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How Much Will Google Glass Cost? The Price of Production Offers Some Clues

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Glass is one of the hottest Google's gadgets on the market, but its production cost is less than one-seventh of its current retail price. That is likely to change.

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However, at about $15 per piece, it's not nearly the most expensive component. SanDisk's (NASDAQ:SNDK) 16 GB Flash module and Elpida's (TYO:6665) 1 GB RAM module together sell for about $29, while other smaller elements might total up to $35.

Compared to smartphones -- where the screen might be the most expensive component, representing roughly 20% to 25% of total cost of materials -- the advanced optical system in Glass is not a massively expensive product; it is about $25 (13% of total costs), according to Karl Guttag, a technology consultant and inventor, who has been closely following the development of display technology in the Glass project.

"The Himax FSC LCOS [Field Sequential Color, Liquid Crystal on Silicon] requires both a display device and normally a 1-chip ASIC controller.... Figure the controller costs about $2 to $3, but this would go to near zero if the functionality was integrated into other chips in the system," he tells Minyanville.

"The LEDs for illumination are about $2, and then the films for homogenizing/spreading the LED light and polarizing with packaging are another $2 to $3. I would guess the optics, including the beam splitter in front of the eye, are on the order of $5. When you total up the display plus controller, illumination LEDs and films, and the optics, the total cost is probably about $25, plus or minus $5."

The figure might be even lower for Google. In July, the company bought a 6.3% stake in Himax Display, a subsidiary of Himax Technologies, Inc. (NASDAQ:HIMX). Google might exercise the option to increase its stake to a total of 14.8% within the next year.

Checking off other items on the list, we'd estimate that the bone conduction speaker and the whole audio subsystem combined are under $12, which is roughly the same price as the camera module ($11), the printed circuit board ($12.3), the wireless module ($12.05), or the case with frame ($11).

google glass tear down prices
Click to enlarge

Add a bunch of sensors ($23.38), a small and cheap battery ($0.7), and box contents ($7), and you'll get to a bottom line of $193.59 for parts. Throw in $15 more for assembly, testing, packaging, and other related costs to make it $208.59 in total.

Clout and Scale

Of course, these numbers in reality are likely to be lower than the estimates above, thanks to Google's clout and its enormous purchasing power.

As in the Foxconn-Apple situation described above, suppliers and partners might go the extra mile to offer bigger discounts and drop a number of one-time manufacturing costs (like molding and tooling, or setting up printed circuit board production), hoping to amortize the costs on the future volume.

"With mechanicals, the biggest cost element that is volume- or quantity-dependent is the tooling costs -- for example, the injection-mold tools, or whatnot. For all the different plastic components in any given electronic device, [the price] could be on the order of the several million dollars, so that's amortized across the production volume," says Keller.

He doesn't expect drastic drops in manufacturing costs when the device goes into mass production. He tells Minyanville, "[Google has] already negotiated fairly favorable pricing to begin with," but as the components grow more and more mature, the price of raw materials might be reduced. "For some of the components -- like apps processors, memory, [and] optical sensors -- over the next couple of years, there might be on the order of 20% to 30% takedown on that."
No positions in stocks mentioned.
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