Apple (AAPL), the world’s most profitable smartphone maker, has a number of advantages over most of the competition. Momentum, complete control over its end-to-end user experience, design prowess and a number of major new revenue channels it may be preparing to tap can be listed among them. But there is one area where top rival Samsung (005930) has a huge edge over Apple and other smartphone companies, and a recent report illustrates just how important it really is.
Earlier this week, research firm IHS iSuppli issued its compulsory pre-launch estimate for the Galaxy S 4’s bill of materials. According to that estimate, the Galaxy S 4 costs Samsung about $236 per unit excluding manufacturing costs. That figure is quite high compared to the estimated $207 Apple pays for each iPhone 5, but a key observation was made by Forbes’ Parmy Olson in a recent post: More than half of the cost of each Galaxy S 4 goes right back into Samsung’s pocket.
The international version of the Galaxy S 4 costs Samsung $236 per unit, but $149 worth of parts used in the phone are manufactured by Samsung, such as the eight-core Exynos processor and the full HD Super AMOLED display. That means 63% of Samsung’s cost per handset is funneled back into the company’s component businesses.
But beyond dollars and cents, this also gives Samsung a level of control over its devices that no other vendor can compete with. “That type of specialization they can work with,” IHS analyst Wayne Lam said. “If they know these components are coming down the line they can start planning and innovating on the software. ‘We have this extra processing power, so why don’t we do this and that.’ ”
BGR recently previewed the Galaxy S 4 and we called it the Android smartphone by which all others will be judged in 2013. The phone will begin rolling out globally next month.