), the much-hyped augmented reality device, looks like the most
promising foray into the wearable tech market by a major company
) forecasts that
the smart Glass market will hit the $6 billion
by 2016, with up to 9.4 million units sold by then.
in spring 2012
, Google Glass is now in use by a limited group of Google
employees, developers, and about 10,000 early adopters (known as
"Explorers") who were chosen by Google.
It costs to belong to that last category; as an Explorer, you have
to pay $1,500 for the device and you cannot resell it. In fact,
it's cost that might be one of the decisive factors to make or
break Glass's market prospects. As the popular technology blogger
and Glass Explorer
Robert Scoble puts it
, "The success of this [device] totally depends on price."
In public talks, he has asked audiences about their willingness to
purchase a Glass headset, and found that most people were reluctant
to buy the device at $500. But, he says, when he asked crowds about
whether they'd purchase Glass at $200, "literally every hand went
"This was consistent, whether talking with students, or more
mainstream, older audiences," Scoble said.
So how much will Glass cost? And what does it cost Google to make
We asked experts and we did some math ourselves. Based on the
components used, it should cost less than $210 to produce one
The retail price will therefore all depend on what margin strategy
Google will choose to use. So far, a
Topology Research Institute analyst
predicted that the device would carry an initial price tag of $299.
A Question of Price -- and Timing
Google has promised to expand the number of Glass Explorers this
year, and the company has said that it will offer "even broader
availability next year," which means that regular customers in the
US will have to wait until 2014 to buy the device at a retail
outlet. (There has been no news about when Glass will be available
Google chairman Eric Schmidt delivered a slightly more specific
message about the timing of a retail launch earlier this year.
"Thousands of these [devices] will be in use by developers over the
next months and then, based on their feedback, we'll make some
product changes, and it's probably a year-ish away," he
said in an April interview with the BBC
By the time Glass makes it into the mass market, the price is
expected to drop.
But Google has yet to provide any hints about the price tag for
Glass. In 2012, Google employees
as saying that Glass would be sold at roughly the price of a
contemporary smartphone. However, the company did not respond to
Minyanville's multiple requests for comment.
How do tech firms set a product price? Aside from taking into
account the most obvious factors, like components used and margins
imposed, the price of the product usually reflects the scale of
production, special discounts (or lack of thereof), shipping, and
customs fees as well.
And let's not forget about contractors' margins, too.
reportedly outsourcing Glass production to
(TPE:2354), although speculation could not be confirmed. A Foxconn
representative said in an email that Foxconn was not commenting on
any existing or potential customers and their products.
Another possible production partner for Google is Shenzen,
, a third-party supplier of product development and production
services, which also has offices in Ireland, South Korea, Japan,
and Hong Kong. Last October,
PCH International opened a new US location
in San Francisco, just 35 miles away from the Google Campus in
Mountain View. PCH International declined to comment on any
possible relationship with Google, quoting internal policies that
ban discussion of any individual companies or clients.
Then again, Google might look no further than its new hardware
subsidiary, Motorola Mobility, to handle Glass manufacturing -- but
perhaps not anytime soon. Motorola Mobility CEO Dennis Woodside
Wall Street Journal
that "it could someday be an opportunity."
Electronic manufacturing services (EMS) -- the companies that
design, manufacture, and deliver devices to big brands like
) -- are known to operate
on relatively thin margins
, reportedly around 1.5%, or
$8 per iPhone 5
Kevin Keller, a senior principal analyst for
, told Minyanville that the EMS margins generally don't exceed 5%,
but may be significantly lower in some cases.
"I'd say that 1.5% is very low. Maybe someone like Apple may be
able to negotiate for something like that with Foxconn, but on
average, it's usually around 3% to 5%," he said.
Tearing Down Google Glass
Let's go down to the component level and try to estimate the
production costs of Google Glass. A teardown of the device by some
uncovered all of its guts, making it relatively easy to explore all
the components used in detail.
Minyanville asked some experts to help us estimate the production
costs for Google, based on openly available information. Sergey
Kovalev, head of production support at electronics design house
, said that according to his engineering team's estimations, the
cost of Google Glass materials should not exceed $194 per unit when
produced in 10,000-unit batches.
