I’m not fond of defending Samsung on this blog, and shortly after I publish this, I’ll go back to criticizing their anti-consumer business strategies. However, this yearly trend of judging phone “value” by looking at a parts list is a ludicrously stupid exercise that primes consumers for horrifically unrealistic expectations.

My editorial here holds true for iPhones, Motos, OnePluses, Sonys, Xiaomis, Vivos, and every other brand under the sun, but we’re going to focus on the Galaxy Note 23, as the most recent addition to this moronic trend.

The Galaxy does NOT “cost $469 to make”.

Counterpoint Research recently published their report on the Galaxy’s Bill of Materials. Their report includes great analysis on the state of the phone industry, the cost of components ordered at scale, Samsung’s part partners, and the estimated costs to buy all the pieces inside a Galaxy.

Unfortunately, this report taints the conversation with an overly simplistic headline which many outlets lazily copied. The simplicity of this title undermines the incredible logistics dance necessary to produce a single phone in this modern computing era.

‘BoM Analysis: Samsung Galaxy S23 Ultra Costs $469 to Make’

For an organization doing such good work at collecting the data, this headline is simply not true. It’s not true in a literal sense of “making a phone”, and it’s not true in practical sense of bringing a phone to market.

This pithy phrase gets repeated, and lives in our reader’s heads.

It matters a LOT less that there’s always an asterisk with TINY font noting that this price tag does not include assembly or shipping or anything else necessary for “making a phone”. That’s buried in the article too far down to make an impact on the person who sees the headline scrolling through social media.

“If it only costs $469 to make, why are they charging ME $1200?!?!?”

What Do You Get For $469?

Spend $469 and what will you have?

You’ll get a box full of parts. You won’t have a phone.

This number severely devalues the human labor costs associated with assembling and distributing phones. A Galaxy costs $1200 because an entire ecosystem has to be built around that single device.

Starting roughly two years before the phone ships to consumers, designs need to be considered, and engineering teams need to find solutions for incorporating tech that hasn’t yet been invented.

Even for how “stale” the Galaxy design has become over the last four years, tiny changes to internal parts are challenges almost as difficult to solve as designing a phone from scratch. Millions of dollars of R&D will be invested before prototypes are made to test those designs and new technologies.

Once the designs are approved, those parts need to be assembled at an incredible scale. Robots are becoming a larger part of that process, but human labor is overwhelmingly used to construct these gadgets. Robots and people are expensive.

Scaling up the manufacturing, a single phone sold to consumers is not an island unto itself. Samsung builds estimates on failure rates and replacement parts. There have to be formulas that take into account spare parts, for EVERY part of the phone.

“For every X number of phones sold, we need Y number of spare screens available.”

Some consumers will pay for those parts. Some consumers will have accidental damage warranties. Beyond the part itself, all the costs of distributing those parts globally, and certifying those parts for different regions needs to be built into the price of the phone.

Quality Assurance is another cost that people underestimate. With every batch of phones constructed, sample phones are pulled off production lines and are sacrificed to make sure they meet performance and durability standards. It might be a couple dozen phones per manufacturing line, but that’s still dozens of phones assembled on each line (each requiring human labor to combine the $469 of parts) then destroyed. The price of your Galaxy needs to account for those “sampled” devices.

I was able to witness this in person visiting an Oppo manufacturing center. A LOT of phones are destroyed daily.

Shipping and distribution is a more esoteric cost to consider.

MOVING the phone isn’t necessarily MAKING the phone, but you won’t be able to own that phone if local warehouses are out of stock. The recent trend of eliminating accessories in packaging shows us how those costs impact the profits of large manufacturers. It’s estimated that by removing accessories from the box, Apple saves roughly $2 BILLION dollars a year on shipping costs. We can assume Samsung has enjoyed similar operational cost savings.

Removing accessories was never about the environment. It was always about profits, but I digress…

Reducing costs is good for Samsung’s bottom line, but it still costs money to put phones in boxes, and put boxes on pallets, and put pallets in cargo containers, and put containers on trucks and boats.

I consider distribution a significant cost in “making a phone”.

Lastly, Samsung is still one of the top technology companies spending money on advertising. Samsung has scaled back ad spending from their high (shortly after the Note 7 exploded), but they still outspend nearly every other tech brand today. A small slice of what makes your Galaxy so expensive is Samsung telling everyone that the Galaxy exists. It’s a cost of making that phone, and the main source of revenue to account for that cost is selling the phone.

Why Focus ONLY on BoM?

The Bill of Materials is useful analyst data.

BoM helps us look at the global tech industry, and consider the health of different companies engaged in these component deals. We’re crawling out of a global pandemic and a massive component shortage. This is fantastic data to get a bird’s eye view of how we’re course correcting. Companies are adjusting to consumer and work trends.

Manufacturing costs also show us the challenges of improving parts, and where there might be an opportunity to compete or disrupt. If a new company can make a good radio for a couple pennies cheaper than an established provider, that part can save a company MILLIONS when those radios are bought at scale.

BoM is a terrible consumer metric for judging the “worth” of a phone.

These headlines poison the well for consumers, and likely contribute to expectations that manufacturers are trying to fleece their customers.

If you regularly read my articles or watch my videos, I’m not commenting on your ability to understand these trends. You’re likely smarter than the average bear, and you have excellent taste in tech commentary.

Reading through comments and replies on other articles, videos, and forums, we SHOULD NOT expect other tech “enthusiasts” are similarly reasonable. By the time these articles have traveled through the perverse game of social media headline editorializing, we can be sure that any consumers passively paying attention to this market, have consumed a warped interpretation of corporate costs.

Considering the INCREDIBLE logistics at play, $1200 is a reasonable MSRP for a gadget this complex.

If you want the best phone a manufacturer can make, and you want it to have good support, and good warranties, and want it to be available to purchase when you want to buy it, $1200 is a reasonable MSRP for a premium tier, high performance phone.

It’s now up to the customer to get $1200 worth of use OUT of that phone. If you’re not going to USE $1200 worth of phone, you should really save your cash and buy a less expensive phone. I digress again…

The nuance matters more than ever.

In parts costs, environmental impact, human labor, and marketing, we should not shy away from sharing a more complete conversation.  Our industry is facing incredible challenges, and this data is critical.

Our audiences are smarter than we give them credit for, but we also need to bring the correct expectations for folks who are less tech savvy. We should be better educators. We should not have to spend significant time correcting expectations from folks who just scan through social media.

It’s a simple change to start. Write better headlines.