Tuesday, January 12, 2010

Nexus One Components May Cost $174

Business Week
Analysis by iSuppli suggests that parts for the Android-based smartphone made by HTC may be less expensive than those in Motorola's Droid

From the outside, the Nexus One and Droid smartphones have a lot in common. Both run Google's (GOOG) Android operating system software and have touch-sensitive screens. Each is designed to compete against Apple's (AAPL) iPhone.

On the inside, however, the phones boast some key differences. The Nexus One, introduced on Jan. 5, may have been cheaper to build, according to analysis of the devices by market research firm iSuppli. The components used to build the Nexus One may cost about $174 while the Droid's cost about $185, according to iSuppli estimates. Google sells the Nexus One without a wireless service contract for $529, while the Droid is available contract-free from Best Buy (BBY) for $599.

Analysts use so-called teardown analysis from iSuppli and other researchers to assess how much profit a manufacturer or service provider may get from sales of a consumer electronics device. Smartphones are expected to represent 38% of all mobile devices sold in 2013, up from 14% in 2009, according to Gartner (IT). Demand for such advanced mobile phones, which provide access to e-mail, the Web, games, and various software-based tools, has surged in the years since Apple introduced the iPhone. Analysis from iSuppli focuses on components and doesn't include additional costs such as labor, marketing, and distribution.

HTC makes the Nexus One under contract for Google. T-Mobile USA, the U.S. mobile phone arm of Deutsche Telekom (DT), sells the Nexus One with a two-year service plan for $179. Motorola (MOT) makes the Droid, which is being sold through Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone (VOD), for $199 with a two-year service contract.

The Nexus One's parts may be cheaper because of the price of its memory card, says iSuppli principal analyst Kevin Keller. The Droid boasts a 16-gigabyte flash memory card that goes for about $35, while the Nexus One is sold with a four-gigabyte card that costs about $8.50. The Nexus One analysis is preliminary and subject to revision, iSuppli says.

Qualcomm pushing TI out?

Wireless chipmaker Qualcomm (QCOM) is a winner in both phones. With the Nexus One, Qualcomm's Snapdragon chip handles the connection to wireless networks and is responsible for running the software. Keller estimates the cost of the chip at $30.50, or about 18% of the device's component cost. For the Droid, Qualcomm also supplied a less-advanced wireless chip that cost about $14.

Qualcomm competitor Texas Instruments (TXN) landed four chips on the Droid, including a $13 version of its OMAP chip. TI's share of Droid components amounts to about $23, or 12% of the total. TI may have landed no more than $2 of chips in the Nexus One, iSuppli says. "As Qualcomm has been evolving its technology and adding the ability to handle the applications as well as the wireless connection, TI is getting pushed out," Keller says.

Synaptics (SYNA), the Santa Clara (Calif.)-based company that specializes in touch-sensitive technology, is supplying several pieces of the touch-enabled screen in the Nexus One, Keller says. Atmel (ATML), a San Jose-based chip company, supplied the chip that controls the touch interface on the Droid.

Chipmaker Broadcom (BRCM), based in Irvine, Calif., supplied a single chip to handle both Bluetooth and Wi-Fi features on the Nexus One. TI and Triquint Semiconductor (TQNT) of Hillsboro, Ore., together supplied three chips that handled those features in the Droid, Keller says.

One chip common to both smartphones, and used in Apple's iPhone 3GS as well, drives the onscreen compass. All three use compass chips from AKM Semiconductor, the San Jose-located subsidiary of the Tokyo-based industrial and electronics company Asahi Kasei.

Google and Motorola representatives declined to comment on iSuppli's reports.