How nice it is sometimes to count other people's money. Just don't say that you have never thought about how much money the manufacturer of this or that thing earns for you. Especially if it's an expensive item, like a car, a flagship smartphone, or a branded jacket. Each thing has several simple and understandable indicators. Among them is the price we pay when purchasing. There is also the cost of production – this is what the manufacturer will pay to create this thing. And then there is the development cost, which must be “smeared” across the entire consignment for the company to make a profit. Now, after a short excursion into the basics of the economy, I will tell you how much Samsung earns from each Galaxy Note 20 Ultra sold.
A good smartphone must be expensive. Or not?
How much does Samsung make
It was revealed that Samsung gets 55% of the profits from each Samsung Galaxy Note 20 Ultra device 5G. Right off the bat! According to Counterpoint Research, the relatively low cost of manufacturing each device has resulted in good margins for the South Korean giant.
Actually, it is precisely this pledged profit that allows the company to easily arrange sales, like the one that is now going to the United States, where the smartphone is given 200 dollars cheaper (and this is a month after the presentation). Many can immediately start criticizing the company, they say, they are cashing in on us, let's first look at all aspects of pricing and understand if everything is so bad.
How much does it cost to manufacture a smartphone
According to research, each Samsung Galaxy Note 20 Ultra 5G costs just under $ 550 to make. This makes a good profit for every device. However, it also demonstrates how effective Samsung is with its flagship models.
Senior analyst Ethan Qi praised Samsung for its effectiveness in creating such a device. He said, 'Samsung has done an excellent job of developing, manufacturing and integrating many advanced technologies and components.' He noted that this is very impressive and indicates a victory in the creation of camera sensors. This allowed Samsung to compete with Sony in this area.
Most expensive smartphone component
Sammobile also noted that the most expensive component of the Note 20 Ultra is the Qualcomm Snapdragon X55 5G modem and RF antenna system. They cost $ 92.20. Included with them you need to purchase a Snapdragon 865+ processor, which will cost another $ 57 per piece. The processor of its own production, Exynos 990, probably costs the company a little cheaper, but analysts have no exact information on this matter.
In a smartphone, not only are its components important, but also the infrastructure it provides.
True, according to some estimates, Samsung's own processor can cost half as much, which allows it to earn even more. On the other hand, in the US, the smartphone is sold with Snapdragon in the minimum version – only 128 GB of memory, and in Europe and Russia, users are offered Exynos, but with 256 GB in the base.
The study also suggests that the Galaxy Note 20 Ultra smartphone, which sells at full price, could bring the company a profit of $ 741. BUT now, few people sell it at full cost. The famous Samsung discount system works in all its glory.
However, in the above there is one rather fat “BUT”. The above manufacturing cost does not include licensing costs. When a smartphone is released to the market, you have to pay not only fees, but also taxes on profits. I’m not even saying that you have to pay a salary to the regional office and provide delivery, advertising and sales chains.
In addition, you can be sure that if it was more profitable to sell smartphones in the US on Exynos, Samsung would definitely do it. This means that this proves once again that there are certain obstacles, including financial ones.
Why phones are so expensive
So Samsung is already getting less than $ 741 per unit of Note 20 Ultra. At the same time, such high sales will not last long. A new one iPhone will be released very soon, which will take away part of global sales from Samsung. We are also waiting for the Huawei Mate 40 Pro, which will sell well in the Chinese market, although the company will not have so many components to manufacture them. And after a couple of months, people will stop buying Note 20 themselves, preferring to wait for the S21.
Most importantly, try to do something with this camera.
It's also a little sly to estimate the net cost of manufacturing a device with a retail price. Even if we cross out the marketing budget and other expenses for maintaining the company, we must remember that the company spends billions of dollars a year on development and they also need to be taken from someone. So they are included in the total cost. Even if someone says the exact price of development costs, we simply cannot isolate from it what was spent on these smartphones.
Ultimately, the company has to calculate how much it has spent on development, figure out how much it will spend on components and various costs, and then estimate how many devices it can sell. All this is mathematically calculated and the price is set. But considering that sales are falling, but fans will still pay 1000+ dollars, you can immediately set the price higher in order to quickly recapture all costs. If sales remain high, great. If not, then there is still profit.
And just think, would you earn a conditional ruble on something, if you can raise the price and earn the conditional five rubles. No need to pretend that you are for the first option.