price of Google Glass is about 10 times more than the cost to build the wearable computer, but analysts say the device is more than the sum of its parts.
Much of the $US1500 cost of Google's Glass is in non-recurring expenses such as engineering and software, analysts say. (Image: Google)
A report today from the Teardown Analysis Service at IHS Technology found that the parts for Google Glass cost $US132.47. Add to that a $US20 cost for manufacturing cost and the total cost to the digital eyewear jumps to $US152.47.
The teardown costs do not include expenses for software, licensing, research and royalties.
Still, the cost to build a pair of Glass is a fraction of the $US1500 the company charged early adopters to buy a Glass prototype.
Google disputes IHS's cost estimate.
"While we appreciate another attempt to estimate the cost of Glass, this latest one from IHS, like Teardown.com's, is wildly off," said a Google spokesman in an email to Computerworld. "Glass costs significantly more to produce."
While the price tag is a lot bigger than the sum of its parts, IHS analyst Andrew Rassweiler, said that's not the whole picture.
"As in any new product -- especially a device that breaks new technological ground -- the bill of materials cost of Glass represents only a portion of the actual value of the system," Rassweiler said. "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 expenses, extensive software and platform development, as well as tooling costs and other upfront outlays.
"When you buy Google Glass for $US1500, you are getting far, far more than just $US152.47 in parts and manufacturing," he added.
While 8,000 to 10,000 early adopters, also known as Explorers, are using Glass, the product is not officially for sale. It's expected to hit the market sometime this year.
Dan Olds, an analyst with The Gabriel Consulting Group, said he doubts that the cost of Glass will come down significantly when the product officially hits the shelves.
"I do expect the costs of Google Glass to drop over time, but not all that much in the first couple of years," Olds said. "In the absence of a competitor, Google can let the price drift down. Plus, I think it's in Google's best interest to let the Glass market grow slowly. Even before the glasses are available, we've already seen a firestorm of controversy surrounding the product."
Olds also said he's not surprised that Glass costs so much more to buy than to build.
"While Google disputes the cost breakdowns, I tend to think that they're reasonably accurate," said Olds. "However, what these teardowns don't incorporate is the cost of engineering and some of the assembly costs. In some ways, this is like looking at the cost of manufacturing a new cutting-edge cholesterol medication. The cost of making each pill is almost nothing, but the cost of making that first pill -- discovering the compound, testing it, getting approvals, etc., is massive."
IHS's teardown shows Texas Instruments' products were used in Glass.
Texas Instruments provides Glass with the apps processor, power management integrated processors, audio codec, battery fuel gauge and regulator integrated circuits. Altogether, Texas Instruments accounts for about $US37.90 worth of components identified so far. That's 29 per cent of the cost of the products parts.
According to IHS, the glass' frame, which is made of titanium, is the single most expensive component, at $US22.00, or 17 per cent of the component price.
This article, Google Glass worth more than the sum of its parts, say analysts, was originally published at Computerworld.com.
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is firstname.lastname@example.org.
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