Click to enlarge
That estimate matches at least two other expert valuations. Keller
told Minyanville that he expected the bill of materials (BOM) for
Google Glass to be "well under $200," and Scoble
said the same thing
A cut-and-dried list of components is one thing, but to estimate a
device's worth, it's also necessary to consider how well the parts
Looking at Glass, Star Simpson and Scott Torborg of Catwig.com
, "The build quality is what you'd expect from a device that costs
as much as a high-end laptop. Everything fits together precisely,
and has a solid feel and great surface finish."
Kovalev agrees. "I cannot say that the device design is simple, and
that is based solely on commonplace components," he tells us. "It
took a lot of work to design it."
Keller adds that none of the Glass building blocks can truly be
called "off-the-shelf" parts: "Everything is customized to some
degree, even if it's a semi-customized variation of what might be
considered a standard product."
At the core of Google Glass is
OMAP 4430 processor. It was released in 2011 to power a wide range
of tablets and smartphones, including the
(OTCMKTS:SSNLF) Galaxy Tab 2, the Motorola Droid RAZR, and
) Kindle Fire.
However, at about $15 per piece, it's not nearly the most expensive
(SNDK) 16 GB Flash module and
(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),
, a technology consultant and inventor, who has been closely
following the development of display technology in the Glass
"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
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.
(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).
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
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
Matter of Strategy
The price tag in a store does not necessarily have to reflect
production costs; companies the size of Amazon, Google, or
(MSFT) can afford to sell devices at prices that are lower than
production costs to quickly grow the installed base, and then the
companies make money on exploiting the whole ecosystem.
Smartphone makers usually go for a 60% to 70% margin in their
top-tier devices. The Samsung Galaxy 4's price tag includes an
margin, and the Apple iPhone 5 is sold with a
Google is known to operate on
fairly thin margins
, and the price of its recent blockbuster release, the
, at $35, suggests that Google tends to stick to reasonable price
points. (The $1,299
is the exception to the rule).
But even if Google decides to reap a smartphone-class reward on
each Glass sold, the device should still cost no more than $599,
and it'll likely be much less than that; $299 (for a 30% margin) or
$399 (a 47% margin) might be the sweet spots for the company.
No matter the price, however, analysts are skeptical about the
financial impact of the project in the near term.
"I don't know if it will even move the needle," Ivan Feinseth,
chief investment officer at Tigress Financial Partners LLC, tells
That makes sense: According to IHS iSuppli's
most optimistic scenario
, there'll be just 2 million pairs of smart glasses sold in 2015.
Even if we consider that 100% of the market will be dominated by
Google and the company opts for a relatively high 60% margin, 2
million sales would bring Google roughly around $600 million in
gross profit. For a company that
$29.7 billion in gross profit and $10.7 billion net income per
year, a mere $600 million is not going to cause any serious impact.
"It's more of a kind of buzz-related item than actually a business
needle-moving item," said Feinseth.
Want to Get "Glass" Now? You Can Get Pretty Close!
While the forthcoming sales of Glass might not mean much to
Google's bottom line, it will mean a lot to the companies that are
already producing Glass-like devices, including GoPro rugged
cameras that start from $199.99.
Several other manufacturers also have products similar to Google
Glass readily available or coming soon.
While the most advanced smart glasses from
(CVE:VZX) are still not in stores, you can opt in for a
Wrap 1200 video eyewear for a mere $499.99
The other option is a pair of Moverio BT-100 wearable glasses from
priced at $699.99
, and running an Android-based OS.
How about smart devices in active wear? Check out
, priced at $599 and due to hit the market in February 2014. Or you
might choose a less advanced
"live HUD" right now
, for just $299. It stealthily integrates into Recon Ready alpine
If you're ok with having smart glasses without a screen, check out
, equipped with a high-quality camera and onboard storage, starting
with $299 for an 8 GB model and arriving in late summer 2013,
according to the company.
Indie products, such as
are options, too.
Whatever alternative you choose, keep in mind that competitors will
have a hard time fighting Google Glass for market attention when
the company switches on its marketing machine and begins promoting
Glass, despite its cost or availability -- and even despite its
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