Saturday, November 10, 2012

Thoughts about the Nexus 4 pricing

While there has been discussions that Google is subsidizing the Nexus 4, but I don't think that Google is doing it as such:

  • Being the big player with big pockets, selling under cost is an invitation for anti-trust scrutiny.
  • The iPhone 5 production costs are estimated at around $200. I've taken the iPhone 5 as an example because it's costs are being analyzed by many people. While the Nexus 4 is not an iPhone 5, one can probably argue that the costs will be similar. That would leave around $100 for assembly, shipping and handling. Not a huge margin, but enough if one does not care much about the margins on hardware.
  • The Nexus 7 has been similarly rumored to be "to cheap", despite these rumors, the Nexus 7 sales have improved the results of it's manufacturer Asus quite a bit, so no Asus is not loosing money, nor has it declared any subsidies from Google in it's quarterly results.

So why is LG trying to sell the Nexus 4 for twice the price when it's distributing it (Google Play Store is not available in all countries)? Simple LG is trying to emulate the pricing model of Apple with over 100% markup.

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