Some of you may have seen the new tear-downs, especially on teardown.com, which proclaims that while Glass is priced at "a whopping $1500", the "cost" of it is only $80. I make hardware, for Glass in fact, and I can tell you that this assessment is astoundingly wrong-headed.
More importantly, the folks at teardown.com are not silly or misguided, they are greedy. I will explain more later, but quick preview: they know what they are doing, they know how costly hardware development is, and they know they will get lots of press by proclaiming Glass to be an $80 device. Why do they want press? Because they are selling something. Full tear-downs of devices. Meaning, pictures and lists of what is inside devices that other people spent time making. How much do they charge? $7,000 each. While you ponder that, some points:
* Saying that a hardware device 'costs' the sum of its recognizable parts is about as absurd as saying the cost of a hollywood blockbuster movie is the price of the film the final version is printed on. Not quite that absurd, but almost.
* Glass is a totally new device so all development is custom.
* The cost of a single tooling to make each injection-molded plastic piece of the case (which is several, complex pieces) is $40K to $100K and you can be sure that Google went for the $100K+ version, and went through round after round after round of refining the designs and the toolings. To figure a per-unit cost of the plastic shell, then, you have to spread those hundreds of thousands if not millions of dollars over the number of units made. Glass is beta, so not so many have been made.
* That is just for the plastic housing. Not the titanium rim, not the nose pieces, not the prism, etc.
* Let's next consider the circuitry. Each circuit board in there is custom. The amount of engineering that goes into designing a custom board even if it can be big and sparsely populated and hot is mind-boggling. Now if it has to be dense, tiny, and address a nearly impossible heat-management challenge, the costs skyrocket.
* For a moment lets entertain them, by considering just the raw cost of the parts, as if all the design and engineering and manufacturing costs didn't matter.
* The parts they list are only a few of the parts inside Glass (notice there are only a few colored boxes on each board picture), and their costs seem to be based on ordering hundreds of thousands of the parts, which Google may not have done, for the small batches of Glass they have been rolling out.
* Some of their costs are miles off, like the price of the battery. A custom-made, advanced 570 (or 660) mAh lithium-polymer pouch cell with protection circuitry for $1.14? Miles off. 6-10 times that, in small batches, 3 times that in massive quantities.
* Then they list an item for "assembly and test". How much? $2.15.
Really? Assembling a whole Glass device and testing it, for $2.15. Forget disadvantages labor markets and sweat shops, this is Google and this is assembled in California. If they were using minimum-wage workers to assemble their flagshop futuristic device (as in: they are not), that is $8 per hour, which means about 15 minutes to assemble. Given the likely wages, plus perks and overhead, in fact teardown's esimate probably means about 30 seconds. And what do they mean by assembly? Do they mean micro-soldering of the literally hundreds of surface-mounted parts onto the custom circuit boards? Obviously humanly impossible. But that means they are talking about custom PCB manufacture in a board fabrication house. Major factory-based manufacture. Again, this means massive tooling costs, lots of generations of prototypes that didn't work, and more and more costs, including for quality assurance and to protect the designs against theft. For this, teardown.com budgeted two dollars per device. Brilliant math!
* What about all the wildly complex engineering to fit the circuitry into such a tiny space, and to make it all so slick and beautiful. This is not easy and not cheap. It is in fact probably 90% of the total cost of the development. (Why does a Maseratti cost more than a Datsun?)
What is the cost of Google Glass? Remember that the first word is Google! This is a connected device, and it draws on the vast power of Google's servers and all their software and knowledge offerings, potentially dozens of times each second. So much of the software stack likely needed to be tuned for Glass, and an entire set of APIs created to allow Glass to work. Did Teardown look inside Glass and find all the APIs, all the iterations of software development, all the device drivers, and so forth? No, then how can they cost out the product?
Importantly, having Glass now is being part of a program. When Google came out with a new version of the hardware, they sent me a new Glass. So right there my $1500 just turned into $1500 for TWO devices. Then my new one had some small problems. They sent me another one overnight. Whenever I call customer service I get a friendly voice, day or night, within a couple timezones of where I am. They are knowledgeable about every aspect of the device.
I have been to a half-dozen events in New York and Boston invited by Google for Explorers, where the senior team members like and were present and enthusiastically ready to listen to our questions and feedback. That means Google flew them across the country for each of those events, and does so to cities around the country. That is a real cost of the explorer program. (If you are cynical you could say that is business development, but think about whether Apple would ever let users get products early, and whether they would let them talk to key internal team members, and pay for those members' time to fly around the country.) The point is that your $1500 buys you a place in a larger program, not just Glass, and certainly not just a pile of electronic parts that you can somehow assemble yourself for $2.15!
I would hazard that our $1500 is well subsidized and categorically less than the actual cost per unit.
Teardown.com might defend themselves and try to say, "we are just talking about the cost of the parts; we know that is not the same thing as the total cost of manufacture nor of the Glass program as a whole." They can logically argue that, but they also know that they are getting press because the public is not seeing that nuance. The public is seeing "I have to pay $1500 for Glass, but Google only paid $80".
Teardown is helping them make that conclusion. Therefore Teardown is lying. Intentionally.
It turns out that Teardown sells their detailed reports of what is inside other companies' devices. By their logic of what 'cost' is, these reports should be only the cost of the goods sold, plus a small markup. So, for the Fuel Band product, for instance,
that would be the price of one Fuel Band ($149) plus the time of the people who tore it apart and took pictures, then researched each part inside. What is that, total. $1000? So, if 1000 people buy the report, the cost is $1 per customer, and their price should be similar to that, right? Well, in fact, what is their price for the Fuel Band tear-down? Not $1, not $10, not $100. In fact, it is $7,000. Seven thousand dollars for each customer who buys the report. Who knows how many they sell, but I guess it is a lot. Seven thousand dollars. I believe that the company who sells that for that price should be very wary of calling Google out as if they are over-charging their customers!
What is Google offering their customers, with Glass? Much more than one device. Glass is an experience. Exploring Glass, early, is a particularly wonderful experience. having access to the developers' kit is not only an experience but a chance for the community to start hundreds or thousands of small companies, doing things no one can even predict yet. Glass is a platform. It can be an operating room companion for a surgeon, to save lives; it can transform the lives of children with disabilities; it can help an artist create art. It is the future, and it is exciting.
Meanwhile, what is Teardown offering their customers? Sneak peeks insider their competitors's goods. Nothing new, no engineering, no addition to humanity. Just information on the competition. Particularly ironic is that one of the key things they offer, in their photos and schematics, is which electronic components the manufacturers of the products they tear apart choose to put in their devices, how they arrange them in physical space, and what types of boards and wiring and materials they use? Why would any company pay $7000 for this? Because it is valuable. Because an electronic device is NOT just the collection of parts inside. It is the engineering. It is the design. Teardown's entire business model is predicated on that! And yet they try to pretend that Google is the one being disingenuous.